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Basis of Estimate Template - PowerPoint

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					                                 TRICARE
                                Management
HEALTH AFFAIRS                     Activity




           Independent Government
                Cost Estimate
                   (IGCE)
                              IGCE Definition
                                                                                    TRICARE
                                                                                   Management
HEALTH AFFAIRS                                                                         Activity



 • An IGCE is the Government’s estimate of the cost of a proposed
   contract action
       – FAR 15.404-1(a) requires contracting officers to ensure that the final
         contract price is fair and reasonable for all acquisitions through cost
         analysis
 • The IGCE is developed by the TMA requiring activity
 • An IGCE is based on:
       – Statement of Work (SOW) or Performance Work Statement (PWS),
       – Historical experience / costs
 • An IGCE must be developed without the influence of potential
   contractor’s marketing efforts


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                               IGCE Purpose
                                                                 TRICARE
                                                                Management
HEALTH AFFAIRS                                                      Activity



    • The IGCE is a key program management document
      throughout the life cycle of the requirement
    • Properly developed IGCEs can provide program and task
      managers with a valuable tool to:
          – Defend their use of resources
          – Make trade-off decisions
          – Manage their acquisitions
    • IGCEs are often the best estimate available to resource
      managers who must ensure and verify that these resource
      requirements are included in the budget and managed to
      support the acquisition

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                           IGCE Best Practices
                                                                                 TRICARE
                                                                                Management
HEALTH AFFAIRS                                                                      Activity



   • Form a Team Early
         – Users, acquisition managers, resource managers, technical experts,
           analysts, etc…
         – For complex acquisitions get a cost analyst involved
   • Team members
         – Provide functional and technical expertise
         – Excellent source of historical data and projections
   • Use a Structured Approach
         –   Work Breakdown Structure (WBS)
         –   Cost Element Structure (CES)
         –   Arrange by task
         –   Models or analogies with other acquisitions
         –   SOW/PWS, IGCE, and spend plans should all tie to this same structure
             and related cost elements.

                                                                                 4
                              IGCE Best Practices
                                                                               TRICARE
                                                                              Management
HEALTH AFFAIRS                                                                    Activity


    • Fully Document Assumptions and Basis of Estimates
          – Undocumented assumptions are often the cause of poor cost
            estimates or misunderstandings between the estimator and other
            members of the acquisition team
          – The Basis of Estimate (BOE) and its supporting documentation
            captures how the estimate was built and can be an important tool to
            be used by the Contracting Officer for negotiation
    • Key questions to ask before using any IGCE:
          –      How was the estimate made?
          –      What assumptions were made?
          –      What information and tools were used?
          –      Where was the information obtained?
    • A good IGCE clearly answers these questions
                                                                                  5
                        IGCE Best Practices Continued
                                                                              TRICARE
                                                                             Management
HEALTH AFFAIRS                                                                   Activity


  • Understand and Correctly Apply IGCE Results
        – Significant differences between the offeror's price and the IGCE may be
          a "Red Flag“ indicating a misunderstanding or disconnect between what
          is being offered and the requirement
        – Gross disparity may prompt the Government to:
                 •   Initiate and shape formal discussions
                 •   Reassess the SOW
                 •   Issue an amendment to the solicitation
                 •   Modify the contract
                 •   Cancel the requirement




                                                                              6
                          IGCE Cost Elements
                                       Labor                                     TRICARE
                                                                                Management
HEALTH AFFAIRS                                                                      Activity



 • Direct Labor Cost is the cost of labor directly applied to
   producing the requirement
       – Unburdened rates - includes only salary
       – Burdened (fully loaded) rates - includes salary plus an allocation of costs
         for overhead, general and administrative costs, and profit
 • Using burdened rates simplifies the cost estimating process
       – The accuracy of this method depends on the availability of recent,
         competitively negotiated burdened rates that have similar skill
         requirements as your acquisition




                                                                                 7
                           IGCE Cost Elements
                               Other Direct Costs                               TRICARE
                                                                               Management
HEALTH AFFAIRS                                                                     Activity



 • Other Direct Costs (ODC) are all costs (other than labor and raw
   materials) used to satisfy the requirement:
       –   Equipment
       –   Supplies
       –   Travel
       –   IT support
       –   Any other direct cost
 • Document the source or basis of any ODC estimates
       – Detailed equipment lists
       – Average costs of comparable equipment (from your market research)
       – Number and destination of travel requirements, airline cost, per diem, etc.
 • Do not use "Lump sum" ODC estimates
       – Lump sum estimates do not demonstrate IGCE validity and are useless in
                                                                            8
         making program tradeoffs or evaluating proposed alternates
                              IGCE Template
                                                    TRICARE
                                                   Management
HEALTH AFFAIRS                                         Activity



 • Assumptions and Basis of Estimate Remarks
       –   Period of Performance:
       –   Where work will be performed:
       –   Work week =
       –   Work month =
       –   Work year =
       –   Local Travel Rate =
       –   Local Telephone Cost =
       –   Reproduction Cost =
       –   Source of Labor Categories and Rates:
       –   Other Assumptions and BOE Remarks

                                    IGCE Example
                                                    9
                              IGCE Template
                                                           TRICARE
                                                          Management
HEALTH AFFAIRS                                                Activity



 • Program Information
       –   Program Name:
       –   Action Officer (Program/Task Manager)/Phone:
       –   Brief Description:
       –   Budget Reference:
 • Labor by Individual Task
       –   Labor category
       –   Labor hours
       –   Basis of estimate
       –   Low rate / low amount
       –   High rate / high amount
 • Labor Roll-Up for All Tasks
 • If any tasks are options, show them separately         10
                              IGCE Template
                                                                                  TRICARE
                                                                                 Management
HEALTH AFFAIRS                                                                       Activity




    • Other Direct Costs
          – Description
          – Quantity
          – Reason
    • Do not include surcharges in the IGCE
          – Many contracting agencies charge a fee (surcharge) for acquisition
            support
          – The contracting agency surcharge is a business cost, not directly
            attributable to the contract




                                                                                 11
                           IGCE Template
                                            TRICARE
                                           Management
HEALTH AFFAIRS                                 Activity



 • Coordination (signatures/phone/date)
       – IGCE Preparer
       – Resource Manager Coordination
       – Program Manager




                                           12
                          Conclusion
                                                                TRICARE
                                                               Management
HEALTH AFFAIRS                                                     Activity




 • Use a structured approach in developing your IGCE
 • A well-documented IGCE provides essential program cost
   information needed to evaluate and negotiate contract proposals
 • An IGCE is only as good as the quality and clarity of its
   underlying assumptions
 • The IGCE continues to serve as a key program management
   document throughout the life cycle of the requirement




                                                               13
                 Questions?
                               TRICARE
                              Management
HEALTH AFFAIRS                    Activity

				
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posted:11/14/2010
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Description: Basis of Estimate Template document sample