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Average Procurement Unit Cost (APUC) is calculated by dividing total procurement cost by the number of articles to be procured. Total procurement cost includes flyaway, rollaway, sail away from the cost (that is, recurring and nonrecurring costs associated with the production of the item such as hardware/software, Systems Engineering (SE), engineering changes, and warranties) plus […]

Actual Cost Estimating is a technique where actual cost experience or trends (from prototypes, engineering development models, and/or early production items) are used to project estimates of future costs for the same system. These projections may be made at various levels of detail, depending on the availability of data. Cost estimates that support Full-Rate Production

Affordability is the results obtained from the analysis of the Life-Cycle Cost (LCC) of a proposed acquisition, in which the purchase is in accord with the resources and long-term requirements of the acquirer. The Defense Acquisition Guidebook (DAG) defines affordability as the degree to which the LCC of an acquisition program is in consonance with

Step 9 “Conduct Risk and Uncertainty Analysis” on the point estimate developed in Step 7 “Develop Point Estimate and Compare it to an Independent Cost Estimate”. This analysis will expand on the sensitivity analysis that was conducted in Step 8 “Conduct Sensitivity Analysis”. Risk and uncertainty refer to the fact that because a cost estimate

A cost estimate is not considered valid until management has approved it. Since many cost estimates are developed to support a budget request or make a decision between competing alternatives, it is vital that management is briefed on how the estimate was developed, including risks associated with the underlying data and methods. Therefore, the cost

Step 6 “Obtain Data” is the foundation of every cost estimate. How good the data are affects the estimate’s overall credibility. Depending on the data quality, an estimate can range anywhere from a mere guess to a highly defensible cost position. Credible cost estimates are rooted in historical data. Rather than starting from scratch, estimators

Step 8 “Conduct Sensitivity Analysis” should be included in all cost estimates because it examines the effects of changing assumptions and ground rules. Since uncertainty cannot be avoided, it is necessary to identify the cost elements that represent the most risk and, if possible, cost estimators should quantify the risk. This can be done through

Documentation provides total recall of the estimate’s detail so that it can be replicated by someone other than those who prepared it. It also serves as a reference to support future estimates. Documenting the cost estimate makes available a written justification showing how it was developed and aiding in updating it as key assumptions change

Step 5 “Identify Ground Rules and Assumptions”. Cost estimates are typically based on limited information and therefore need to be bound by the constraints that make estimating possible. These constraints usually take the form of assumptions that bind the estimate’s scope, establishing baseline conditions the estimate will be built from. Because of the many unknowns,

Step 7 “Develop Point Estimate and Compare it to an Independent Cost Estimate” pulls all the information together to develop the point estimate; the best guess at the cost estimate, given the underlying data. High-quality cost estimates usually fall within a range of possible costs, the point estimate being between the best and worst case