There are many reasons for cost overruns, but one of the key factors it the lack of resources (time, money, and staffing) spent to do proper up-front cost estimates. Another major reason is that the implements were not involved in the estimating. The purpose of this article is to address the issue of the cost to do a cost estimate . We will report on how others handle this issue and make suggestions on how the Deep Space Network (DSN) should estimate the amount to spend on a cost estimate and its impact on reducing the probability of a cost overrun.
We will report on our literature search and actual data from JPL procurement on what others charge JPL for a cost estimate. Our goal is to come up with guidelines with a methodology for estimating how much to spend on a cost estimate to achieve a desired accuracy. We think that many companies and government agencies typically underallocate resources for producing a cost estimate and, as a result, do not take the time to include all the necessary cost elements. This leads to cost overruns and/or de-scoping of the functional requirements of projects.
© 1993 AACE International
Remer, D. S. and Buchanan, H. R., "The Cost of Doing a Cost Estimate," Cost Engineering, 35, 3, 7 (1993).
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Copyright © 1993 by AACE International; all rights reserved.