Valuation in Cost Estimating: Taking a Page from the Investment Banker’s Playbook

Methods and Models II Track



Valuation is “the process of estimating what something is worth”. It is commonly undertaken in investment banking to support activities such as initial public offerings of company stock and mergers & acquisitions. The need for valuation analysis arose in a cost estimation setting in order to satisfy Office of Management and Budget budgetary treatment criteria, yet valuation techniques in general may be a useful addition to the cost estimator’s toolkit, facilitating price analysis and cross-checks of cost estimates. Likewise, cost estimation techniques may inform valuation analysis. While cost estimation generally results in market-independent estimates, valuation provides the viewpoint of what the market will bear. This presentation will provide an overview of four major valuation techniques: Price multiple; Replacement cost; Comparable transaction, and Discounted Cash Flow. A case study in valuation will be presented.


Kevin Schutt
Cobec Consulting, Inc.
Kevin Schutt has 15 years of experience as a consultant and analyst in a variety of government and private sector settings. As a senior consultant for Cobec Consulting, Inc., he supports the Federal Aviation Administration in cost-benefit analysis of proposed investments in the National Airspace System. He previously worked for the Treasurer and Chief Financial Officer of AARP where he achieved significant cost savings and cash flow improvement through process analysis and redesign. As a contractor to the U.S. Department of Labor, Mr. Schutt performed statistical analysis of pension plan data and built financial models to assess the impact of regulatory reform. He also has experience in the health policy field, having created a health insurance plan claims payment model and performed actuarial reviews of Medicare HMO rate proposals submitted to the Centers for Medicare and Medicaid Services. Mr. Schutt holds the Certified Cost Estimator/Analyst designation from the Society of Cost Estimating and Analysis, a Master of Business Administration and Master of Science in Finance dual degree from The George Washington University, and a Bachelor of Science in Mathematics from The College of William and Mary.