Cost Estimating & Basis of Estimate
Most overruns are created before award. They are created in an estimate that was never defensible, priced to win rather than to execute. The institution treats the estimate as the first and most consequential cost control.
Work Breakdown Structure First
No number is produced before the work is decomposed. The estimate follows the same work breakdown structure that will later carry the baseline, the charge numbers, and the performance report, so the estimate and the execution record speak the same language from day one.
- Product-oriented WBS extended to the level at which a responsible engineer can defend an hour count
- WBS dictionary entries defining scope inclusions and, equally important, exclusions
- One-to-one mapping from WBS element to cost account, charge number, and responsible lead
- Traceability from every solicitation requirement and statement-of-work paragraph to a WBS element
- Alignment with the customer's reporting structure where the contract specifies one
Documented Basis of Estimate
Every cost element carries a written basis of estimate stating the method used, the data behind it, the assumptions made, and the name of the person accountable for it. An estimate no one will sign is not used.
- Method identified explicitly: engineering build-up, analogy, parametric, vendor quote, or catalog price
- Source data cited — historical actuals, prior program records, published rate tables, or supplier quotations
- Assumptions written down where they are made, not reconstructed after the fact
- Estimator and technical approver named for each element
- Ground rules and assumptions consolidated into a single controlled document issued with the estimate
Labor Build-Up and Skill Mix
Labor is the dominant cost on engineering services work, and it is where cost realism findings most often originate. The build-up shows which labor category performs which task, at what level of effort, over which period, and why that mix is the honest one for the work.
- Labor categories matched to solicitation definitions with qualifications the assigned people actually hold
- Level of effort phased by month rather than averaged across the period of performance
- Skill mix justified against task complexity — no under-grading of senior work to reduce a bid
- Escalation applied by contract year using a stated, defensible index
- Uncompensated overtime not assumed as a source of cost reduction
Rates, Escalation, and Other Direct Costs
Indirect rates, escalation, travel, materials, and subcontracted effort are estimated with the same rigor as labor. Rate structures and values are competition-sensitive and are furnished through the acquisition's own channel rather than published.
- Indirect rates applied consistently with the disclosed accounting practice and the base each pool uses
- Provisional rates reconciled forward to expected final rates with the variance risk identified
- Travel estimated to the Federal Travel Regulation and GSA per diem tables for named trips, not as an allowance
- Material and equipment supported by quotations, catalog pricing, or documented historical actuals
- Subcontract effort supported by a subcontractor cost proposal and a price or cost analysis of it
Cost Risk, Reserve, and Confidence
Risk is priced rather than absorbed. Cost risk is identified alongside technical and schedule risk, quantified where the data allows it, and carried transparently instead of being buried inside optimistic hours.
- Cost risk register linked to the technical and schedule risk registers with shared identifiers
- Quantified risk analysis where historical data supports it; documented judgment where it does not
- Management reserve held at a defined level with release authority vested above the program
- Confidence-level discussion consistent with NASA cost estimating practice where the customer expects one
- Explicit identification of the assumptions whose failure would drive the largest cost growth
Independent Cost Review Before Submission
No estimate reaches a contracting officer without review by people who did not build it. The review is scheduled into the proposal calendar as a gate, not appended if time allows.
- Cost Review Board examination of the basis of estimate, rates, risk, and reserve before submission
- Cross-check of the cost volume against the technical and management volumes for consistency of effort
- Independent sanity check against analogous work and any available public benchmark
- Documented reconciliation of any change made between the reviewed estimate and the submitted price
- Chief executive approval of the final price and of any cost risk knowingly accepted
Estimating System Discipline
The estimating process is a system, not a spreadsheet habit. It is written down, applied consistently, and maintained so that the same inputs produce the same estimate regardless of who prepares it.
- Written estimating policy and procedures applied to every proposal above a defined threshold
- Consistency between estimating practice and accounting practice, as Cost Accounting Standards require
- Version-controlled cost model files with a documented audit trail of changes
- Retention of proposal cost files, supporting data, and rationale for the period the contract requires
- Post-award comparison of estimated to actual cost, fed back into the estimating data set
Where This Connects
Estimating discipline is exercised inside the capture process. See capture and proposal discipline, pricing and DCAA, and cost control and overrun prevention for what happens to the estimate after award.
Alignment Disclosure
Monarch Space Systems describes its cost estimating, accounting, and cost control practices as aligned with the cited federal regulations, agency guidance, and consensus standards. Alignment is not a determination. The institution does not claim an approved or audited accounting system, an approved estimating or purchasing system, an EVMS validation, a Cost Accounting Standards coverage determination, negotiated forward pricing or final indirect rates, or a completed incurred cost audit. Rate values, pricing data, and cost performance figures are not published; they are furnished to a contracting officer or auditor through the channel the acquisition requires.
Cost policy documentation, procedures, and control descriptions are available to customers and prospective teammates through the confidential engagement pathway or by request through institutional contact.