Estimating the Estimate: Toward a Quick and Inexpensive Method for Weapons System Cost Estimation

Abstract

This paper describes a process to provide low-cost and timely cost estimation for weapons system and services procurements based on data analytics. This will enable quick estimation that can serve as a sanity check for more formal estimation methods. Specifically, this cost estimation technique is built on the price-to-win methodology used by defense companies to respond to DoD solicitations. The process is based on market clearing prices as reflected by actual winning bids, expert knowledge to validate the scope of work, and an algorithm developed to incorporate these aspects into an estimate. The process is an estimate of the estimate and meant as an adjunct to formal cost estimating processes. The value lies in the ability to create quick, inexpensive estimates responsive to management needs while the formal cost estimating process proceeds.