Estimating Checklist
The Cost Proposal Book
1. Documentation of the entire process described in this checklist shall be maintained in an electronic “Cost Proposal Book,” which shall serve as a permanent, complete history of the development of the bid amount. The book shall include a roster of pursuit team members and the roles they played.
Cost discipline process
1. At the beginning of the pursuit process, the pursuit leader shall decide upon and shall establish in writing a cost discipline process to be applied to the pursuit and to the project if captured. It may be a variant of design to cost, cost as independent variable or other recognized process. The defining document shall state the goals of the process and shall assign responsibilities and specific actions to be taken. It shall describe in detail how bases of estimates and quality of estimate assessments are to be done.
Estimating team composition and prerogatives
1. The estimating team shall have a lead estimator who has led, or has assisted in leading, at least one similar estimate.
2. There must be an estimating team of sufficient size to accomplish the estimate without resorting to compression of the estimating schedule. The lead estimator shall be the judge of the size of the team and the skills required to be on the team.
3. The time made available to the team to create and check the estimate must take into consideration both the size and complexity of the project, and the variety of cost details and reports required by the customer and by management. The lead estimator shall be the judge of the time required.
4. The estimating team shall have available to it all tools that have been used in the past to prepare successful estimates, including computers, parametric estimating models, historical data for completed similar projects, spreadsheets, word processors, presentation tools, well lit, comfortable work spaces where all estimating team members can be co-located, telephones, a fax machine, and a copier.
5. The lead estimator shall have at least a bachelor’s degree from a properly accredited school in a business subject, or an engineering subject, or mathematics, or a physical science.
6. In addition to the lead estimator, there shall also be an assistant lead estimator who has at least a bachelor’s degree from a properly accredited school in a business subject, or an engineering subject, or mathematics, or a physical science, as well as at least five years of experience in estimating similar projects.
7. The lead estimator and the assistant lead estimator both shall have been thoroughly briefed on the cost definition and allocation methods approved for use in their organization by their organization’s accounting staff.
8. The lead estimator and the assistant lead estimator both shall have been thoroughly briefed on the human and other resources available for use in the project being estimated.
9. An experienced systems engineer or other senior technical person in the proposal technical team shall be designated to assist the lead estimator in interpretation of technical information related to the project, and in creating bases of estimates. This shall be the highest priority of this technical person, who shall put no other duties ahead of this obligation.
10. If manufacturing is to be estimated, a senior manufacturing engineer in the manufacturing team shall be designated to assist the lead estimator in the interpretation of manufacturing information related to the project and in creating bases of estimates. This shall be the highest priority of this engineer, who shall put no other duties ahead of this obligation.
11. If there are to be subcontracts, or significant material purchases, a senior purchasing agent shall be designated to assist the lead estimator in acquisition of vendor cost data related to the project and in creation of bases of estimates. This shall be the highest priority of this agent, who shall put no other duties ahead of this obligation.
12. For each parametric cost estimating model or accounting style cost model used by the team, the team must include at least one estimator with at least three years of estimating experience, who has at least a week of formal training in the model, to assure that model entries are made correctly, and model results are properly interpreted.
13. The lead estimator and the estimating team are members of the pursuit team but shall report directly to an executive who is senior to the pursuit leader, and who has final authority as to the amount to be bid. This person is the Bid Executive and his or her decisions relative to bid amount shall be final.
Project scope determination
1. The pursuit leader shall within one month of the beginning of the pursuit cycle create or cause to be created and shall make available to the pursuit team and to the lead estimator a document to be called the Project Scope Dictionary (PSD). This document shall be updated weekly throughout the pursuit cycle to keep it current. A brief summary of the nature of each update shall promptly be sent to members of the pursuit team and to the lead estimator. Each update shall be given a unique revision number and date, and it shall always be possible at a future time to readily establish the exact contents of a previous update. The PSD shall contain or shall refer to the location of each of the following ancillary documents:
a. Customer Goals Database (CGD), a database which collects all known customer goals, and which indicates how each one was confirmed as being valid. It shall also describe all goal ambiguities, possible mistakes in goal statements, and goal conflicts not yet resolved with the customer, plus statements of how problems with ambiguous or conflicting goals were resolved.
b. Proof of Compliance Matrix (PCM), a document that describes how in the proposal the pursuit team will credibly defend compliance with each entry in the CGD.
c. Product Work Breakdown Structure (PWBS), which shall contain a hierarchical listing not fewer than three or more than six levels deep of every item of hardware, software, and documentation required to be delivered under the contract.
d. PWBS Dictionary, which shall describe the nature of the contents of each element of the PWBS in sufficient detail that a member of the pursuit team or the estimating team can readily determine to which system or subsystem any element of project hardware or software belongs, once its function is stated.
e. Project Master Schedule (PMS), which shall as a minimum contain the planned start and finish dates of every development and production task in the PWBS. The PMS shall also identify the points in time when completion of defense of each element of the PCM is expected to be complete.
f. Current Product Design Baseline (CPDB), which shall be that set of drawings, specifications, trade study reports, and other documentation that defines and justifies the current product design baseline. The CPDB shall identify any design feature about which there is significant lack of certainty as to how it will be designed or procured, and further will set forth the design issues involved and the planned actions to resolve them.
2. Not later than five days after initial issuance of the PSD, the pursuit leader shall identify for the lead estimator all “buy” items of the PWBS, the names of the proposed vendors, and the proposed terms and conditions of the purchase to the extent they are known, including when during the project the purchase is expected to be made. As additional information about each buy item becomes available, it shall be promptly passed to the lead estimator.
3. The pursuit leader shall within one month of the beginning of the pursuit cycle create or cause to be created and shall make available to the pursuit team and to the lead estimator the Project Indirect Scope Dictionary (PISD). The PISD shall be updated monthly throughout the pursuit cycle to keep it current. A brief summary of the nature of each update shall promptly be sent to members of the pursuit team and to the lead estimator. The PISD shall contain or shall refer to the location of each of the following ancillary documents:
a. Indirect Customer Goals Database (ICGD), a database which collects that subset of all known customer goals expected to have a material effect on the amount or kind of indirect support required by the project, and which indicates how each one was confirmed as being valid. It shall also indicate and describe the presence of any goal ambiguities, possible mistakes in goal statements, or goal conflicts not yet resolved with the customer.
b. Indirect Support Functional Breakdown Structure (ISFBS), which shall contain a hierarchical listing not fewer than two nor more than four levels deep of every activity customarily charged to indirect cost (overhead) that will be needed to support the project, including but not necessarily limited to: i. Land
ii. Labor (by function)
iii. Material (by type)
iv. Services
v. Capital equipment
vi. Expensed equipment
vii. Buildings
viii. Infrastructure
Competitive bid range analysis and profit goal
1. As early as possible in the pursuit cycle, but not later than one month into the cycle, the pursuit leader shall determine and disclose to the lead estimator his or her assessment of the lower and upper limits of the competitive bid range, together with the entire analysis (in writing) used to determine these values.
2. As early as possible in the pursuit cycle, but not later than one month into the cycle, the pursuit leader shall determine and disclose to the lead estimator his or her assessment of the profit goal for the project expressed as a currency amount, e.g., dollars.
3. If circumstances are such that the assessments of the competitive bid range or of the profit goal change during the pursuit cycle, the pursuit leader shall immediately notify the lead estimator, and shall supply in writing the analysis leading to the change.
Resource estimating, risk analysis, and Best Bid analysis
1. The initial Project Direct Cost Estimate (PDCE), to be known as the PDCE1 estimate, shall be prepared by the estimating team not later than three weeks into the pursuit cycle. It shall use parametric and/or analogy methods, and vendor submittals, to the extent possible, and shall include fully burdened direct cost values for every WBS element. It shall be based on the current project baseline, i.e., the current PDSD as previously defined. Portions of the estimate made at the lowest level of the WBS shall be rolled up, and portions made at higher levels of the WBS shall be allocated down using rational methods.
2. A quantitative risk analysis shall be applied to the PDCE1 using the Bid to Win Simplified Risk Analysis method or equivalent (See Exhibit 14-2). Inputs to the risk analysis shall be approved by both the pursuit leader and the lead cost analyst. Any disagreements shall be resolved by the Bid Executive.
3. The PDCE1 estimate was made at an essentially unknown confidence level. The risk analysis shall be used to adjust it to the 50% confidence level.
4. A Best Bid analysis shall be performed using the Best Bid model or equivalent and the results of the BDCE and the quantitative risk analysis.
5. The results from PDCE1 and its associated risk analysis and Best Bid analysis shall be updated and compared to the prevailing DTC standard each time the PDSD is revised. These updates shall be designated PDCE2, PDCE3, etc. For each new estimate steps 2, 3, and 4 above shall be repeated.
Indirect support analysis
1. Determine from each of the estimates PDCE1, PDCE2, etc. the amount of overhead allocated cost included.
2. Based on the current PISD separately estimate the cost of all overhead activity planned for the project, and compare it to the current allocation.
3. Consider possible corrective action if the discrepancy is large.
Final review
1. When the sequence of estimates PDCE1, PDCE2, etc. has stabilized at values acceptable to the Bid Executive, there shall be a final bottom up review.
2. In the bottom up review, the lead persons (e.g., lead engineers, managers, subcontracts specialists, etc.) who contributed to the estimate shall all independently review the Cost Proposal Book, and shall either sign off on it as being acceptable, or shall create written objections. All written objections shall be disposed of by the Bid Executive, whose decisions shall be final.