Survey of Step 7

Process Tasks

• Develop the cost model, estimating each WBS element, using the best methodology from the data collected and including all estimating assumptions.
• Express costs in constant year dollars.
• Time-phase the results by spreading costs in the years they are expected to occur, based on the program schedule.
• Sum the WBS elements to develop the overall point estimate.
• Validate the estimate by looking for errors like double counting and omitted costs.
• Compare estimate against the independent cost estimate and examine where and why there are differences.
• Perform cross-checks on cost drivers to see if results are similar.
• Update the model as more data become available or as changes occur and compare results against previous estimates.

Best Practices

The cost model is developed by estimating each WBS element using the best methodology from the data collected.

• If analogy is used, adjustments are reasonable and based on program information, physical and performance characteristics, and the like.
• If the build-up method is used, the work scope is well defined, the WBS sufficiently detailed, a detailed and accurate materials and parts list is available, the estimate is based on specific quantities, and an auditable source is provided for labor rates.
• If the parametric method is used, the size of the data set is sufficient and homogeneous data were available for developing the cost estimating relationship (CER). Parametric models are calibrated and validated using historical data.
• If CERs are used, the statistics are provided and they are reasonable. The CER inputs are within the valid dataset range.
• Expert opinion is used sparingly and the estimates account for the possibility that bias influenced the results.
• If learning curves are used, they represent manual, complex, and repetitive labor effort. If production is not continuous, production breaks are incorporated.

The estimate contains few, if any, minor mistakes.

• The estimate does not contain mistakes, such as numbers that do not sum properly, costs that do not match between documents, and the like.
• The program uses a quality control process to ensure the cost estimates contains few, if any, mistakes.

Major cost elements are cross-checked to see if results are similar.

• Major cost elements are cross-checked to see if results are similar.

An independent cost estimate is conducted by a group outside the acquiring organization to determine whether other estimating methods produce similar results.

• An ICE was performed by an organization outside of the program office’s influence.
• The depth of the ICE analysis was sufficient to allow reconciliation between the ICE and the program office estimate.
• The ICE is based on the same technical baseline and ground rules as the program office estimate.
• Differences between the ICE and the program office estimate are documented and justified.

Likely Effects if Criteria Are Not Fully Met

• Unless alleviated by probing further into the experts’ opinions, the expert opinion method should be considered subjective. Expert opinion should be used sparingly and the estimates should account for the possibility that bias influenced the results.
• Without access to a detailed cost model, one cannot be certain that all WBS cost estimate calculations are accurate and account for all costs. Validating that a cost estimate is accurate requires thoroughly understanding and investigating how the cost model was constructed.
• Unless an estimate employs cross-checks, the estimate will have less credibility because stakeholders will have no assurance that alternative estimating methodologies produce similar results.
• Without an ICE, decision-makers will lack insight into a program’s potential costs because ICEs frequently use different methods and are less burdened with organizational bias. Moreover, ICEs tend to be more conservative by forecasting higher costs than the program office.
• A program estimate that has not been reconciled with an ICE has an increased risk of proceeding underfunded because an ICE provides an objective and unbiased assessment of whether the program estimate can be achieved.