NOT MEASUREMENT SENSITIVE DOE G 413.3-21A 6-6-2018 Cost Estimating Guide [This Guide describes suggested non-mandatory approaches for meeting requirements. Guides are not requirements documents and are not to be construed as requirements in any audit or appraisal for compliance with the parent Policy, Order, Notice, or Manual.] U.S. Department of Energy Washington, D.C. 20585 AVAILABLE ONLINE AT: INITIATED BY: www.directives.doe.gov Office of Project Management DOE G 413.3-21A i (and ii) 6-6-2018 FOREWORD A strong cost estimating foundation is essential to achieving program and project success. Every Federal cost estimating practitioner is challenged to strive for high quality cost estimates by using the preferred best practices, methods and procedures contained in this Department of Energy (DOE) Cost Estimating Guide. Content in this guide supersedes DOE Guide 413.3-21, Chg1, Cost Estimating Guide, 10-22-2015. The Guide is applicable to all phases of the Department’s acquisition of capital asset life-cycle management activities and may be used by all DOE elements, programs and projects. When considering unique attributes, technology, and complexity, DOE personnel are advised to carefully compare alternate methods or tailored approaches against this uniform, comprehensive cost estimating guidance. Programs may specify more specific processes and procedures that augment or replace those in this guide (e.g. NNSA Life Extension Programs (LEPs) fall under the process/timeline in the Phase 6.X process). Guides provide non-mandatory supplemental information and additional guidance regarding executing the Department’s Policies, Orders, Notices, and regulatory standards. Guides may also provide acceptable methods for implementing these requirements. Guides are not substitutes for requirements, nor do they replace technical standards that are used to describe established practices and procedures for implementing requirements. Send citations of errors, omissions, ambiguities, and contradictions found in this guide to [email protected]. DOE G 413.3-21A iii 6-6-2018 TABLE OF CONTENTS 1.0 PURPOSE ........................................................................................................................... 1 2.0 KEY GUIDANCE CHARACTERISTICS ............................................................................. 1 2.1 High-Quality Cost Estimates .......................................................................................... 2 2.2 Cost Estimate Structure................................................................................................... 4 2.3 Purpose of the Cost Estimate .......................................................................................... 6 2.4 Overview of the Cost Estimating Process Model ........................................................... 6 3.0 COST ESTIMATING INPUTS ............................................................................................ 6 3.1 Project/Program Requirements ....................................................................................... 7 3.2 Application of this Guide to DOE Estimating ................................................................ 9 4.0 COST ESTIMATING CHARACTERISTICS and CLASSIFICATIONS ............................. 13 4.1 Planning the Cost Estimates.......................................................................................... 13 4.2 Cost Estimate Classifications ........................................................................................ 15 4.3 Cost Estimate Ranges ................................................................................................... 17 5.0 COST ESTIMATING METHODS ..................................................................................... 18 5.1 Detailed Estimating Method ......................................................................................... 18 5.2 Parametric Estimating Techniques ............................................................................... 19 5.3 Other Estimating Methods ............................................................................................ 22 5.4 Methods of Estimating Other Life-Cycle Costs............................................................ 25 6.0 COST ESTIMATING DEVELOPMENT PROCESS.......................................................... 26 6.1 Overview of the Cost Estimating Process ..................................................................... 26 6.2 Estimate Planning ......................................................................................................... 33 6.3 Cost Estimate Inputs ..................................................................................................... 34 6.4 Cost Estimate Production .............................................................................................. 37 6.5 Cost Estimate Review ................................................................................................... 64 6.6 Estimate Reconciliation ................................................................................................ 65 6.7 Cost Estimate Documentation....................................................................................... 65 6.8 Estimate Maintenance ................................................................................................... 69 7.0 COST ESTIMATING OUTPUTS ...................................................................................... 70 7.1 Cost Estimate Interfaces ............................................................................................... 70 7.2 Presenting the Estimate to Management ....................................................................... 71 7.3 Baselines and Change Control ...................................................................................... 72 7.4 Analysis......................................................................................................................... 73 8.0 COST ESTIMATING EXPECTATIONS ............................................................................ 73 8.1 Summary of Expectations ............................................................................................. 73 8.2 Lessons Learned............................................................................................................ 74 8.3 Independent Cost Estimates and Cost Reviews ............................................................ 74 Appendix A: Acronyms and Definitions ................................................................................... A-1 Appendix B: Summary of Federal Requirements ..................................................................... B-1 Appendix C: Summary of DOE Requirements ........................................................................ C-1 DOE G 413.3-21A iv 6-6-2018 Appendix D: Generic Review Criteria .................................................................................... D-1 Appendix E: Example of the Calculation and Use of Economic Escalation ........................... E-1 Appendix F: Example of Life-Cycle Cost Analysis .................................................................. F-1 Appendix G: Cost Estimate Classifications (AACE International) ........................................ G-1 Appendix H: References .......................................................................................................... H-1 Appendix I: DOE Recommendations for Quality Cost Estimates ............................................. I-1 DOE G 413.3-21A 1 6-6-2018 1.0 PURPOSE The primary purpose of the DOE Cost Estimating Guide is to supply DOE cost estimating practitioners with uniform guidance, methodologies, and best practices to ensure development of high quality cost estimates. Although applicable to all cost estimating, this guidance is tailored to be largely applicable to the cost estimation of construction projects and/or programs. These cost estimates usually result in project independent cost estimates (ICEs) to validate a project performance baseline. They are similar but different from an independent government cost estimate (IGCE) normally used to support a contract action. The guidance considers all phases of the Department's work in creating credible project cost estimates that can be used to predict, analyze, and evaluate a project and program's cost and schedule, and serve as a critical program control planning tool. Once credible cost estimates have been presented to and approved by management, they can be used as a basis for measuring performance against an approved baseline using an Earned Value Management (EVM) System. While this guide is largely applicable to the cost estimation of construction projects and/or programs, the recommended practices and methodologies are also valid when applied to IGCEs. The IGCE can be used to support contract cost and price analysis, cost realism analysis for a negotiated contract action, or a contract source selection matter must be coordinated with the contracting officer and their supporting cost and price analyst to ensure that they are consistent with the prescribed methodologies, cost treatment, and guidance set forth in the Federal Acquisition Regulations, DOE Acquisition Regulations, and other agency policies and guidance. This guide references the GAO Twelve Steps of a High-Quality Cost Estimating Process (GAO-09-3SP) for techniques that have been proven to improve cost estimates. Formally documenting the cost estimate using the GAO 12-step process provides