Team Composition and Organization
Program office cost estimates are normally prepared by a multidisciplinary team with functional skills in financial management, engineering, acquisition, logistics, scheduling, mathematics, and/or communications.11 The team should also include participants or reviewers from centers, facilities, and laboratories, among others, that are affected in a major way by the estimate.
Ideally, the estimating team is composed of people who have experience in estimating all cost elements of the program. Because this is seldom possible, the team leader should be familiar with the team members’ capabilities and assign tasks accordingly. If some are experienced in several areas, while others are relatively inexperienced in all areas, the team leader should assign the experienced analysts responsibility for major sections of the estimate while the less experienced analysts work under their supervision.
A cost analyst should possess a variety of skills to develop a high-quality cost estimate that satisfies the 12 steps of a reliable cost estimate.
Figure 6: Disciplines and Concepts in Cost Analysis
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Economics:
- Break-even analysis
- Foreign exchange rates
- Industrial base analysis
- Inflation
- Labor agreements
- Present value analysis
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Budgeting:
- Appropriations
- Internal company (industry)
- Program specific
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Engineering:
- Design
- Materials
- Performance parameters
- Production engineering
- Production process
- Program development test
- Scheduling
- System integration
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Computer science/mathematics:
- Analysis of commercial models
- Analysis of proposals
- Development of cost estimating relationship
- Model development
- Programming
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Statistics:
- Forecasting
- Learning curve applications
- Regression analysis
- Risk/uncertainty analysis
- Sensitivity analysis
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Accounting:
- Cost data analysis
- Financial analysis
- Overhead analysis
- Proposal analysis
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Communication skills:
- Estimate knowledge
- Briefing and writing skills
- Collaboration
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Public and government affairs:
- Appropriations process
- Auditors
- Legislative issues
- Outside factors
Each discipline in figure 6 applies to cost estimating. For example, having an understanding of economics and accounting will help the cost estimator better understand the importance of inflation effects and how different accounting systems capture costs. Budgeting knowledge is important for knowing how to properly allocate resources over time so that funds are available when needed. Because cost estimates are often needed to justify enhancing older systems, having an awareness of engineering, computer science, mathematics, and statistics will help identify cost drivers and the type of data needed to develop the estimate. It also helps for the cost estimator to have adequate technical knowledge when meeting with functional experts so that credibility and a common understanding of the technical aspects of the program can be quickly established. In addition, cost estimators with good presentation skills who defend their cost estimate with solid facts and reliable data stand a better chance of convincing decision-makers to use the estimate as the basis for program funding. Finally, cost estimators need to have solid interpersonal skills, because working and communicating with subject matter experts is vital for understanding program requirements.
Because schedules are the foundation of the performance plan, having a scheduling staff member integrated on the team is critical for validating the plan’s reasonableness. A scheduler can determine the feasibility of the network schedule by analyzing its durations. GAO’s Schedule Assessment Guide (GAO-16-89G) has more information on creating and maintaining reliable schedules.↩︎