Unit I - Module I Cost Estimating Basics Flashcards
(104 cards)
Which of the following are the three major types of cost estimates?
A. Analysis of Alternatives, Budget Estimate, Independent Cost Estimate
B. Budget Estimate, Life Cycle Cost Estimate, Independent Cost Estimate
C. Independent Cost Estimate, Life Cycle Cost Estimate, Rough-Order-of-Magnitude
D. Budget Estimate, Independent Cost Estimate, Economic
B. Budget Estimate, Life Cycle Cost Estimate, Independent Cost Estimate
The three major types of cost estimates are Life Cycle Cost Estimate (LCCE),
Independent Cost Estimate (ICE), and Budget Estimate. Other types include
Rough Order of Magnitude (ROM), Estimate At Complete (EAC), Independent
Cost Assessment (ICA), Analysis of Alternatives (AoA), and Economic
Analysis (EA). “Economic Evaluation” is not a term commonly used to
describe a type of cost estimate.
True or False. A Cost Analysis Requirements Description (CARD) ensures that cost projections are based on a common definition of the system and the acquisition program.
True.
The purpose of a CARD is to collect, integrate, and coordinate technical, programmatic, and
schedule information necessary to estimate program costs.
A CARD ensures that cost projections developed by the analyst are based
on a common definition of the system and the acquisition program.
A Work Breakdown Structure…
A. Provides a financial reporting framework
B. Relates the work scope elements to each other and to the end products)
C. Evolves as system/program evolves
D. All of the above
D. All of the above
A Work Breakdown Structure (WBS) provides a common frame of reference for relating
job tasks to each other and relating project costs at the summary level of detail.
The WBS may evolve with the program.
True or False. Data collection should always begin after determining the estimating methodology.
False
In our standard process, we have data collection occurring after the development of the WBS and establishment of the program/system baseline.
The following steps
include data analysis and methodology selection. That being said, it is often a good
idea to have in mind potential methodologies before commencing data collection.
As we stress throughout CEBoK, data collection and data analysis should be
considered an iterative process.
Cost estimating and analysis at its best is an interdisciplinary mix which includes which of the following?
A. Economics, Sociology, and Mathematics
B. Statistics, Accounting, and Political Science
C. Probability, Marketing, and History
D. Engineering, Operations Research, and Statistics
D. Engineering, Operations Research, and Statistics
Some of the disciplines useful in cost estimating and analysis are Engineering, Mathematics, (including Probability and Statistics), Economics, Operations Research, Budgeting Accounting, Marketing, and Computer Science. Sociological, political, and historical considerations are a bit too far afield to have a direct bearing.
“Historical” in the cost estimating sense refers to the data that serves as the basis for our estimates.
True or False.
A Budget Estimate is also known as a Total Ownership Cost (TOC) estimate.
False.
TOC Estimate is a synonym for the more commonly used Life Cycle Cost Estimate (LCCE).
This type of estimate includes Research and Development (R&D), Production, Operations
and Support (O&S), and Disposal. A Budget Estimate generally spans a shorter time period (five or six years) that does not encompass all of these phases.
It also probably only corresponds to one or two line items in the budget, whereas a TOC Estimate or LCCE
encompasses all costs, regardless of funding source.
True or False.
Training and logistics plans should always be described in the Program/System Baseline documentation.
True.
The Program/System Baseline documentation should include all of the information found in a CARD (Cost Analysis Requirements Description), spanning system technical description,
work breakdown structure (WBS), predecessor system description, manpower requirements, risk, operational concept, deployment, logistics support concept, training, acquisition schedule, acquisition strategy, system test and evaluation (ST&E), and environmental
impacts analysis.
The training plan should include types of user training or certification, types of training or certification needed for system maintenance or administration personnel, training provider and location,
seat requirements, and frequency of training.
Logistics and supportability considerations are very important, because O&S is often the majority of life cycle cost (LCC), but because they are further in the future, they may not receive as much attention as they should.
The cost estimating process includes which of the following?
A. Data Collection and Analysis
B. Accounting and Financial Management
C. Results and Report Generation
D. Model Development and Validation
E. All of the above
F. A, B, and D only
G. A, C, and D only
G. A, C, and D only
True. Data collection and analysis, model development and validation, and results and report generation, in that order, are all steps in the cost estimating process.
Accounting and financial management is a related discipline.
True or False. Cost estimating can be applied with cookbook precision
False.
Amongst the limitations of cost estimating are that it cannot be applied with cookbook
precision; produce results that are better than input data; predict political impacts;
substitute for sound judgment, management, or control; or make final decisions.
High quality cost estimates have which of the following characteristics?
A. Traceability
B. Credibility
C. Replicability and Auditability
D. Accuracy
E. Comprehensiveness
F. All of the above
G. None of the above
F. All of the above
All the qualities listed, as well as timeliness, are characteristics of high quality estimates.
All the others contribute to the credibility of the estimate, which is the single most important quality of a good cost estimate, without which the benefits will be much harder to realize.
True or False. Cost analysis is required whenever resources are allocated.
True.
Since resources are not limitless, we must estimate and plan for the consumption of finite resources, such as labor, capital, and equipment, available to the program or job.
Cost estimating is required to manage changing requirements efficiently under tight constraints and to quantify the resource impact of alternatives to support management decisions.
A Life Cycle Cost Estimate (LCCE)…
A. Is often confused with an operations and support estimate
B. Compares the costs and benefits associated with each alternative course of action
C. Is a “cradle to grave” estimate
D. A and C only
E. B and C only
F. A and B only
G. None of the above
D. A and C only
A Life Cycle Cost Estimate (LCCE) is a “cradle to grave” estimate encompassing
Research and Development (R&D), Production, Operations and Support (O&S), and Disposal.
Because the emphasis of an LCCE is to include the oft-neglected O&S portion, it can be misconstrued as an O&S estimate. Choice B describes an Economic Analysis (EA).
True or False.
A well-documented estimate withstands intense scrutiny and increases the credibility of the estimate
True.
Robust and detailed documentation permits reviewers to follow estimate logic
from assumptions to results. At a minimum, it should provide reviewers with: the purpose and scope of the estimate; ground rules and assumptions; program background and system
description; schedule; and cost estimating methodology.
True or False.
Scatter plots provide the analyst with a good idea of the relationships and trends present in the data.
True.
Scatter plots develop visual depiction of the relationships in the data.
They provide the analyst with uncanny insight, a wealth of important information, and give a good idea of the relationships and trends present in the data.
Which of the following is not a benefit of cost estimating and analysis?
A. Can help choose between design alternatives
B. Can capture cost impacts of new technology or processes
C. Can transform a poor data set into a high quality estimate
D. Can establish and defend budgets
E. Can quantify impacts of program risks
C. Can transform a poor data set into a high quality estimate
Cost estimating, when done well, can provide all the benefits noted, but it cannot produce results that are better than the input data. Thus it suffers from the same “garbage in, garbage out”
phenomen that many processes do.
Which of the following are cost estimating techniques or methodologies?
A. Engineering build-up
B. Analogy
C. Extrapolation from actuals
D. Expert opinion
E. Parametric
F. All of the above
G. None of the above
F. All of the above
The primary cost estimating techniques are analogy, parametric, and engineering build-up, and extrapolation from actuals, encompassing averages, learning curve projections, and earned value management (EVM) estimates at complete (EACs), is also an important technique.
Keep in mind that expert opinion is not in and of itself a valid technique, but judgment and expertise are applied when using the other techniques listed above.
True or False.
Cross-checking an estimate with historical data for similar programs or other estimating methodologies or models does not assist in validating the estimate.
False
Estimates should always be based on historical data, but cross-checking them
against standard factors, rules of thumb, and the like increases the validity of and confidence in the estimate.
Remember that no estimate is ever right; the best we can hope for is to be in the
right ballpark – that’s why it’s called an estimate!
Which of the following would not be negatively impacted by an overly short turn-around time requirement for an estimate?
A. Ability to obtain needed data
B. Ability to coordinate with other organizations
C. Ability to perform regression analysis
D. Quality and detail of the estimate
C. Ability to perform regression analysis
Limited time to perform an estimate inevitably impacts the quality and detail of the estimate.
There may be inadequate time to coordinate with other organizations and obtain needed data.
If applicable data were available, in a continuously-maintained database, say, then the actual regression analysis could be performed fairly quickly using any of various tools available, including Microsoft Excel.
True or False. Cost estimates can be used to evaluate proposals for cost reasonableness.
True
For a government agency, accurate estimates assess the reasonableness of contractor proposals and program budgets and help the program office effectively defend budgets to oversight organizations
such as OSD, OMB, and the ODNI, and even to Congress.
What is the biggest concern that would prompt an agency to do an ICE?
A. What is the cost and requirement impact of different solutions?
B. Is the project affordable?
C. Is the estimate the same when unbiased?
D. Is money available when needed?
E. What solutions would meet mission requirements?
C. Is the estimate the same when unbiased?
While project affordability is paramount, the best way to ensure this is to conduct an
independent cost estimate (ICE), free from the bias of the program office. Program risks especially can be mistreated if the 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 and accurately assessed.
Cost estimating is the process of
collecting and analyzing historical data and applying quantitative models, techniques, tools, and databases to predict the future dollar amount of an item, product, program or task to facilitate the successful completion of a program, project, or process.
Often, the cost estimator will need to adjust for new materials, new technology, a new software programming language, or new resource allocations. Still, the estimate must never become divorced from historical experience or it risks losing credibility.
Cost estimating:
translates system/functional requirements associated with programs, projects, proposals, or processes into budget requirements,
determines and communicates a realistic view of the likely cost outcome of a system or program, and
forms the basis of the plan to develop, field, and support the system or program.
For commercial entities (i.e., contractors), this plan usually begins in the proposal stages where the cost estimate serves
as an important basis for a new business proposal which includes the management bid/no-bid decision.
For government entities, an Independent Cost Estimate (ICE) or the program cost estimate will often serve
as the basis for a program’s budget.