Chapter 1.1 Definition and Purpose Flashcards
(35 cards)
(3) Primary Reasons for Cost Estimating are:
1.Budgeting -
2.Planning -
3.Trade-offs -
As part of a total systems analysis, cost estimating helps decision makers:
-Make program decisions
-establish/defend budgets;
-conduct Analysis of Alternatives (AoA);
-perform source selection;
-conduct reviews of major projects;
-perform design trade-offs;
-assess technology changes;
-comply with public law; and
-satisfy oversight requirements
Special purpose organizations exist within the government and industry to perform ICEs and validate or adjust the estimates of other organizations. These are known as
cost oversight organizations.
-During pre-systems acquisition phase, __________or __________ are useful.
AoAs (Analysis of Alternatives) or trade studies
_________ are studies comparing technical, cost, and performance characteristics of multiple approaches and are used to select among alternatives before committing to a particular project.
AoAs (Analysis of Alternatives) or trade studies
During systems acquisition, a _______________ is performed to compare competitors’ approaches to satisfying requirements.
source selection process
After system development, a _________ can then be performed before full-scale production.
cost study
refers to advertising a cost significantly under the actual amount of effort for the purpose of winning a piece of work as the lowest bidder. As the system is developed, it becomes apparent the estimate was too low and to recover, either the customer or manufacturer is faced with paying for the overrun, which can lead to lost profitability or bankruptcy
Buying in
refers to estimating too high, meaning the manufacturer can no longer remain competitive. Accurate estimating prevents the occurrence of these situations, ensuring a solid reputation which enhances future business potential.
Pricing out of the market
The characteristics of high-quality cost estimates are:
Accuracy
Comprehensiveness
Replicability
Auditability
Credibility
Timeliness
Challenges to Cost Estimating:
Decision Support - Cost estimates support critical decision making, but analysts may find it challenging to quantify the cost impacts of various alternatives under consideration due to difficulty in establishing CERs (Cost Estimating Relationships) that are linked to the right design parameters, new technologies, or non-traditional approaches.
Quality The quality of an estimate relies on good data (input) and good documentation (output).
Coordination Because system costs frequently cut across organizational boundaries, the data collection and estimate validation processes may involve a lot of coordination requiring considerable time and resources.
Resource and Schedule constraints - Analysts must deliver cost estimates to decision makers in a timely manner or the estimates will be overcome by events.
Security/access - There may be reasons to restrict access to both the data used to create the cost estimate and the completed estimate product. Data may be considered proprietary or classified.
_____________ is a specific case of a technical and schedule baseline description required by major DoD programs (see Resources for DoD Policy Guidance)
he technical and schedule baseline description features programmatic information such as program plan and purpose as well as mandates or directives governing the program.
Cost Analysis Requirements Description (CARD)
A DoD CARD (Cost Analysis Requirements Description) includes
System technical description
WBS
Manpower requirements
Operational Concept
Deployment Details
Logistics support details
Training plan
Acquisition Strategy
System Test and Evaluation Plan
Environmental impacts
Changes from the prior CARD
Types of Estimates:
Life Cycle Cost Estimate (LCCE)
Independent Cost Estimate
Budget Estimate
Rough order of Magnitude (ROM)
An Estimate at Completion (EAC)
An Independent Cost Assessment (ICA)
An Economic Analysis (EA)
The Analysis of Alternatives (AoA)
A _________________ is the prototypical cost estimate that includes Research and Development (R&D), production, Operations and Support (O&S), and disposal costs (commercial definitions are similar). It covers all costs associated with the program for its complete duration.
Life Cycle Cost Estimate (LCCE)
An ____________________ is a LCCE developed by an analyst outside the program or project office that tests the reasonableness of the program or project estimate.
Independent Cost Estimate
A ______________ refers to estimates developed strictly to obtain authorization for funding. Has a wider margin for error than other types of estimates.
Budget Estimate
The fundamental purposes of budget estimates are:
-to ensure project feasibility and attainable performance levels;
-to develop a reliable project cost estimate consistent with realistic schedules; and
-to establish baseline project definitions, schedules, and costs.
___________estimate is used when very little specific information is known about the project. The design effort for the program or system has not begun, and the estimate is often based on ratios or factored historical information. Is primarily used for feasibility studies and selection from among alternatives.
A Rough Order of Magnitude (ROM)
________________is used for in-process programs and for ICEs when there is sufficient cost history. It typically relies on the techniques of EVM
An Estimate At Completion (EAC)
___________________is an independent estimate with risk incorporated that started with an external estimate (usually from the contractor or program office) and incorporates adjustments based on a more objective view of the program. These assessments may fall anywhere in the spectrum from a full-blown ICE to a cursory sufficiency review.
An Independent Cost Assessment (ICA)
_____________describes a specific mission requirement and lists specific alternative courses of action that will satisfy the requirement. Is a framework for systematically investigating problems of choice. Examines and compares the costs and benefits associated with each alternative course of action. It is also known as cost-benefit analysis or Business Case Analysis (BCA).
An Economic Analysis (EA)
A __________ would determine a full program cost including all development, production, and maintenance of the craft. For example, automation of tasks can have a high development effort but significantly reduce the cost to build and maintain the system. Therefore, a good understanding of life cycle costs informs decision making. It includes aircraft R&D, acquisition, maintenance, spare parts, and disposal.
Life Cycle Cost Estimate (LCCE)
An ____________ would assess a program office estimate for bias. Program risks may understate costs if the original estimating party is not detached from advocacy. Headquarters may want to do an objective estimate to make sure all program risks are captured.
Independent Cost Estimate (ICE)
