he U.S. Government Accountability Oice 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 eectively, the government must meet the demands o today’s changing world by employing eective management practices and processes, including the measurement o governmentprogram perormance. In addition, legislators, government oicials, and the public want to know whethergovernment programs are achieving their goals and what their costs are. o make those evaluations,reliable cost inormation is required and ederal standards have been issued or the cost accounting thatis needed to prepare that inormation.
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 relect changes, and analyzing dierences 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 Oice o Management and Budget’s (OMB) capital programming process.
Without this ability, agencies are at risk o experiencing cost overruns, missed deadlines, and perormance shortalls—all recurring problems thatour program assessments too oten reveal. Furthermore, cost increases oten 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 reers to all phases in a capital asset’s lie cycle—that is, concept analysis, technology denition, 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. Dierences in expectations are measured in both cost and schedule variances. Te Oce o Management and Budget(OMB) requires agencies to use EVM in their perormance-based management systems or the parts o an investment in whichdevelopment eort is required or system improvements are under way.
Oce o Management and Budget,
Preparation, Submission, and Execution of the Budget
, Circular No. A-11 (Washington,D.C.: Executive Oce o the President, June 2006);
Management of Federal Information Resources
, Circular No. A-130 Revised(Washington, D.C.: Executive Oce o the President, Nov. 28, 2000); and
Capital Programming Guide: Supplement to Circular A-11, Part 7, Preparation, Submission, and Execution of the Budget