Improve Government Effectiveness with Cost Estimation and EVM

The Los Alamos National Laboratory security system project cost $213M, lasted more than 7 years and is yet to meet objectives, as reported by the ABQ Journal. Many taxpayers chalked it up as another way the Government is wasting money and failing to achieve goals; the examples are seemingly endless. Could effective cost estimating and the use of earned value management (EVM) minimize costly and ineffective Government projects such as this?

An essential reference guide for generating credible cost estimates for government programs is the GAO Cost Estimating and Assessment Guide published by the Government Accountability Office (GAO). According to FedTech, this guide combines the best practices of earned value management and cost estimation in government. EVM is a project management technique that measures the performance and progress on a project. Utilizing EVM can combine the measurement of cost, scheduling, and scope of a project. Using this management technique involves utilizing a project plan to identify the goals, a valuation plan, which is the budgeted cost of work that will be done in a given time period, and lastly a set of metrics to track the accomplished work.

The GAO’s guide is a practical manual that departments can use to plan and manage their programs. The guide provides specific details on how to generate cost estimates for government programs, as well as helping agencies to understand the important link between cost estimating and EVM. The guide includes working examples, why cost estimates are important, and definitions of cost analysis compared to cost estimating. Also included is information related to assembling a cost assessment team to implement the plan.

The two year effort that went into creating the guide incorporated experts in government, as well as industry, and included experienced project managers, program analysts, and experts in the fields of cost estimation and EVM. Since creation of the guide, the GAO has worked to keep the guide as up-to-date as possible to help battle against programs that fail to stay on schedule and budget. The guide points out that effective cost estimation supports the following:

  • Decisions about project funding
  • Development of annual budget requests
  • Evaluation of resource requirements
  • Development of performance measurement baselines
  • Realistic estimates of project costs

In an economy that is requiring major cutbacks in spending, accurate cost estimations and earned value management information can support efficient use of the funds that are available. To continue the discussion on effective cost estimating, or for assistance in setting up a strategy for effective management, contact us.  

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