Article by David S. Christensen and David A. Rees, 2002, published in the Journal of Cost Analysis and Management
This article discusses several methods used to evaluate the likely final cost of a defense acquisition contract, the Estimate at Completion (EAC). One method for calculating the EAC is derived from the Cost Performance Index (CPI). This article is a follow on to a 1993 article written by Christensen and Heise discussing the stability of the CPI to validate it still applied on contracts after 1991. The conclusion from analysis of later contracts confirms the cumulative CPI based calculated EAC for the early and middle stages of a contract is useful for determining a reasonable lower bound to the final contract cost. It is useful for limiting optimistic EACs. After 70 percent of the contract work is completed, the value of CPI-based EAC calculation diminishes because there is less to estimate; most of the authorized work has been completed.
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