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N O T E. If the slide show is not launched, click on View  Slide Show in the menu bar at the top of the Power Point window. When the View option is not visible, the slide show has been launched and you must click to proceed to the next slide. “CLICK” TO CONTINUE….

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  1. N O T E If the slide show is not launched, click on View  Slide Show in the menu bar at the top of the Power Point window. When the View option is not visible, the slide show has been launched and you must click to proceed to the next slide. “CLICK” TO CONTINUE…

  2. C O S T E S T I M A T I N G T E C H N O L O G Y “CLICK” TO CONTINUE…

  3. C O S T E S T I M A T I N G T E C H N O L O G Y Analogy The analogy method is the simplest form of estimating. When historical information is available for a similar program that has already been completed, that information can be used to estimate costs for the proposed program. The estimator makes a subjective evaluation of the differences between the new system and historic systems. An example would be estimating the cost of a new model car based on what you paid for the same make and model 5 years ago. In many cases, it is necessary to compare subsystems of the new system to subsystems of several old systems in order to make the most accurate comparisons. An engineer will typically be asked to make a technical evaluation of the difference between the new system and the old system. Based on the engineer’s evaluation, a cost estimator must assess the cost impact of the technical differences. The analogy method is appropriate very early in the program life cycle when the system is not yet fully defined. When using this method, it is important that differences between the existing system and the proposed system (e.g., software languages, development methodologies, complexity) are identified and their impacts estimated. “CLICK” TO CONTINUE…

  4. C O S T E S T I M A T I N G T E C H N O L O G Y Advantages • The analogy method is based on actual experience. Disadvantages • In many instances, no truly similar programs exist. Subjective evaluations must be made by the technical staff and cost estimators when determining the cost impacts of the differences between old and new systems “CLICK” TO CONTINUE…

  5. C O S T E S T I M A T I N G T E C H N O L O G Y Parametric (Statistical) The parametric, or statistical, method uses a database of similar systems and generates an estimate based on the relationship of cost to system performance or design characteristics. This method assumes that there is a relationship between some system parameter (such as speed, weight, thrust, etc.) and cost. Parametric models generate cost estimates based on statistical relationships called Cost Estimating Relationships (CERs). Cost Estimating Relationships area mathematical equation relating cost as the dependent variable to one or more independent cost-driving variables. A CER relates cost to one or more physical capabilities or performance parameters of existing systems. The parametric method is appropriate early in the program life cycle when a detailed design specification is not available, but a database of like systems and performance specifications is available. This method often serves as a useful check of an estimate made using another method. The Parametric Cost Estimating Handbook, from NASA, provides a guide for implementing and evaluating parametric based estimating systems. The Handbook is a basic course in parametric estimating techniques and the material is structured so that each chapter in the Handbook can be used as a stand alone guide and reference. For more detailed information about parametric estimates, visit NASA’s parametric cost estimating web page at http://www.jsc.nasa.gov/bu2/PCEHHTML/pceh.htm. “CLICK” TO CONTINUE…

  6. C O S T E S T I M A T I N G T E C H N O L O G Y Advantages • Parametric estimates are fast and easy to use • Parametric estimates are easy to change to do what if drills. Disadvantages • This method relies heavily on the timeliness and accuracy of the database. “CLICK” TO CONTINUE…

  7. C O S T E S T I M A T I N G T E C H N O L O G Y Engineering (Bottoms-up) Bottoms-up estimating is generally a very detailed, costly and time-consuming process for estimating costs. This technique involves associating costs to the lowest levels of definable work within the Work Breakdown Structure (WBS). The direct labor hours required to complete the work are estimated from engineering drawings and specifications, usually by an industrial engineer using company or general industry standards. The engineers also estimate raw materials and purchase parts requirements. The remaining cost elements, such as tooling, quality control, other direct costs, and various overhead charges including systems engineering and project management must also be factored in. The engineering cost estimate is most often used during the production phase. This technique encourages the contractor to do his homework early on and define all work down to the lowest level of the WBS. It is also a great process control technique at the production facility. “CLICK” TO CONTINUE…

  8. C O S T E S T I M A T I N G T E C H N O L O G Y Advantages • Bottom-up method provides a detailed cost estimate and can be more accurate than other methods Disadvantages • Since detailed information is required, the bottom up method tends to be time and cost intensive • Historical data is not always available to support these estimates • There is a tendency to rely extensively on judgment “CLICK” TO CONTINUE…

  9. C O S T E S T I M A T I N G T E C H N O L O G Y Actual Costs (Extrapolation) The technique of using actual cost data to extrapolate the future estimated costs is probably the most accurate cost estimating method, when available. Actual cost experience on prototype units, early engineering development hardware, and early production hardware for the program under consideration should be used to the maximum extent possible. This method is usually used in late phases of acquisition, such as production and for replenishment spares. “CLICK” TO CONTINUE…

  10. C O S T E S T I M A T I N G T E C H N O L O G Y Advantages • One of the most accurate cost estimating methods because it is based on actual data. Disadvantages • There is uncertainty associated with this method based on the technical assessment of the differences between an earlier version of the system, such as a prototype and the current model under consideration. The more the two versions are alike and the farther along the system is in the acquisition process, the more easily an accurate estimate can be made. “CLICK” TO CONTINUE…

  11. C O S T E S T I M A T I N G T E C H N O L O G Y SAMPLE To print the PowerPoint slides, click on File  Print… You will then be prompted to choose your print options. Select them and click OK. “CLICK” TO CONTINUE…

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