Study Plan and Schedule
An analytic approach to cost estimates typically includes a written study plan detailing a schedule of specific tasks, responsible parties, and due dates. Because the plan serves as an agreement between the customer and cost estimating team, it must clearly reflect the approved approach and should be distributed formally to all participants and organizations involved.
For estimates of complex programs, the estimating team might be organized as a formal, integrated product team. For independent estimates, the team might be smaller and less formal. In either case, the analysis should be coordinated with all stakeholders, and the study plan should reflect each team member’s responsibilities.
What is required of a cost estimating team depends on the type and purpose of the estimate and the quantity and quality of the data. More detailed estimates generally require larger teams, more time and effort, and more rigorous techniques. For example, a rough-order-of-magnitude estimate—a quick, high level cost estimate—generally requires less time and effort than a budget-quality estimate. In addition, the estimating team must be given adequate time to develop the estimate.
Analysts should develop and tailor an estimate plan with a scope that aligns with the available data with the estimate’s purpose. For a program in development that is estimated primarily with parametric techniques and factors, the scope might be at a higher level of the WBS. As the program enters production, a more detailed estimate is expected. As the analysts develop and revise the estimating plan, they should keep management informed of the initial approach and any changes in direction or method.12
It is important that auditors understand the context of the cost estimate—why and how it was developed and whether it was an initial or follow-on estimate. Regardless of an estimate’s ultimate use and its data availability, time can become an overriding constraint on its detail. When defining the elements to be estimated and when developing the plan, the cost estimating team must consider its time constraints relative to team staffing. Without adequate time to develop a reliable estimate, the team may be unable to deliver a product of sufficiently high quality. For example, a rough-order-of-magnitude estimate could be developed in days, but a first-time budget-quality estimate would likely require many months. If, however, that budget estimate were simply an update to a previous estimate, it could be done faster. The more detail required, the more time and staff the estimate will require.
After the customer has defined the task, the cost estimating team should create a detailed schedule to complete the cost estimate 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, they need additional resources to complete the effort. If additional resources are not available, the estimate’s scope must be reduced.
One of the most time consuming steps in the cost estimating process is step 6: obtaining the data. Enough time should be scheduled to collect the data, including visiting contractor sites to further understand the strengths and limitations of the data that have been collected. Site visits are invaluable to cost estimators and auditors to see what is being developed and how engineering and manufacturing are executed. If there is not enough time to develop the estimate, then the schedule constraint should be clearly identified in the ground rules and assumptions so that management understands the effect on the estimate’s quality and confidence.
Even an estimate that meets all the best practices detailed in this Guide is less useful if it is not ready when needed. Timeliness is as important as quality. However, the quality of a cost estimate may be hampered if the time to develop it is compressed. The essential point is that the team must attempt to ensure that the schedule is reasonable. When this is not possible, the schedule must be highlighted as having curtailed the team’s depth of analysis and the estimate’s resulting confidence level.
An estimate that supports an independent estimate for a DOD program presumably entails no requirement that the independent cost estimating team keep program management informed of approaches or changes in direction and methods. Instead, the program office and independent cost estimators would be expected to maintain communication and brief one another on their results, so as to understand any differences between the two estimates.↩︎