Cost Estimating—Back to Basics
We, as cost estimators, are often criticized for inaccurate estimates of new weapon systems, construction projects, or program concepts. We frequently comment that a cost estimate is only as good as the definition of that being estimated and the risks inherent in the effort being estimated. However, how often does the estimator request the program content information in such a manner or in sufficiency to develop the most “credible” estimate possible. I propose to remind estimators of several micro-economic principles involved in estimating, which oftentimes are inviolate due to the nature of their being.
The briefing begins with a simple model—inputs placed in concert with each other through processes result in an output. The briefing will then provide the ways to translate this model into a cost estimate. A discussion within the briefing will discuss the application of the model to a range of estimating challenges. The necessity to use this simple model in the field of cost estimating and analysis will be discussed. Finally, some personal perspectives from the author about the use of this model and the seeming complexities of cost estimating will be presented with the bottom line that the more simplified, less mathematical and formula driven the cost estimate is, the better the credibility of the estimate.
Dr. John C. Bredfeldt
Dr. John Bredfeldt began his venture in cost analysis as a 2nd Lieutenant in the Air Force in 1971 where his first assignment, lasted 5 years as a cost analyst in aircraft systems. He helped estimate the program costs of the F-5E, F-15, A-10, F-4E, and F-16 aircraft, and also analyzed the various Cost/Schedule Control System Criteria (today’s EVMS) reports for these aircraft. From there, in Washington DC, he served as a weapon system cost and financial inspector with the Air Force IG for 2 and one-half years and then served for 4 years as the chief economist and cost estimator for the DCS of Programs and Resources, at Headquarters Air Force, Pentagon. John attended Air Command and Staff College for a year, and in the Summer of 1984, he went to Headquarters US Air Forces Europe as the Cost Analysis Division Chief. His final assignment in an Air Force uniform was as the Program Control Chief, Special Operations Forces Aircraft Procurement Office at Wright-Patterson, where he lead a group of 16 professional financial personnel in all aspects of financial management and cost analysis for the procurement of aircraft and helicopters for the Air Force SOF mission. In early 1993, John retired from the Air Force as a lieutenant colonel and was hired as an economics and financial consultant with MTC Technologies to work with several programs at Robins AFB in their cost and financial challenges. Since 1979, John has taught economics, and business courses for several colleges and universities at his various sites of work. John has a BBA, with major in economics and minor in accounting from Wichita State University (1969), an MA in Economics from WSU (1971), and a doctorate in Public Administration from La Salle University (1995). John has written, published, and delivered many technical papers and briefings over the years, and he has written and published two books—one in 1995 and one in 2007, both in the field of public economic policy and finance.