A Real-World Example
Let’s look at an actual example of the application of these techniques. Cost Xpert Group, Inc. (www.costxpert.com) was hired to perform an independent cost analysis for the Transcom DEAMS Increment 2 program, and the resultant work was performed by William Roetzheim. DEAMS is a defense accounting and financial management information system (MIS) that is being implemented using Oracle’s eBusiness product (specifically, Oracle Federal Financials) using a spiral methodology. Increment 1 of the project involved spirals 1 and 2, while increment 2 involves spirals 3 and 4. There will be an Increment 3 procurement that will encompass spiral 5. Because the project is an ERP implementation, RICEW was used as the HLO set (Reports-Interfaces-Conversions-Enhancements-Workflows) with COCOMO environmental variables as the productivity adjusting variables. Help desk support was modeled using user counts by type as the HLO with system size in equivalent function points as the adjusting variable. Lifecycle support costs for deployed spirals that must be supported while building the next spiral were modeled using COCOMO II maintenance effort equations. Program management, blueprinting, and IOT&E support were modeled using Cost Estimating Relationships (CERs). The resultant model calculations were compared to actuals following increment 1 and found to be accurate within an 8% tolerance range. For an example of the use of these techniques to manage change requests during the life of a project, see [Tangella, 2010].
IGCEs are an important part of system acquisition at all stages of the project life, from budgeting through procurement through final delivery. Parametric models are a useful tool to support these estimates, offering improved accuracy and significantly reduced internal bias. IGCEs may be developed by government employees working for the agency involved; developed by an agency wide center of expertise (e.g., Navy Center for Cost Analysis, Air Force Center for Cost Analysis); or created by outside experts brought in for this purpose under a consulting agreement. The cost of performing the IGCEs will vary based on the size and complexity of the project; and for Price fair and reasonable analysis, also based on the number of proposals received. For IT projects in the $100M to $1B range, typical budgets would be:
- Feasibility/Budget: $50K to $100K
- Proposal Price Analysis: $100K to $200K
- Lifecycle Acquisition Support: $50K to $100K per year
- FAR 15.404-1
- FAR 7.103
- For an overview of IGCEs using this approach, see: McDonough, Barbara, et. Al, Independent Government Cost Estimates (IGCEs), presented at the 19th annual NARMP training conference, 2009.
- For an in-depth look at parametric estimation approaches in support of acquisitions, see: Parametric Estimating Handbook, DCAA, 1996
- Boehm, Barry, et. Al, Software Cost Estimation with COCOMO II, Prentice Hall, 2000
- See also OMB Circular A-94, Guidelines and Discount Rates for Benefit-Cost Analysis, 1993
- For an example of the successful application of this approach on a government contract, see: Tangella, Lakshmi, Validation of Software Cost Estimates, IBM, 2010