Cost Estimating

DoD Component Cost Estimate

A Cost Estimate (also known as a Life-Cycle Cost Estimate) is a detailed estimate of acquisition and Total Ownership Costs (TOC) for an acquisition program. It’s normally required for high-level decisions. A DoD Component Cost Estimate is a cost estimate that one of the services (Air Force, Army, Navy) is responsible for developing.

A DoD Component Cost Estimate is provided to the Milestone Decision Authority (MDA) at Milestones A, B, C and the Full-Rate Production Decision Review (FRPDR) as required by DoD Instruction 5000.02. It also directs that it must also be provided to the Director, Cost Assessment and Program Evaluation (DCAPE). DCAPE reviews all cost estimates and cost analyses conducted in conjunction with Major Defense Acquisition Programs (MDAP) and Major Automated Information System (MAIS) programs. In order to accomplish this, 10 U.S.C. § 2334(b) requires that DCAPE promptly receive the results of all cost estimates and analyses conducted by military departments and Defense Agencies. [1]

The generic term “DoD Component Cost Estimate” is used to provide considerable latitude to each military service or defense agency as to the actual responsibility for this cost estimate. In some cases, a military service assigns the responsibility to the program office, which then provides a Program Office Life-Cycle Cost Estimate (PLCCE). In other cases, the DoD Component may adopt a more corporate approach, where an initial program office cost estimate is subject to considerable review and possible adjustment as determined by the Service Cost Center or defense agency equivalent. [1]

Each DoD Component establishes a DoD Component-level cost position for all Major Defense Acquisition Programs (MDAP) and Major Automated Information System (MAIS) programs at milestone reviews. To support the DoD’s full funding policy for acquisition programs, as well as statutory certifications and regulatory requirements, the DoD Component is expected to fully fund the program to this cost position in the current President’s Budget Future Years Defense Program (FYDP), or commit to full funding of the cost position in the next President’s Budget FYDP, with identification of specific offsets to address any funding shortfalls that may exist in the current FYDP. In addition, the appropriate Deputy Assistant Secretary of the Military Department for Cost and Economics (or defense agency equivalent) signs for the DoD Component-level cost position, and the DoD Component Acquisition Executive and the Component Chief Financial Officer endorses and certifies that the FYDP fully funds the program consistent with the DoD Component-level cost position. This policy was promulgated in the OSD Memorandum, “Required Signed and Documented Component-level Cost Position for Milestone Reviews,” dated March 12, 2009. [1]

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Updated: 6/18/2018

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