Cost Estimating

Step 12 Update the Estimate to Reflect Actual Costs and Changes

Programs should be monitored continuously for their cost effectiveness by comparing planned and actual performance against the approved program baseline. In addition, the cost estimate should be updated with actual costs so that it is always relevant and current. The continual updating of the cost estimate as the program matures not only results in a higher-quality estimate but also gives opportunity to incorporate lessons learned. Future estimates can benefit from the new knowledge. For example, cost or schedule variances resulting from incorrect assumptions should always be thoroughly documented so as not to repeat history. Finally, actual cost and technical and historic schedule data should be archived in a database for use in supporting future estimates.

For more information see: GAO Cost Estimating and Assessment Guide – Chapter 17

Most programs, especially those in development, do not remain static; they tend to change in the natural evolution of a program. Developing a cost estimate should be not a one-time event but, rather, a recurrent process. Before changes are approved, however, they should be examined for their advantages and effects on the program cost. If changes are deemed worthy, they should be managed and controlled so that the cost estimate baseline continuously represents the new reality. Effective program and cost control requires ongoing revisions to the cost estimate, budget, and projected estimates at completion.

Tasks that should be accomplished during this step include: [1]

  • Update the estimate to reflect changes in technical or program assumptions or keep it current as the program passes through new phases or milestones;
  • Replace estimates with EVM EAC and independent Estimate at Completion (EAC) from the integrated EVM system;
  • Report progress on meeting cost and schedule estimates;
  • Perform a post mortem and document lessons learned for elements whose actual costs or schedules differ from the estimate;
  • Document all changes to the program and how they affect the cost estimate

AcqLinks and References:

Updated: 7/29/2017

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