12-Step Cost Estimating Process with PRICE TruePlanning
Are you following a standard process when you do your cost estimates or are you just doing your estimates willy-nilly without any direction or consistency? Following a standard process helps you make sure that you do all the things you need to do to produce a quality cost estimate. If you don’t have a standard process you need to develop one or follow one like the Government Accountability (GAO) Cost Estimating Process (Figure 1). The GAO Cost Estimating Process consists of twelve (12) steps. Each step builds upon the others to develop a comprehensive and complete cost estimate. Each of the 12 steps is important for ensuring that high-quality cost estimates are developed and delivered in time to support important program decisions.
Figure 1. 12-Step GAO Cost Estimating Process
In a series of five blogs, I will show you how PRICE Systems in general, and PRICE TruePlanning specifically, supports the 12 steps of the GAO Cost Estimating Process; or any other thorough cost estimating process.
The GAO twelve-step process is divided into four phases (Figure 1):
- Initiation and research – in this initial phase you identify your audience and stakeholders, what the parameters of the estimate are, and what needs to be included in the estimate. Your main tasks are to:
- Define the estimate’s purpose
- Develop the estimating plan
- Assessment – during these iterative steps you are developing and refining your estimate in detail while supporting every input through documentation. To develop the best estimate you can, you must:
- Define the program
- Determine the estimating approach
- Identify ground rules and assumptions
- Obtain the data
- Develop the point estimate
- Analysis – this is where you qualify your point estimate and build confidence in your estimate when you:
- Conduct Sensitivity Analysis
- Conduct a risk and uncertainty analysis
- Document the estimate
- Presentation – in this final phase you are preparing and presenting your estimate to program leadership and stakeholders to achieve their buy-in and support. Your efforts focus on:
- Presenting the estimate to management for approval
- Updating the estimate to reflect actual costs/changes
The goal of each TruePlanning estimate is to be accurate and supportable based on industry standards. Following a standardized process for cost engineering while using the PRICE TruePlanning tool will ensure an accurate and supportable cost estimate.