cost estimate | The Contracting Education Academy

September 8, 2015 By AMK

Air Force blames mistaken bomber costs on ‘human error’

The U.S. Air Force blamed mistaken cost estimates for the new bomber program — one of the most closely watched defense acquisition efforts underway — in part on “human error.”

As Bloomberg News reporter Tony Capaccio noted in a question to officials during a “State of the Air Force” briefing at the Pentagon, the service this year estimated the so-called Long Range Strike Bomber, or LRSB, would cost $58 billion over a decade, up from a previous estimate of just $33 billion — though the correct figure is closer to $42 billion.

Air Force Secretary Deborah Lee James said the following about the discrepancy:

“There has been no change in the costing factors over the last two years,” she said. “It was a mistake. It was a regrettable mistake. It occurred in part because of human error and in part because of process error, meaning a couple of our people got the figures wrong and the process of coordination was not fully carried out in this case. Coordination, of course, means other people are providing a check and balance and looking at the numbers, so that’s typically how something like this would get caught.”

Keep reading this article at: http://www.dodbuzz.com/2015/08/27/air-force-blames-mistaken-bomber-costs-on-human-error/

July 13, 2015 By AMK

DoD fails to comply with rules to curb contractor estimate deficiencies

The Defense Department’s contracting component hasn’t observed new rules meant to address deficiencies in the way contractors estimate prices for DoD, says a June 29 DoD inspector general report.

Contractor estimating systems encompass the policies, procedures and practices used by the contractor for generating estimates of costs and other data that are included in proposals submitted to the government.

And it’s important that those systems are accurate, the report says.

“Contractor business systems and related internal controls, including the estimating system, are the first line of defense against waste, fraud, and abuse,” GAO says.

Keep reading this article at: http://www.fiercegovernment.com/story/dod-fails-comply-rules-curb-contractor-estimate-deficiencies/2015-07-01

March 3, 2015 By AMK

DoD doesn’t know if it can sustain contracting database, says GAO

The Defense Department doesn’t know what resources it needs to sustain it’s contracting database, says a Feb. 18 Government Accountability Office (GAO) report.

The DoD has not assessed all resources that it will need to sustain the Synchronized Predeployment and Operational Tracker-Enterprise Suite – a repository of information on contracts and contractor personnel in contingency operations.

DoD has not updated its life-cycle cost estimate or fully defined and assessed its plans to determine the resources needed to sustain SPOT-ES, GAO says.

Specifically, the agency hasn’t updated its life-cycle cost estimate since 2010, despite changes to costs due to schedule delays, the report says.

Keep reading this article at: http://www.fiercegovernment.com/story/dod-doesnt-know-if-it-can-sustain-contracting-database-says-gao/2015-02-19

February 27, 2015 By AMK

Air Force claims $2 billion in acquisition savings from ‘should-cost’ management

The concept of “should-cost” management was a key component of the first version of the Defense Department’s Better Buying Power program when it was first rolled out almost five years ago.

But the Air Force’s top acquisition official said the idea hasn’t been forgotten: his service has used it to cut programs’ actual costs by an estimated $2 billion over the last several years, with more potential savings to come.

Should-cost is not strictly a new idea in government procurement. It’s been codified in the Federal Acquisition Regulation for decades, but it wasn’t until 2010 that the Pentagon ordered the military services to use it in all of their major acquisitions. In a nutshell, it requires program managers to set-aside the historically-based independent cost estimates that are developed for all big programs and that DoD is required to base its budgets on, and instead, manage their programs according to what they ought to cost.

Keep reading this article at: http://www.federalnewsradio.com/395/3802526/Air-Force-claims-2-billion-in-acquisition-savings-from-should-cost-management

July 16, 2014 By AMK

Quality cost data is key to making better management decisions

Cost estimating may not be as exciting as the new baseball season or the competition on American Idol, but for anyone in management, it is absolutely vital, if somewhat less entertaining. Especially if you’re involved in program management, procurement or finance you rely on high quality cost estimates every day. Why? Because they provide the foundation for informed decision-making.

As such, it’s essential for managers to be able to distinguish between two important, but very different (and often confused) types of cost estimates: life cycle cost estimates (LCCEs) and independent government cost estimates (IGCEs).

This table compares and contrasts the two types of estimates, to help decision-makers determine which one they need to utilize.

Life cycle cost estimates take a comprehensive view of a program. They include all costs, whether incurred by the government or the contractor, including labor, materials, facilities, hardware, software and integration costs, and sometimes even imputed costs. Life cycle cost estimates can be for 30 years or more. For high dollar programs, LCCEs are required by many government agencies at various acquisition milestones. For example, on very large programs the Defense Department requires LCCEs at three milestones before projects can proceed. Given the scope and duration of LCCEs, they are treated as living documents that should be updated annually.

Keep reading this article at: http://www.govexec.com/contracting/2014/07/quality-cost-data-key-making-better-management-decisions/87946/

The U.S. Air Force blamed mistaken cost estimates for the new bomber program — one of the most closely watched defense acquisition efforts underway — in part on “human error.”

The Defense Department’s contracting component hasn’t observed new rules meant to address deficiencies in the way contractors estimate prices for DoD, says a June 29 DoD inspector general report.

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