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GAO Cost Assessment Guide

GAO Cost Assessment Guide

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Published by: romulusx on Mar 04, 2009
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GAO COst EstimAtinGAnd AssEssmEnt GuidE
Best Practices for developing an managingCapital Progra Costs
United States Government Accountability Ofce
 Applied Research and Methods
GAO-09-3SPMarch 2009
GAO-09-3SP Pfa
he U.S. Government Accountability Oice is responsible or, among other things, assisting theCongress in its oversight o the ederal government, including agencies’ stewardship o public unds.o use public unds eectively, the government must meet the demands o today’s changing world by employing eective management practices and processes, including the measurement o governmentprogram perormance. In addition, legislators, government oicials, and the public want to know whethergovernment programs are achieving their goals and what their costs are. o make those evaluations,reliable cost inormation is required and ederal standards have been issued or the cost accounting thatis needed to prepare that inormation.
We developed the Cost Guide in order to establish a consistentmethodology that is based on best practices and that can be used across the ederal government ordeveloping, managing, and evaluating capital program cost estimates.For the purposes o this guide, a cost estimate is the summation o individual cost elements, usingestablished methods and valid data, to estimate the uture costs o a program, based on what is knowntoday.
he management o a cost estimate involves continually updating the estimate with actual dataas they become available, revising the estimate to relect changes, and analyzing dierences betweenestimated and actual costs—or example, using data rom a reliable earned value management (EVM)system.
he ability to generate reliable cost estimates is a critical unction, necessary to support the Oice o Management and Budget’s (OMB) capital programming process.
Without this ability, agencies are at risk o experiencing cost overruns, missed deadlines, and perormance shortalls—all recurring problems thatour program assessments too oten reveal. Furthermore, cost increases oten mean that the government
Federal Accounting Standards Advisory Board,
Statement of Federal Financial Accounting Standards No. 4: Managerial Cost  Accounting Standards and Concepts 
(Washington, D.C.: July 1995).
In the context o the Cost Guide, a program reers to all phases in a capital asset’s lie cycle—that is, concept analysis, technology denition, requirements planning, acquisition, and operations and maintenance.
EVM is a project management tool that integrates the technical scope o work with schedule and cost elements or investmentplanning and control. It compares the value o work accomplished in a given period with the value o the work expected in thatperiod. Dierences in expectations are measured in both cost and schedule variances. Te Oce o Management and Budget(OMB) requires agencies to use EVM in their perormance-based management systems or the parts o an investment in whichdevelopment eort is required or system improvements are under way.
Oce o Management and Budget,
Preparation, Submission, and Execution of the Budget 
, Circular No. A-11 (Washington,D.C.: Executive Oce o the President, June 2006);
 Management of Federal Information Resources 
, Circular No. A-130 Revised(Washington, D.C.: Executive Oce o the President, Nov. 28, 2000); and
Capital Programming Guide: Supplement to Circular  A-11, Part 7, Preparation, Submission, and Execution of the Budget 
(Washington, D.C.: Executive Oce o the President, June 2006). www.whitehouse.gov/omb/circulars/index.html.

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