Attach-12_Basis.of.Estimate.Desk.Guide_FINAL.docx

ATTACHMENT 12: W900KK-22-R-0012

BASIS OF ESTIMATE DESK GUIDE

BASIS OF ESTIMATE DEFINITION

Basis of Estimate (BOE) – Documentation that details the premise, or basis, from which proposed costs/prices were developed including cost and labor estimates, material availability, any assumptions or deviations, any studies or analysis used as a reference and any other details which impacted the cost estimates.

In plain English, it represents answers to the following questions:

1. What did you bid?

2. How did you come up with the estimate?

3. How do you know it is correct?

METHODS OF ESTIMATION

There are four (4) types of methods for determining the basis of an estimate. These are listed below.

1. Engineering Estimate (“EE”)

2. Analogy (“ANA”)

3. Actuals (“ACT”)

4. Level of Effort (“LOE”)

Explanations of each method are included in the following paragraphs.

Engineering Estimate A grass root or “bottom up” estimate is used when there are no comparable tasks previously performed on which to base your estimate. These estimates are based on subject matter expert experience with no specific relevant historical actual cost/hours identified. The subject matter expert develops the estimate based on the product description and tasks and operations required to be performed by the responsible department to manufacture/produce the product. This method requires detailed explanation of the rationale for materials and labor (including labor categories utilized as well as hours proposed), and must include detailed expression of the cost calculations used in the EE.

Analogy Analogy relies a great deal on expert opinion to modify existing system/performance data to approximate the new system or level of performance. If possible, the adjustments should be quantitative rather than qualitative, avoiding subjective judgments as much as is reasonably possible. This is an estimate derived from the historical actual cost/hours of a similar project, system/subsystem, or end item. Under this methodology you must identify the analogous program that has already been completed and why it is relevant to the same or similar task estimate. Include the relevant project name, project/contract number, period of performance, and task definition. Ensure that you describe a clear trace to how the analogous data was used to derive the current estimate.

This technique may use actuals but the efforts are usually “factored” for complexity level. For example if you have actual hours and material expended to generate a specific Unit, these values may be multiplied by a factor to equal the required design. If the Unit is twice as big but not as complex, the material may increase by a factor of 1.2 but the design time may only be .8 of the actuals. Similarly, if there are fewer parts than the prior Unit, the assembly time may be less. All mathematical calculations used to derive the proposed cost/price must be included as support.

Actuals An “Actual” is a past record of how long a task took to perform and/or how much material cost or other costs were associated with it. If you designed an assembly for the first time and assembled and tested three of them, there are things for which to account. Examples are listed below:

1. Did the design go well? You don’t want to include iterative design hours due to errors, re-do’s, or other factors outside of the normal efficient design process. “Actual” cost should reflect the “should” cost based on actual prior performance.

2. The first unit took a longer time to build and test than the other two. You have assembly and test times for the three units. Take an average to get a safe but not excessive number.

For material and subcontract estimates the three choices are:

1. Purchasing History;

2. Recent Vendor Quotes; and

3. Engineering estimates.

* Note that in all Material and Subcontract BOEs utilizing choices 1 or 2 above, you must support the BOE with appropriate back-up documentation:

1. Purchasing History: you will need to provide recent, relevant, order documentation and payment confirmation showing that the materials/subcontract were actually purchased and delivered.

2. Recent Vendor Quotes: You will need to provide appropriate documentation depending on the competitive or sole-source nature of the quote:

a. Competitive: Provide copies of the proposals received, with a simple justification as to why the selected vendor was chosen.

b. Sole-Source: Provide justification for sole-source acquisition, and provide a copy of your cost/price analysis, as well as sufficient vendor proposal information to allow independent Government analysis.

Level of Effort Method A form of parametric estimating is based on level of effort (LOE). Historically, LOE is used to determine future repetitive costs based on past cost data, (e.g. If 2 employees spent 1,000 person-hours to develop a guidance document last year, then similar documents may need a similar level of effort.). Often LOE estimates have few parameters or performance objectives from which to measure or estimate, but are carried for several time periods at a similar rate (e.g. the number of workers for a specified amount of time).

LOE estimates are normally based on hours and the number of full-time equivalents (FTEs). Since they are perceived to have little objective basis, LOE estimates are often subject to scrutiny. The keys to LOE estimates are that they should generally be based on a known scope of similar work.

GENERAL NOTES:

1. It is important to reference the program and task that you are using as a basis for bidding each task. This reference must include applicable Government Contract number.

2. You should list any assumptions, limitations, factoring, and justifications for your bid. This will help the reviewer evaluate your bid as relates to the stated requirement and also refresh your memory in the future.

3. Each BOE shall be explained via a narrative explanation of the methodology and the rationale behind the methodology used.

4. All BOE narrative information should be clear, concise, and thorough. BOE narrative information should be provided in complete sentences to make your position can be readily interpreted.

TRMC T&E/S&T BAA Attachment 12: page 3