In preparing for a cost estimate, I came across the following list that was put together by a fellow named Andy Prince. This list is in Appendix O of the 2002 NASA Cost Estimating Handbook. I think it’s some pretty good advice to use to prepare any professional estimate.

  1. Everyone is an expert on cost. Get used to it.
  2. Understand your customer’s requirements. We provide a service to the Agency and that service must always in consonance with the customer’s needs.
  3. The cost breakdown structure (also called the work breakdown structure) is the foundation of the estimate. Put it together carefully to ensure that nothing is left out and that nothing is double counted.
  4. Carefully document all of your ground rules and assumptions. These are the heart and soul of the estimate. Many cost estimates have been misunderstood and misused because the ground rules and assumptions were not explicit.
  5. A cost estimate is by definition a subjective analysis. Seek as much independent input and review as time and circumstances allow in order to counteract your particular biases.
  6. The design engineers are your friends. Work closely with them to understand the complexities of their subsystem, as well as the uncertainties. If you have not met with every lead designer on a project and captured their knowledge and understanding into the estimate, your results are no better than a ballpark guess.
  7. Use all cost models with an ounce of skepticism. They are guides based on past experience and are at best a fuzzy predictor of the future.
  8. The only thing that can be said with certainty about a cost estimate is that the final cost will be different. The real question is not how right you are but how wrong you are.
  9. Make sure your work is logical and defendable. If you cannot explain how you arrived at your results based on the evidence in hand, past experience, and expert judgment you will not be taken seriously.
  10. Presentations should be clear and concise. Provide sufficient information to ensure that people understand how you arrived at your results, but don’t get bogged down in detail (put that in the backup charts for the occasional person who wants a core drill).
  11. Be careful with statistics and statistical analyses. NASA management often does not have the background to understand statistics and how they are used.
  12. Every estimator gets bloodied now and then. Don’t take it personally and don’t be defensive. Listen carefully for the message behind the attack, there may be something that you need to hear and act upon.
  13. I use what I call the half rule to tell if my cost estimates are reasonably accurate. The half rule says that if half the people in the audience think your estimate is too high, and half the people think your estimate is too low, you are probably about right.
  14. All cost estimates should be evaluated with a sensitivity analysis. The sensitivity analysis will tell you what is and is not important to the results, and can sometimes produce interesting surprises.
  15. A cost estimate is just that, an estimate. Perform a probabilistic risk assessment to understand the level of uncertainty in the estimate as well as defining a range of probable outcomes.
  16. A good cost estimate cannot overcome bad management. A cost estimate is just another piece of information that goes into the management puzzle. You cannot (and you should not) dictate how management chooses to use that information.
  17. You will often get pressure to produce a specific result. Be aware of that pressure and responsive to it, but don’t let it override what the data and your knowledge and experience tell you.
  18. Consistency before truth. If you have not established a consistent, logical process to achieving the estimate, then you can neither explain your results nor do you have a basis for improvement.
  19. The first test of any estimate is credibility. Credibility can only be established with the help of others. Independence is determined by who provides the assessment of credibility.
  20. Producing a good cost estimate is an iterative process. Anyone who thinks that they can get it right the first time is naïve.
  21. This profession is not for sissies and wimps. Integrity and courage are required to stand up for your work.
  22. Question everything. Question the inputs, the models, the assumptions, and the logic of the estimate. Question everything in the search for truth. But, be careful that the questioning doesn’t turn into an inquisition; you will loose credibility with your customer.