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).
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/