GAO Cost Estimating and Assessment Guide

Because federal guidelines are limited on processes, procedures, and practices for ensuring credible cost estimates, the Cost Guide is intended to fill that gap. Its purpose is twofold—to address generally accepted best practices for ensuring credible program cost estimates (applicable across government and industry) and to provide a detailed link between cost estimating and EVM. Providing that link is especially critical, because it demonstrates how both elements are needed for setting realistic program baselines and managing risk.

As a result, government managers and auditors should find in the Cost Guide principles to guide them as they assess (1) the credibility of a program’s cost estimate for budget and decision making purposes and (2) the program’s status using EVM. Throughout this guide, we refer to program cost estimates that encompass major system acquisitions, as well as government in-house development efforts for which a cost estimate must be developed to support a budget request. The basic information in the Cost Guide includes the purpose, scope, and schedule of a cost estimate; a technical baseline description; a work breakdown structure (WBS); ground rules and assumptions; how to collect data; estimation methodologies; software cost estimating; sensitivity and risk analysis; validating a cost estimate; documenting and briefing results; updating estimates with actual costs; EVM; and the composition of a competent cost estimating team.6 The guide discusses pitfalls associated with cost estimating and EVM that can lead government agencies to accept unrealistic budget requests—as when risks are embedded in an otherwise logical approach to estimating costs. Since the Department of Defense (DOD) is considered the leader in government cost estimating, the guide relies heavily on DOD for terminology and examples that may not be used by, or even apply to, other federal agencies.