Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Program Costs – dated March 2020
The U.S. Government Accountability Office (GAO) is responsible for assisting the Congress in its oversight of the federal government, including agency's stewardship of public funds. The Cost Estimating and Assessment Guide is a compilation of best practices that federal cost estimating organizations and industry can use to develop and maintain reliable cost estimates throughout the life of an acquisition program. It also discusses the importance of the relationship between cost estimating and earned value management (EVM). The March 2020 publication improves on the initial version of the guide published in 2009 to better describe and clarify best practices, provide additional content, and update case studies and references to legislation and rules.
Developing reliable cost estimates is crucial for realistic program planning, budgeting and management. The purpose of the Cost Guide is twofold; 1) to address generally accepted best practices for ensuring reliable cost estimates (applicable across government and industry) and 2) to provide a detailed link between cost estimating and EVM. Providing that link is critical, because it demonstrates how both elements are necessary for setting realistic baselines and managing risk. Government managers, auditors, and others can use the best practices in the Cost Guide to help them assess: 1) the reliability of a program's cost estimate for budget and decision-making purposes, and 2) the program's status using EVM.
Chapters 1 to 16 of the Cost Guide discuss the importance of cost estimating and best practices associated with creating reliable cost estimates. They describe how cost estimates are used to predict, analyze, and evaluate a program's cost and schedule and serve as a critical program control planning tool. The first two chapters discuss government's need for cost estimating and a general overview of types of cost estimates and related analyses. Chapter 3 introduces the 12 steps in developing a reliable cost estimate, the associated best practices, and how the steps and best practices relate to the four characteristics of a reliable estimate. Chapters 4 through 15 address each of the 12 cost estimating steps. Chapter 16 is a new chapter focused on the auditor, and recaps steps, best practices, and characteristics as well as the process for auditing and validating an estimate.
Chapters 17 to 20 discuss cost management and the use of earned value management for measuring program performance against an approved baseline plan. These chapters address best practices in implementing and integrating cost estimating, system development oversight, and risk management and their use to manage costs throughout the life of a program.