Cost Estimating

Step 2 Develop Estimating Plan

Step 2 “Develop Estimating Plan” is the second step in the GAO cost estimating process. To do this a multidisciplinary team must be assembled whose members have functional skills in financial management, engineering, acquisition and logistics, scheduling, and mathematics, in addition to communications. The team should also include participants or reviewers from the program’s operating command, product support center, maintenance depot, and other units affected in a major way by the estimate. Team members might also be drawn from other organizations. In the best case, the estimating team is composed of persons who have experience in estimating all cost elements of the program. [1]

For more information see: GAO Cost Estimating and Assessment Guide – Chapter 5 & 6

An analytic approach to cost estimates typically entails a written study plan detailing a master schedule of specific tasks, responsible parties, and due dates. Tasks that should be accomplished include: [1]

  • Determine the cost estimating team and develop its master schedule;
  • Determine who will do the independent cost estimate;
  • Outline the cost estimating approach;
  • Develop the estimate timeline

After the customer has defined the task, the cost estimating team should create a detailed schedule that includes realistic key decision points or milestones and that provides margins for unforeseen, but not unexpected, delays. The team must ensure that the schedule is not overly optimistic. If the team wants or needs to compress the schedule to meet a due date, compression is acceptable as long as additional resources are available to complete the effort that fewer analysts would have accomplished in the longer period of time. If additional resources are not available, the estimate’s scope must be reduced. [1]

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Updated: 7/29/2017

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