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Evaluation of the Cost Estimating Process

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EVALUATION OF THE COST ESTIMATING PROCESS

AT WHITE SANDS MISSILE RANGE

Technical Advisor

Francisco S. Reyes

White Sands Test Center

Budget Office

Prepared by

Andres Ruvalcaba

Materiel Test Directorate

Tactical Missiles Branch

December 2, 2004

EVALUATION OF THE COST ESTIMATING PROCESS

AT WHITE SANDS MISSILE RANGE

Andres Ruvalcaba

1. EXECUTIVE SUMMARY

Currently, White Sands Missile Range cost estimates account for the majority of the labor, material, contracts, and equipment costs. Thus, on the basis cost alone, WSMR’s cost estimating process must be carefully monitored and evaluated.

The problem in this study was to determine the options regarding improving the current cost estimating process. Specifically, my research included becoming a member of the Integrated Product Team focused on the Strategic Plan Initiative 1.1. My primary focus was determining the present level of the existing cost estimating tools. I compared what the Army, Navy, WSMR and NASA organizations were using and evaluated their performance to propose an effective cost estimating tool for the IPT to consider. Interviews with several Branch Chiefs familiar with cost estimating provided the principal data for this study.

Overall, nearly everyone I interviewed agreed upon the need of an effective tool that would provide a system for managing project costs, measuring earned value, analyzing budgets, actuals and projections. However, I found that everyone has their own method of doing cost estimates and how they are archiving them.

During my investigation I found forty-five existing cost estimating methods and narrowed it down to a list of five. I selected the five best that fit the needs of what the IPT was looking for. I evaluated each of their strengths and weaknesses. Therefore, I recommend that WSTC should consider further study of the methods I found to improve its current cost estimating process. In the meantime, I continue to work with the IPT in the development of an effective cost estimating tool that meets the requirements of Initiative 1.1.

CONTENTS

1. EXECUTIVE SUMMARY 2

2. INTRODUCTION 4

3. PURPOSE AND SCOPE OF THE STUDY 4

4. RESEARCH PROCESS 5

5. RESEARCH FINDINGS 6

6. CONCLUSIONS AND RECOMMENDATIONS 8

7. POTENTIAL BENEFITS 9

8. REFERENCES 10

EVALUATION OF THE COST ESTIMATING PROCESS

AT WHITE SANDS MISSILE RANGE

Andres Ruvalcaba

2. INTRODUCTION

Cost estimates are a rapidly growing and increasingly important factor in the future success of White Sands Missile Range. Without an effective way of cost estimating your chances of retaining current customers is dismal. However, by analyzing methods to improve cost estimates we can improve our processes and grow to be a striving organization.

This study inspired me to become a member of the IPT focused on Initiative 1.1 outlined in the 2004 WSMR Strategic Plan. Our goal as a team is to develop a coordinated cost estimating process and tool for the White Sands Test Center (WSTC). As part of my study I wanted to take a look at the current cost estimating process and how it works. As a result, I found that our process accounts for the majority of labor, material, contracts and equipment costs. Thus, on the basis of cost alone, our process must be carefully monitored and evaluated.

In addition, I compared what the Army, Navy, and NASA are using to create accurate cost estimates against what we are using. Primarily,

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