Chapter 1.1 Definition and Purpose

Question 1

(3) Primary Reasons for Cost Estimating are:

Answer 1

1.Budgeting -
2.Planning -
3.Trade-offs -

Question 2

As part of a total systems analysis, cost estimating helps decision makers:

Answer 2

-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

Question 3

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

Answer 3

cost oversight organizations.

Question 4

-During pre-systems acquisition phase, __________or __________ are useful.

Answer 4

AoAs (Analysis of Alternatives) or trade studies

Question 5

_________ are studies comparing technical, cost, and performance characteristics of multiple approaches and are used to select among alternatives before committing to a particular project.

Answer 5

AoAs (Analysis of Alternatives) or trade studies

Question 6

During systems acquisition, a _______________ is performed to compare competitors’ approaches to satisfying requirements.

Answer 6

source selection process

Question 7

After system development, a _________ can then be performed before full-scale production.

Answer 7

cost study

Question 8

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

Answer 8

Buying in

Question 9

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.

Answer 9

Pricing out of the market

Question 10

The characteristics of high-quality cost estimates are:

Answer 10

Accuracy
Comprehensiveness
Replicability
Auditability
Credibility
Timeliness

Question 11

Challenges to Cost Estimating:

Answer 11

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.

Question 12

_____________ 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.

Answer 12

Cost Analysis Requirements Description (CARD)

Question 13

A DoD CARD (Cost Analysis Requirements Description) includes

Answer 13

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

Question 14

Types of Estimates:

Answer 14

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)

Question 15

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.

Answer 15

Life Cycle Cost Estimate (LCCE)

Question 16

An ____________________ is a LCCE developed by an analyst outside the program or project office that tests the reasonableness of the program or project estimate.

Answer 16

Independent Cost Estimate

Question 17

A ______________ refers to estimates developed strictly to obtain authorization for funding. Has a wider margin for error than other types of estimates.

Answer 17

Budget Estimate

Question 18

The fundamental purposes of budget estimates are:

Answer 18

-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.

Question 19

___________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.

Answer 19

A Rough Order of Magnitude (ROM)

Question 20

________________is used for in-process programs and for ICEs when there is sufficient cost history. It typically relies on the techniques of EVM

Answer 20

An Estimate At Completion (EAC)

Question 21

___________________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.

Answer 21

An Independent Cost Assessment (ICA)

Question 22

_____________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).

Answer 22

An Economic Analysis (EA)

Question 23

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.

Answer 23

Life Cycle Cost Estimate (LCCE)

Question 24

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.

Answer 24

Independent Cost Estimate (ICE)

Question 25

An _________________ would evaluate the wing manufacturer’s estimate for bias and feasibility. Reviewing the prime contractor’s estimate for reasonableness and impartiality will determine if a sole-source contract is the best option.

Answer 25

Independent Cost Assessment (ICA)

Question 26

A _____________ would ensure the affordability of the portfolio. If another project is draining resources, the cost and schedule of this project could be impacted. Earlier stages of a program are sometimes given a certain amount of money to develop a technology or proof of concept. As the program moves towards Authority To Proceed (ATP), more emphasis is placed on generating a firm budget for future development and production.

Answer 26

budget estimate

Question 27

_____________ estimates would determine whether the cost of this next-generation plane is in the right ballpark. It is not as accurate as a full-scale estimate.

Answer 27

Rough Order of Magnitude (ROM)

Question 28

An ____________ would help down-select from early trades with cost and requirement impacts of solutions. The analyst might explore various designs: blimp, jet, and propeller. For short flights, the propeller could probably meet mission requirements at a much lower cost, while the jet is only effective at long ranges. Blimps could even be in the trade space, but the amount of money necessary to invest might make them stack up poorly against the other options.

Answer 28

Analysis of Alternatives (AoA)

Question 29

An ______________ would be useful when the jet design is already being built. A good assessment of spend rates and progress could identify serious problems. The jet has high-risk engines, and the best way to evaluate that impact is a good unbiased look at the program.

Answer 29

Estimate At Completion (EAC)

Question 30

An ___________ would provide a business analysis of different solutions to the problem. Is there a market for building a high-altitude near-supersonic plane? What should the passenger capacity be?

Answer 30

An Economic Analysis (EA)

Question 31

A _________ is the collection of cost estimating methodologies associated with a cost element or work breakdown structure that best reflects the cost of a future system

Answer 31

Cost model

Question 32

A ______ establishes a common frame of reference for relating job tasks to each other and for relating project costs at the summary level of detail. It provides a consistent and visible framework for specifying the objectives, labor, materials, and contracts of the program/system.

Answer 32

Work Breakdown Structure (WBS)

Question 33

For data to be useful, the data needs to be consistent and comparable to other data used in the estimate. The process to do this is called ____________.

Answer 33

normalization

Question 34

WBS items can sometimes be conveniently aggregated into one data need using a process known as __________. The items are weighted by some defining characteristic, such as weight, quantity, size, or percentage of the new design.

Answer 34

compositing

Question 35

The three basic costing techniques or methodologies available when developing a cost estimate are _______, __________, and _________.

Answer 35

analogy, parametric, and build-up