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It is important to understand the significance of the Independent Government Cost Estimate. Along with the Statement of Work, the IGCE is an important document that has direct influence on how long it may take to execute an acquisition and, ultimately, the estimated cost of performance. It is not expected that individuals assigned as CORs will be expert cost estimators. Nor is it considered feasible that each receive specialized training in this area. It is necessary, however, that persons preparing the IGCE have "access" to individuals reasonably well trained in this discipline.
The government is entitled to receive quality supplies and services at fair prices. Under normal market conditions, competing offers ensure that adequate value is received. The contracting officer relies on the IGCE to assist in the determination of the acquisition strategy, as well as an estimated cost for the proposed effort. An under-estimated project can result in too little funding, delayed and iterative proposal processes, negotiation difficulties and delays, and other internal administrative problems.
The following are guidelines in generating the IGCE to be provided to the contracting officer:
- The IGCE can be calculated using prior historical rates and information.
- The IGCE should include detailed breakdowns of estimates for material and travel, if/when applicable.
- The IGCE should include methodology used for estimating the level of effort required.
- The IGCE should be structured to identify and address each subtask.
Development of the IGCE may be accomplished using one or a combination of methodologies. Several methodologies for IGCE development are identified and briefly explained below.
- Historical Data: Often the proposed requirement is similar or a follow on to a previously performed requirement. When this is the case, a review and analysis of historical data can be utilized to formulate the IGCE for the new requirement. When using historical data, the preparer needs to ensure: The present requirement is very similar to the previous requirement and that adjustments are made to the IGCE to reflect any differences Learning curve efficiencies are factored into the IGCE, when appropriate, to recognize greater contractor efficiencies Historical data reflects the most technically effective and cost efficient method to accomplish the requirements/effort Historical data is factored to account for differences in resource values over time (this will generally have an upward effect on estimates of labor costs, but may have a neutral or downward effect for costs such as equipment which may have declined in price in the marketplace) All reasonably accessible sources are utilized to gain analogous information (earlier efforts anywhere within other organizations, other government agencies, commercial efforts, etc)
- Industry Standards: For some types of work, (e.g., provisioning, technical documentation, and certain types of specification or software development) industry standards have been developed for the approximate number of hours and types of labor required to perform certain repetitive functions. These standards may be useful benchmarks from which to build the IGCE.
- Documentation Methodology: As part of the documentation submitted to support the IGCE, the preparer should indicate how the IGCE was developed. If historical data was used, the source of such data should be identified. If standards were applied, reference to those should be indicated. Or if, for example, a work breakdown using in-house experience at doing similar work is utilized, reference to the particular project or other similar reference should be shown with the IGCE. This reference is important, both as a record to be used for reference for future efforts, and as evidence of the realism of the IGCE so that it can be relied on by the contracting officer, if necessary.
Each IGCE should address the below-listed cost elements. Along with each portion of the cost breakdown there should be an explanation of the rationale used to formulate the estimate.
- Labor Mix/Hours: The IGCE should clearly indicate the labor categories and associated hours at each level to perform each task identified in the Statement of Work. For ease of evaluation and comparison, each task shall be listed in order in which it appears in the body of the SOW. In some cases where a particular task involves multiple functions; the preparer may want to further break down the IGCE according to these separate functions. If the SOW is broken down into subtasks, then there should be a separate analysis of each. One commonly overlooked consideration is in overall management or direction. The preparer should include a reasonable number of hours for this function. The preparer of the IGCE should consider the skills required for task order accomplishments, not individuals. The government is not bound to provide full-time employment for any contractor employee. Show only the number of hours that will be productively utilized.
- Subcontracting: For the purposes of developing the IGCE, the preparer should assume all work under the SOW will be done by the prime contractor even if the preparer knows or assumes the contractor will propose subcontracting a portion of the requirement. It is the contractor's responsibility to identify and propose work which it intends to subcontract.
- Travel: The IGCE should be consistent with travel requirements identified in the SOW. The IGCE should clearly indicate the anticipated destinations, number of trips, number of personnel involved with each trip, and trip duration. (NOTE: Travel time should be considered when calculating the trip duration, e.g., if the contractor is required to travel on Sunday for a Monday to Friday trip, the trip would be six days, not five. And travel hours should be included in compensable labor hour estimates.) All rates utilized in the IGCE should be consistent with those specified in the federal Travel Regulations.
- Other Direct Costs: The IGCE should identify all estimated costs other than labor and travel as ODC cost elements. The preparer of the IGCE should not include any cost element, whether it be a material or ODC, for general or miscellaneous office supplies. Such supplies are part of the contractor's normal business operations cost and should not be included as direct cost unless such supplies are unique to requirements.
It is important to note that the Independent Government Cost Estimate must be developed without any assistance or input from a contractor. It is totally inappropriate to develop the IGCE using input from a contractor since the IGCE may be the basis for the government's negotiation position relative to the contractor's cost proposal.