Cost Estimating Team

Centralizing the cost estimating team facilitates the use of standardized processes, the identification of resident experts, a better sharing of resources, commonality and consistency of tools and training, more independence, and a career path with more opportunities for advancement. Centralizing cost estimators and other technical and business experts also allows for more effective deployment of technical and business skills while ensuring some measure of independence.

A good example is in the Cost Assessment and Program Evaluation office (CAPE) in the Office of the Secretary of Defense. Its cost estimates are produced by a centralized group of government personnel to ensure long-term institutional knowledge and no bias toward results. Some individuals in the cost estimating community consider a centralized cost department that provides cost support to multiple program offices, with a strong organizational structure and support from its leadership, to be a model.

In contrast, decentralization often results in ad hoc processes, limited government resources (requiring contractor support to fill the gaps), and decreased independence, because program offices typically fund an effort and because program management personnel typically rate the analysts’ performance. However, one major advantage of a decentralized process is that analysts have better access to technical experts. Under a centralized process, analysts should thus make every effort to establish contacts with appropriate technical experts.

Furthermore, organizations that develop their own centralized cost estimating function outside the acquiring program office represent the best practice over organizations that develop their cost estimates in a decentralized or ad hoc manner under the direct control of a program office. One of the many benefits of centralized structure is the ability to resist pressure to lower the cost estimate when it is higher than the allotted budget.

Finally, reliance on support contractors raises questions from the cost estimating community about whether numbers and qualifications of government personnel are sufficient to provide oversight of and insight into contractor cost estimates. Other experts in cost estimating suggest that reliance on support contractors can be a problem if the government cannot evaluate how good a cost estimate is or if the ability to track it is lacking. Studies have also raised the concern that relying on support contractors makes it more difficult to retain institutional knowledge and instill accountability.

Therefore, to mitigate any bias in the cost estimate, government customers of contractor-produced cost estimates must have a high enough level of experience to determine whether the cost estimate conforms to the best practices outlined in this Guide.