Preface

To use public funds effectively, the government must employ effective management practices and processes, including the measurement of government program performance. In addition, legislators, government officials, and the public want to know whether government programs are achieving their goals and what their program costs are. The U. S. Government Accountability Office (GAO) has shown that in order to conduct oversight of the federal government, including agencies’ stewardship of public funds, reliable cost information is required. We developed this Guide to establish a consistent methodology based on best practices that can be used across the federal government for developing, managing, and evaluating program cost estimates. The Cost Estimating and Assessment Guide presents the best practices associated with developing a reliable, high-quality cost estimate and the best practices associated with effective management of program costs using earned value management (EVM).1 Use of these best practices should enable government programs to better estimate and manage their costs to improve program management and execution.

For the purposes of this Guide, a cost estimate is the summation of individual cost elements, using established methods and valid data, to estimate the future costs of a program, based on what is known today. The management of a cost estimate involves updating the estimate with actual data as they become available, revising the estimate to reflect program changes, and analyzing differences between estimated and actual costs—for example, by using data from a reliable EVM system.

The methodology outlined in this Guide is a compilation of best practices that federal cost estimating organizations, the public sector, and industry use to develop and maintain reliable cost estimates throughout the life of a government program. The ability to generate reliable cost estimates is a critical function for federal agencies and is necessary to support the Office of Management and Budget’s (OMB) capital programming process.2 Without this ability, agencies are at risk of experiencing cost overruns, missed deadlines, and performance shortfalls—all recurring problems that GAO program assessments too often reveal. Furthermore, cost overruns may cause the government to reduce funding for other programs, which affects their results or timely execution.

GAO, the Congressional Budget Office (CBO), and other organizations have developed projections that show the nation’s fiscal path is unsustainable, primarily because of health care programs and net interest on the debt. New resource demands and demographic trends will place serious budgetary pressures on federal discretionary spending, as well as on other federal policies and programs in the coming years. When resources are scarce, competition for those resources increases. It is imperative, therefore, that government programs deliver their promised results, not only because of their value to the public, but also because every dollar spent on one program is one less dollar available to fund other efforts.

We intend to update the Cost Estimating and Assessment Guide to keep it current. Comments and suggestions from experienced users, as well as recommendations from experts in the cost estimating, scheduling, and program acquisition disciplines, are always welcome. If you have any questions concerning this Guide, you may contact me at (202) 512-6888 or . Contact points for our Office of Congressional Relations and Office of Public Affairs may be found on the last page of this Guide. Major contributors to this project are listed in appendix III.

Timothy M. Persons, Ph.D.

Chief Scientist and Managing Director

Science, Technology Assessment, and Analytics Team

  1. EVM is a project management tool that integrates the technical scope of work with schedule and cost elements for investment planning and control. It compares the value of work accomplished in a given period with the actual cost of the work accomplished and the value of the work planned in that period. Differences are measured in both cost and schedule variances. The Office of Management and Budget (OMB) requires agencies to use EVM for major acquisitions with development effort.↩︎

  2. Office of Management and Budget, Executive Office of the President, Preparation, Submission, and Execution of the Budget, Circular No. A-11 (Washington, D.C.: December 2019); Office of Management and Budget, Executive Office of the President, Managing Federal Information as a Strategic Resource, Circular No. A-130 (Washington, D.C.: July 28, 2016); and Office of Management and Budget, Executive Office of the President, Capital Programming Guide, Supplement to Circular A-11, Part 7, Preparation, Submission, and Execution of the Budget (Washington, D.C.: December 2019).↩︎