CostMetrix Estimator Guide

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Parametric Cost Estimating Software
Version 3.0
for Windows
User’s Guide
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Version 3.0
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Copyright  1999, 2000, 2001 NHYSOFT, Inc.

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Version 3.0
Copyright  1999, 2000, 2001 by NHYSOFT, Inc.

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9th Edition, 010426
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Table of Contents
Page
What’s New in Version 3.0 .......................................................................................................... xii
1. Introduction ................................................................................................................................ 1
What is CostMetrix?............................................................................................................... 1
What is parametric cost estimating?...................................................................................... 2
Benefits of using cost models for estimating ......................................................................... 5
What is CostMetrix ModelBuilder?......................................................................................... 6
Cost models and tasks .......................................................................................................... 7
The history of parametric estimating...................................................................................... 7
Cost estimating with CostMetrix Estimator ............................................................................ 9
For better estimating accuracy............................................................................................. 10
Key features of CostMetrix Estimator .................................................................................. 11
What is a high quality cost estimate? .................................................................................. 11
System requirements ........................................................................................................... 11
Installing CostMetrix Estimator ............................................................................................ 12
Uninstalling CostMetrix Estimator ........................................................................................ 12
Getting help.......................................................................................................................... 12
2. Overview ................................................................................................................................... 13
How CostMetrix Estimator works ......................................................................................... 13
Tasks ................................................................................................................................... 14
Task types............................................................................................................................ 15
Summary tasks .................................................................................................................... 15
Parametric tasks .................................................................................................................. 16
Fixed Cost tasks .................................................................................................................. 16
Level of Effort tasks ............................................................................................................. 17
Explicit Formula tasks .......................................................................................................... 17
Manual Entry tasks .............................................................................................................. 18
Parameters .......................................................................................................................... 18
Quantity parameters ............................................................................................................ 19
Scale parameters................................................................................................................. 19
Grade parameters................................................................................................................ 19
Computed parameters ......................................................................................................... 20
Cost categories .................................................................................................................... 20
Escalation factors................................................................................................................. 21
Cost vs. price ....................................................................................................................... 21
Overhead and G&A.............................................................................................................. 21
3. Creating a Cost Estimate......................................................................................................... 24
Opening a new cost estimate............................................................................................... 24
Entering project summary information ................................................................................. 26
Importing project summary information ............................................................................... 30
Selecting the cost model...................................................................................................... 30
Browsing the Task List......................................................................................................... 31
viii
Activating a parametric task................................................................................................. 32
Entering bid rates ................................................................................................................. 36
Cost display options ............................................................................................................. 38
Importing bid rates ............................................................................................................... 38
Viewing the cost breakdown report...................................................................................... 40
Viewing the CER basis......................................................................................................... 41
Activating another Parametric task ...................................................................................... 42
Entering escalation rates ..................................................................................................... 44
Summary tasks .................................................................................................................... 47
Activating other Parametric tasks ........................................................................................ 47
Displaying the cost summary ............................................................................................... 48
Activating a Fixed Cost task................................................................................................. 49
Activating an Explicit Formula task ...................................................................................... 50
Displaying all active parameters .......................................................................................... 51
Activating a Level of Effort task............................................................................................ 52
Activating a Manual Entry task............................................................................................. 53
Adding a cost category to the estimate................................................................................ 55
Adding tasks to the Task List............................................................................................... 58
Entering the task CER basis ................................................................................................ 60
Itemizing travel expenses .................................................................................................... 61
Documenting groundrules and assumptions ....................................................................... 65
4. Getting Results......................................................................................................................... 68
Review the cost estimate ..................................................................................................... 68
Cost estimate reports........................................................................................................... 69
Customizing the report logo ................................................................................................. 71
Customizing the report header............................................................................................. 72
Customizing the rationale .................................................................................................... 72
Report Viewer controls......................................................................................................... 74
Saving reports ...................................................................................................................... 74
Using Microsoft Word to generate reports ........................................................................... 75
Customizing reports generated in MS Word........................................................................ 75
Cost risk analysis ................................................................................................................. 76
Displaying and entering cost risk information ...................................................................... 79
The Cost Risk Analysis report.............................................................................................. 80
Charts .................................................................................................................................. 81
Chart options........................................................................................................................ 84
Bid Metrics ........................................................................................................................... 85
Exporting schedule data to MS Project................................................................................ 85
Appendix A Sample Cost Estimate Reports............................................................................. 88
Schedule 1 – Direct Labor Tasks and Rationale ................................................................. 90
Schedule 1a – Groundrules and Assumptions .................................................................... 91
Schedule 1b – Direct Cost Summary by Category............................................................... 92
Schedule 1c – Tasks Descriptions....................................................................................... 93
Schedule 1d – Basis of Estimate ......................................................................................... 94
Schedule 1e – Parameters .................................................................................................. 95
ix
Schedule 1f – Task Dates and Performance Factors.......................................................... 96
Schedule 1g – Escalation Factors ....................................................................................... 97
Schedule 2 – Direct Material List ......................................................................................... 98
Schedule 3 – ODC Summary............................................................................................... 99
Schedule 4 – Direct Cost Summary by Task ..................................................................... 101
Schedule 5 – Direct Cost Breakdown by Task................................................................... 102
Schedule 6 – Liaison Travel Costs .................................................................................... 105
Schedule 7 – Proposal Bid Rates ...................................................................................... 106
Schedule 8 – Proposal Cost Summary.............................................................................. 107
Schedule 9 – Bid Metrics ................................................................................................... 108
Schedule 10 – Cost Risk Analysis ..................................................................................... 109
Index............................................................................................................................................ 111
Authorization Code Request & Registration Form ................................................................. 114
Customer Support Form ........................................................................................................... 115
x
xi
What’s New in Version 3.0
This is the third major release of the CostMetrix ModelBuilder and Estimator suite of parametric
cost estimating software for Microsoft Windows-based personal computers. Here is a brief
summary of some of the new features in this release.
ƒ Computed parameter formulas in a cost model can now reference other computed parameters
so there can be mathematical chains of variables that depend on each other. CostMetrix
ModelBuilder checks each formula to prevent circular references that cannot be resolved.
ƒ Explicit formula tasks can now use formulas that reference other explicit formula tasks so
there can be mathematical chains of explicit formula tasks that depend on each other.
CostMetrix ModelBuilder checks each formula to prevent circular references that cannot be
resolved.
ƒ The basis of the CERs for each task can now be documented in the cost estimate.
ƒ ModelBuilder now compiles and embeds cost variance information in the cost model for cost
risk analysis. CostMetrix Estimator now includes a Risk Analysis report that shows the likely
cost range for each task and the total estimate.
ƒ While the internal Report Viewer is still included, reports can now be generated in Microsoft
Word 97 or Word 2000. This feature requires that Word 97 or Word 2000 be installed on
your system.
There are also many subtle improvements “under the hood” of CostMetrix Estimator. These new
features and enhancements help make Estimator even more powerful, faster, and more
productive. If you have an idea for an additional enhancement, please feel free to contact us at
www.nhysoft.com. We would like to hear it!
xii
xiii
1 Introduction
Welcome to CostMetrix Estimator, a software program that will help you
produce faster, better project cost estimates. CostMetrix Estimator is a
powerful and flexible estimating tool that lets you quickly and easily prepare
detailed, well-documented project cost estimates based on custom-built
parametric cost models created using a companion software program called
CostMetrix ModelBuilder. These two tools, CostMetrix Estimator and
CostMetrix ModelBuilder, are an integrated system that makes estimating
the cost of complex projects much easier, faster, and more reliable.
This User’s Guide describes the features and use of CostMetrix Estimator
for creating cost estimates. If you will also be designing cost models, you
should first review the CostMetrix ModelBuilder User’s Guide and then
return to this manual, starting in Chapter 3. This chapter includes the
following topics:
ú What is CostMetrix?
ú What is parametric cost estimating?
ú Benefits of using cost models for estimating
ú What is CostMetrix ModelBuilder?
ú Cost models and tasks
ú The history of parametric estimating
ú Cost estimating with CostMetrix Estimator
ú Key features of CostMetrix Estimator
ú System requirements
ú Installing and uninstalling CostMetrix Estimator
ú Getting help
What is CostMetrix is a revolutionary software suite from NHYSOFT, Inc., designed

CostMetrix? to facilitate the development and use of custom parametric cost estimating
systems in the engineering and manufacturing fields. CostMetrix makes it
easy to develop and validate powerful parametric cost models, and provides
the tools to automate the use of those cost models for project cost estimating
and cost risk analysis.
CostMetrix consists of two separate software modules; ModelBuilder and
Estimator. ModelBuilder was designed specifically to make the process of
developing, validating, and documenting parametric cost models faster,
easier, and less expensive. It offers an intuitive graphical user interface and
CostMetrix Estimator User’s Guide

2 Chapter 1 Introduction
automates the statistical analysis functions needed to extract parametric cost

estimating relationships directly from historical project data.
CostMetrix Estimator lets you quickly and easily create parametric cost
estimates based on your CostMetrix ModelBuilder cost models. It also has
an intuitive point-and-click graphical user interface and simplifies and
improves the cost estimating process with the following key features:
ƒ Work elements displayed in a logical hierarchical tree

ƒ Task-sensitive parameter display and editing
ƒ Automatic escalation adjustments for material cost inflation
ƒ Easy importing of bid rates and factors
ƒ Automatic generation of rationale and basis of estimate documentation
ƒ Graphical display of cost and resource profiles during the period of the
project.
ƒ Cost risk analysis to show the range of cost uncertainty that can be
expected with each estimate.
ƒ Reports output directly to Microsoft Word.
This manual describes the features and use of CostMetrix Estimator. The
reader is referred to the user’s guide for CostMetrix ModelBuilder for a
detailed description of that product.
What is parametric Cost estimating is a critical business function in industries such as manu-
cost estimating? facturing, engineering, and contracting. In many cases, the accuracy of the
project cost estimates can determine the ultimate success or failure of the
company. Parametric cost models are powerful tools that can provide
accurate project cost estimates in a fraction of the time and effort of tradi-
tional methods. Indeed, they are so effective that the U.S. Department of
Defense (DoD) stated in the. the Parametric Estimating Handbook1 that
using parametric cost models "can result in significantly reduced proposal
development, evaluation, and negotiation costs, and associated cycle time
reductions".
In its simplest terms, a cost model is a set of algorithms (mathematical
formulas) for estimating cost. These algorithms “model” the key
relationships between project variables and cost. CostMetrix ModelBuilder
uses a graphical user interface to help you build sophisticated cost models
for your projects. Once developed, a CostMetrix ModelBuilder cost model is
a very powerful business tool that can be used with CostMetrix Estimator for
cost proposals, internal budgeting, and strategic decision making.
Parametric cost models fall into two categories; commercial and proprietary
(company-developed). Commercial parametric estimating models contain
1
The Parametric Cost Estimating Handbook is available through the International Society of
Parametric Analysts (ISPA) and can be downloaded from the parametric cost estimating web
site at www.ispa-cost.org/PEIWeb/.

Chapter 1 Introduction 3
generic algorithms and estimating methods based on a database of industry-

wide data, encompassing many different products. A company must calibrate
a commercial parametric model to make it useful for estimating of the costs
of that specific organization, before it is used as a basis of estimate for
proposals submitted to the Government or higher-tier contractors.
According to the Parametric Estimating Handbook, one key reason
companies develop proprietary parametric cost models is because they have
specific estimating needs that cannot be met using commercial parametric
models. In many instances the algorithms and estimating methods in a
commercial cost model do not adequately represent the specific products,
cost-drivers, technologies, processes, or business culture of a particular
company.
Unfortunately, few specialized tools are available to assist the individual or
company in the development or use of proprietary cost models, particularly
cost models that rely heavily on historical cost data for the derivation of
CERs. Spreadsheet programs are the most commonly used tools for this
purpose but they have significant shortcomings. For example, it typically
requires a substantial time investment to develop a workable layout and
structure for cost model design with effective algorithms for parametric CER
derivation, especially for those who are less than seasoned cost model
developers.
Deploying spreadsheet-based cost models to a group of estimators presents
certain logistical problems such as how to ensure that the most recent
version is being used, and how to prevent estimators from altering key
features like CERs, either accidentally or intentionally. Spreadsheet
programs can result in “fragile” estimating tools that can be easily misused
by unfamiliar users and may require the intimate knowledge of the developer
to operate effectively.
Spreadsheet-based cost models can also be difficult and labor intensive to
maintain. Frequently, only the original developers understand them well
enough to perform regular maintenance functions, and/or explain them to
auditors. As a result of all of these issues, many companies have limited
success developing proprietary parametric cost models, or they avoid trying
at all.
ModelBuilder and Estimator are an integrated set of software programs
from NHYSOFT, Inc., developed specifically to assist companies in
developing and using proprietary parametric cost models. These programs
were designed to overcome the real-world challenges of parametric cost
model development and deployment described above. CostMetrix
ModelBuilder is used for cost model development and CostMetrix Estimator
is used for generating cost estimates.
The figure below shows a diagram of the cost model development process
recommended by the DoD Parametric Estimating Handbook. CostMetrix
ModelBuilder and CostMetrix Estimator were designed to perform or assist
eight of the ten major steps.

1 Identifying the Parametric Opportunity
2 Preliminary Model Design 3 Information Systems Needs
5 Model Development 4 Data Collection/Analysis
6 Calibration/Validation 7 Estimating Policies/Procedures
9 External Approval Process 8 Internal Approval Process
10 Model Maintenance
steps where CostMetrix ModelBuilder and Estimator aid cost

=
model development and use
CostMetrix ModelBuilder makes the process of developing, validating, and

documenting cost models faster, easier, and less expensive than using
conventional tools such as spreadsheets. The software provides an easy to
use graphical user interface that was created specifically for cost model
development and maintenance. Using its unique CER Solver, CostMetrix
ModelBuilder can automatically derive parametric cost estimating
relationships (CERs) from historical data compiled from a company’s prior
projects. It also analyzes the quality of the cost estimating relationships it
derives using standard statistical measures of accuracy and correlation to
help the developer assess the cost model quality.
A CostMetrix ModelBuilder cost model is easy to maintain and update with
new project data, even by someone other than the original developer. It
provides comprehensive documentation of the cost model details and
statistics to make auditing easy, and produces a robust cost model that can be
easily deployed directly to estimators or stored on a server for easy version
management.
CostMetrix Estimator is the second part of the integrated cost estimating
system. It lets estimators quickly and efficiently produce cost estimates
based on the cost estimating relationships contained in CostMetrix
ModelBuilder cost models. It has intuitive graphical user interface that is
designed specifically for parametric cost estimating, with a checklist format
for selecting tasks, and convenient prompts for needed parameter values.

CostMetrix Estimator can import labor bid rates, record groundrules and
assumptions, automatically adjusts material and other direct costs for
inflation based on escalation tables, and use manual cost entries for special
cases such as when suppliers or other organizations submit bids that must be
added to the cost estimate.
CostMetrix Estimator provides comprehensive output with summary and
detail cost reports to help the estimator evaluate the results and document the
estimate, and the “rationale” that explains how the estimate was derived for
archive and audit purposes. It also provides charts of cost by month during
the proposed project to identify resource needs and reveal spending profiles.
Of course the completed estimate can be saved electronically on disk for
archive, review, or editing.
Benefits of using Some of the many benefits of using parametric cost models for estimating
cost models for are:
estimating
More reliable estimates with less subjectivity – A cost model derived and
validated using historical cost data will be much less subjective than
personal estimates and will prove consistently more reliable.
Much faster estimates and estimate revisions – A cost model can eliminate
much of the labor and tedium associated with creating cost estimates.
Estimates that might take many hours to prepare by manual methods can be
generated in minutes with a cost model. Estimate revisions can also be made
quickly and easily.
Consistently higher estimate quality with minimal estimator-to-estimator

variability – A good cost model can allow less experienced estimators to
produce estimates comparable in quality to the best estimators in the
organization because the critical estimating rules are built into the cost
model and do not rely upon the estimator’s personal experience.
Track cost trends and productivity using the metrics developed with the
cost model – A cost model can provide important cost and performance
metrics which measure the productivity and efficiency of an organization.
Implement design-to-cost with a cost model – Since it facilitates rapid cost

estimating, a good cost model allows project parameters to be quickly
iterated and optimized to achieve cost targets, and that is the fundamental
basis of design-to-cost.
Reduced cost of estimating – With a cost model, cost estimates can be

prepared in a fraction of the time compared to manual methods, saving labor
costs as well as cycle time. The time associated with developing a cost
model can be easily recovered many times over by the savings realized
through subsequent estimates.

Highly supportable cost estimates – A supportable cost estimate is one that

has a reasonable and logical basis. A good cost model uses objective data
and methods, thus providing a sound basis for estimating which can
withstand the scrutiny of audits.
What is CostMetrix CostMetrix ModelBuilder builds cost models in a way that is analogous to
ModelBuilder? the way a finite element program builds structural models for stress analysis.
A finite element program can model complex structures by breaking them
down into small pieces, each of which can be accurately characterized using
various types of standard elements. In other words, complex structures are
analyzed as the sum of many simple elements. Once built, a finite element
model can be subjected to various load cases to accurately predict stresses,
strains, etc.
In a similar way, CostMetrix ModelBuilder models the cost of a complex

project by breaking it down into individual elements or tasks, each of which
can be estimated using various types of standard relationships or algorithms.
The cost of a complex project can then be readily estimated as the sum of the
cost of the individual tasks.
Each task in a CostMetrix ModelBuilder cost model can have its own unique
algorithms for calculating cost. CostMetrix ModelBuilder lets you
incorporate cost estimating relationships you may have previously
developed, plus it includes a powerful Solver that can automatically derive
cost estimating relationships from past project cost data. This is a powerful
capability that no other cost estimating system offers.
A cost model needs a user interface to make it useful for estimating.

CostMetrix Estimator was designed specifically for this purpose. It allows
you to create cost estimates quickly and efficiently using any CostMetrix
ModelBuilder cost model. It makes selecting tasks and entering parameters
for cost estimates easy, and it offers a complete set of reports to document
each cost estimate. These reports are comprehensive enough to support cost
proposals in both the government and commercial contracting domains.
These two tools, CostMetrix ModelBuilder and CostMetrix Estimator are an

integrated system that can dramatically reduce the time and labor required to
create high-quality project cost estimates. In a typical scenario, a few key
individuals in a department or division use CostMetrix ModelBuilder to
develop cost models for each project type that is commonly bid. Tools
included in CostMetrix ModelBuilder allow you to assess and validate the
quality of the cost model as it is being developed. Once the cost models are
completed, tested, and approved by management for bidding purposes, they
are distributed to each individual in the organization that generates project
cost estimates, along with the CostMetrix Estimator software. CostMetrix
Estimator can read the contents of CostMetrix ModelBuilder cost models but
cannot edit them, so there is no chance that the basic estimating algorithms
will be accidentally (or intentionally) altered by estimators.

When cost estimates are prepared using CostMetrix Estimator, management

will have more confidence in the cost proposals because the estimating
algorithms are well established and are pre-validated. This simplifies the
review process greatly and expedites the flow of the estimate through the
typical approval steps.
Cost models and The cornerstone of a CostMetrix ModelBuilder cost model is the Task List; a
tasks hierarchical set of work or cost elements. Cost estimators select tasks from
this list to be included in each project cost estimate. Each task in the Task
List has unique cost estimating relationships (except Summary tasks and
Manual Entry tasks described below).
A Parametric task is employed when CostMetrix ModelBuilder is used to

derive cost estimating relationships based on parameters and cost data
collected from prior projects.
A Fixed Cost task is used when the cost of a task is a fixed amount of labor,
material, or other direct costs.
A Level of Effort task is used when the cost of a task is proportional to its
duration. The cost/week (in hours and/or dollars) is defined in the cost model
and the estimator specifies the duration of the task.
An Explicit Formula task is used when the cost estimating relationship is a

function explicitly defined by the cost model designer. It may involve
constants and parameter values, or it can be a function of the cost of other
tasks in the cost model.
A Manual Entry task is used when the cost estimate for a task must be
entered manually. This type is frequently used when a cost estimate for a
task must be provided by an outside organization, such as a subcontractor.
A Summary task is used in a cost model to break a major activity down into
multiple subtasks. The Summary Task serves as a cost summary for a group
of subordinate subtasks.
Therefore, there are six different types of tasks you may encounter when
using CostMetrix Estimator.
The history of A key goal in the development of CostMetrix ModelBuilder and CostMetrix
parametric Estimator was to make it easier to employ parametric estimating techniques
estimating which are recommended by the U.S Department of Defense (DoD) as the
best practice for cost estimating. According to the DoD, a parametric cost
estimate is one that uses cost estimating relationships and associated
mathematical algorithms (or logic) to establish cost estimates. A parametric

cost model is a group of cost estimating relationships used together to

estimate entire cost proposals that consist of multiple cost elements.
Parametric cost modeling techniques were first developed in the 1950’s by

the Rand Corporation for the DoD for estimating the cost of new military
acquisition programs. Rand Corporation, a think-tank for independent
analysis had a staff of cost analysts that proved to be early pioneers in the art
and science of cost analysis. Rand developed the basic tool of the parametric
cost estimating technique, which they called the cost estimating relationship
(CER), to predict the cost of aircraft as a function of variables such as speed,
range, and altitude.
The cost estimating relationships Rand developed did not attempt to analyze
the cost of a project at the lowest levels of activity. Instead, they focused on
the high-level cost drivers. They discovered that meaningful relationships
could be developed between the cost of fighter aircraft and parameters such
as speed, range, and altitude. They could further improve estimating
accuracy by breaking costs down into major categories and refining
parameters, but they focused on extracting cost trends from high-level data
rather than building cost estimates using a bottoms-up approach. This
resulted in cost models that were easy and fast to use.
Rand concluded that well-designed parametric cost models are powerful

estimating tools that can be surprisingly accurate for predicting the cost of
even complex systems, and are much easier and faster to use than discrete
methods which involve a laborious buildup of labor hours and materials on a
task-by-task basis. And they concluded that parametric cost estimating tech-
niques could save both Industry and the Government time and money in the
evaluation and definition cycle of proposals and contracts.
Initially, the U.S. government used parametric estimating techniques to

prepare budgets for future hardware acquisition, and to evaluate the
proposals of defense industry contractors for cost-plus contracts. Since the
mid 1980’s, the government auditing agencies have encouraged defense
contractors to adopt parametric estimating methods because they have
proven to be more reliable, less time-consuming, and less costly to prepare,
and are much easier to audit than traditional bottoms-up estimates.
In 1994, the Department of Defense launched the Joint Government/Industry

Parametric Estimating Initiative Steering Committee to study ways to
enhance the use of parametric estimating techniques. This Committee
sponsored the development of the Parametric Cost Estimating Handbook2, a
general guide for implementing and evaluating parameter-based estimating
systems. This handbook is the industry guide for parametric cost estimating
2
The Parametric Cost Estimating Handbook is maintained by the International Society of
Parametric Analysts (ISPA) and can be downloaded from the parametric cost estimating web
site at www.ispa-cost.org/PEIWeb/.

and has a wealth of useful information for anyone involved in cost

estimating.
According to the Parametric Cost Estimating Handbook, it is important that

all cost estimating relationships be carefully tested for validity using
historical cost and labor hours and standard statistical approaches. In other
words, parametric cost estimating relationships should be derived from and
tested against historical data whenever possible. The handbook says
“historical cost and labor hours data are required as a basis for estimating,
and parametric estimating is no exception.” A method that uses the cost of
past projects, analyzed in a disciplined manner, invariably yields more
reliable results than a subjective estimate.
CostMetrix ModelBuilder was designed to make history-based parametric

cost models much easier to develop. For further details on the features and
use of CostMetrix ModelBuilder for cost model development, the reader is
referred to the CostMetrix ModelBuilder User’s Manual.
Cost estimating CostMetrix Estimator is a cost estimating program for use with CostMetrix
with CostMetrix ModelBuilder cost models. Using the CostMetrix Estimator program and
Estimator CostMetrix ModelBuilder cost models, you can quickly create fully
documented estimates (cost proposals) with rationale. The amount of time
and effort required to produce cost estimates is dramatically reduced using
CostMetrix Estimator compared to traditional bottoms-up estimating
techniques.
CostMetrix Estimator was designed to allow a group of cost estimators to

use a cost model for generating cost proposals. These estimators may have
had little or no involvement in the creation of the cost model. Therefore, the
user interface for CostMetrix Estimator is designed to make the estimator’s
inputs and options as simple and intuitive as possible. Tasks are selected
with the mouse and prompts are provided for any needed parameter values.
CostMetrix Estimator also displays helpful hints like task definitions and
units for parameters.
When you start a cost estimate with CostMetrix Estimator, you select which
CostMetrix ModelBuilder cost model to use as the basis. CostMetrix
Estimator extracts the tasks and cost estimating relationships from the cost
model and encapsulates them into a cost estimate file. You then use a menu
to select the tasks that apply to the project you are estimating and enter
proposal-specific data such as parameter values, bid rates, etc. You are then
ready to review the cost estimate and expenditure profiles and print summary
and detailed cost proposal reports. The entire process can take just minutes
to complete.
A CostMetrix ModelBuilder cost model is not modified when a cost estimate

is created. Each cost estimate is saved in a separate file with a .cef extension,

which can be reopened with CostMetrix Estimator at any time for review or
revision. Any future changes made to a CostMetrix ModelBuilder cost
model will not affect prior estimates created with that cost model.
For better Ease of use and speed are two very desirable characteristics in a cost
estimating estimating system. However, the most important characteristic is that it
accuracy provides reliable predictions of the cost to perform future projects.
CostMetrix ModelBuilder and CostMetrix Estimator are designed to not
only reduce the time required to create estimates, but also to improve
estimate accuracy.
It may not be obvious that a parametric estimate could be as reliable as a

traditional bottoms-up compilation of labor hours and materials. However,
the DoD found that parametric estimating techniques, when properly
applied, are almost always superior to bottoms-up methods. In fact, the DoD
determined that “parametric techniques are a credible cost estimating
methodology that can provide accurate and supportable contractor estimates,
lower cost proposal processes, and more cost-effective estimating systems.”
History-based parametric cost models are typically much more accurate than
bottoms-up estimates for several reasons:
1. They are based on past project data, so they are more objective and are
less likely to be influenced by the estimator’s biases about the project.
2. Parametric cost models can be built to account for subtle variations in
project conditions or groundrules, which are hard to accurately account
for in bottoms-up cost estimates.
3. Parametric cost models can be updated to account for changing business
conditions or process changes.
4. A parametric cost estimate can be revised quickly and easily if require-
ments or groundrules change.
The concept of cost estimating accuracy varies from business to business.

For example, a contractor that builds tract homes that are essentially
identical may need to estimate his future costs to within a few percent to be
able to bid competitively against other contractors. On the other hand, an
engineering manager on a high-technology development project may be very
happy if he can predict his costs to within 15%, knowing the typical cost
risks inherent to developing a new product.
Competitive pressures often determine the accuracy a particular business

needs in its cost estimates. If gross profit margins are 50%, then an accuracy
of ±20% may be adequate to bid jobs and ensure profitability. If the market
only allows a gross profit margin of 10%, a much more accurate cost model
is needed. Businesses that bid fixed-price jobs typically require more
accurate cost estimates than those that bid on a time-and-materials basis.

An important factor in determining how accurate your cost estimating

system can be is to understand how well controlled your processes are for
performing the project. If the processes are well-defined, controlled and
consistently executed, the costs incurred will generally have very predictable
trends. In such a case, a well-designed parametric cost model should be able
to predict the costs quite accurately. However, if the processes or the people
that perform them vary substantially from one project to the next, the costs
will vary significantly, and no cost model will be able to predict the cost of
future projects with high accuracy.
Key features of There are many benefits of using CostMetrix Estimator for cost estimating.
CostMetrix Here are a few:
Estimator
♦ It uses a friendly graphical user interface for cost estimate preparation
with intuitive point and click, and drag and drop operations.
♦ CostMetrix Estimator provides a consistent user interface and
methodology for all cost estimates regardless of cost model.
♦ The cost estimating relationships are built into the cost model so the
estimator does not have to derive them with each cost estimate.
♦ Cost models can be validated and “approved” by management in
advance so only the specific project options and parameters need to be
checked when a cost estimate is prepared.
♦ Cost models can be easily and quickly updated and deployed to
estimators so they can track the most current project trends and
business conditions.
♦ CostMetrix Estimator provides a complete set of reports to document
your cost estimate.
♦ CostMetrix Estimator cost estimates are completely auditable.
♦ CostMetrix Estimator performs cost risk analysis based on cost
variance statistics contained in CostMetrix ModelBuilder cost models.
What is a high CostMetrix Estimator was developed to help you create high-quality cost
quality cost estimates. What does high-quality mean in the context of cost estimates? A
estimate? high-quality cost estimate has the following key characteristics:
1. Its accuracy is understood and quantitatively validated based on past

project performance.
2. It provides the flexibility necessary to allow you to tailor estimates for
the unique characteristics of each project you estimate.
3. It produces supportable estimates, i.e., they are derived by reasonable
deduction which can be logically explained.
4. It is auditable, i.e., it is well documented including the means by which
estimating relationships are derived and validated.
System For best performance, the computer system requirements for CostMetrix
Estimator are:
requirements

♦ Microsoft Windows 95/98 or Windows NT 4.0 or later.

♦ A Pentium 133 or higher processor.
♦ A minimum of 32 MB of RAM.
♦ Approximately 15 MB of available hard disk space.
♦ A VGA color monitor with 640 x 480 resolution or higher and 256
colors or higher (800 x 600 and 16,000 colors is better).
Installing To install CostMetrix Estimator on your computer:

CostMetrix
Estimator 1. Start Windows and insert the CostMetrix ModelBuilder CD-ROM into
your CD-ROM drive.
2. Using the My Computer icon or Windows Explorer, open a directory of
the CD-ROM, and open the folder called Estimator Install.
3. Double-click the file called setup.exe.
4. Follow the instructions on the install screens until the install is finished.
Uninstalling If you need to uninstall CostMetrix Estimator to update to a newer version or

CostMetrix for any other reason, follow these steps:
Estimator
1. Click on the Start button and select Settings/Control Panel.
2. Double click on the Add/Remove Programs utility.
3. On the Install/Uninstall tab, select CostMetrix Estimator from the list of
installed programs, and click Add/Remove.
4. Follow the on-screen instructions to remove CostMetrix Estimator from
your hard drive.
NOTE: It is safe to remove all shared files in the CostMetrix Estimator installation
directory during an uninstall, and you should always do so before installing a later
version of CostMetrix Estimator.
Getting help In addition to this manual, CostMetrix Estimator has an online help system
you can access with the F1 function key. You can also open the help system
window by selecting Help Topics from the Help menu.

2 Overview
This chapter provides an overview of the terms and concepts you should be
familiar with when using CostMetrix Estimator, and it will prepare you to
begin the tutorial in Chapter 3 entitled Using CostMetrix Estimator. This
chapter also provides some helpful background information on cost model
principles for cost estimators.
The topics covered in this chapter are:
ú How CostMetrix Estimator works

ú Tasks
ú Parameters
ú Cost categories
ú Escalation factors
ú Cost vs. price
ú Overhead and G&A
How CostMetrix CostMetrix Estimator produces project cost estimates based on cost
Estimator works estimating algorithms contained in CostMetrix ModelBuilder cost models,
and inputs provided by the estimator that apply to each specific project.
When you start a cost estimate with CostMetrix Estimator, you select the
cost model to use as the basis of the estimate. For example, you might have
several different cost models for different products you produce or services
you provide. When you select the one that applies, CostMetrix Estimator
reads the cost model file and extracts the cost model information such as the
tasks, parameters, cost estimating relationships, etc.
CostMetrix Estimator allows you to customize each cost estimate by

selecting the tasks, parameter values, and bid rates that apply. CostMetrix
Estimator then calculates the cost of each task based on the cost estimating
relationships stored in the cost model. You can also add supplemental tasks
that are not included in the cost model if needed, entering the cost estimates
manually.

14 Chapter 2 Overview
When you have completed the task selection and parameter data entry, you
can print a comprehensive set of reports to fully document your cost
estimate, including the tasks, parameters, period of performance, and the
labor, material, and other direct cost breakdown, etc. And of course you can
save your estimate on your hard drive or floppy disk for future reference or
updates.
Making revisions to a CostMetrix Estimator cost estimate is very easy. You

can quickly add or remove tasks, change parameter values or rates, and
instantly recalculate the cost breakdown. Therefore, you can use CostMetrix
Estimator to easily evaluate different proposal options, comparing cost and
bid parameters, and using it as a powerful design-to-cost3 tool. For example,
you can use it to determine the project parameters required to achieve a
desired target cost.
To use CostMetrix Estimator effectively, there are a few cost model terms
you should be familiar with. The next few sections of this manual define
these terms so you will understand their meanings and relationships when
you encounter them in the tutorial of Chapter 3. If you are already familiar
with CostMetrix ModelBuilder, you might want to skip directly to Chapter 3.
Tasks CostMetrix Estimator uses an activity-based cost model approach, meaning

that a project is broken down into discrete activities or cost elements which
are called tasks. Each task is an independent entity and has its own cost
estimating relationships for labor, material, or other direct costs (ODC). This
activity-based approach allows the cost estimator the flexibility to select the
tasks that apply to each cost proposal and omit those that are not appropriate.
For example, you might have a task called Analysis that includes several
subtasks representing the various types of analysis that might be performed
on a project. There could be Thermal analysis, Stress analysis, Reliability
analysis, etc., as shown below.
Analysis -
Thermal Analysis
Stress Analysis
Reliability Analysis
In this example, Analysis is called a summary task because it represents the

sum of the cost of all the subtasks under it. The tasks under Analysis are
independent activities and each one of these could also be further broken
down into subtasks by the cost model designer if appropriate to provide the
estimator with flexibility in selecting task elements that may be needed for
proposals. Not every project would necessarily require every type of
analysis, so the estimator can choose the analysis tasks that should be
included for each estimate. Therefore, the list of tasks serves as a checklist to
3
Design-to-cost is a term for the process of tailoring a product design, including its
characteristics, features, and performance to meet a specific cost target.

Chapter 2 Overview 15
help the estimator include all the tasks and costs that apply to a project,
while omitting those that do not. The example cost estimate described in
Chapter 3 illustrates a simple Task List with multiple hierarchical levels.
NOTE: CostMetrix ModelBuilder allows Task Lists with up to six indentured levels so
you can have extremely detailed project cost model structures.
Each task in the Task List has it own unique cost estimating relationships
(except Summary tasks and Manual Entry tasks described below) that are
derived by CostMetrix ModelBuilder from past project cost data, or are
defined explicitly by the cost model designer.
Government contractors refer to the task list as a Work Breakdown Structure

(WBS) and each task is called a WBS element. Government document MIL-
STD-881B provides guidelines for creating a WBS for the Department of
Defense and its contractors. However, familiarity with that specification is
not required to use CostMetrix ModelBuilder.
Task types There are six different types of tasks that you may encounter in a CostMetrix
Estimator cost estimate. The primary difference between the types of tasks is
the way the cost estimating relationships are derived or computed. The types
are:
♦ Summary tasks
♦ Parametric tasks
♦ Fixed Cost tasks
♦ Level of Effort tasks
♦ Explicit Formula tasks
♦ Manual Entry tasks
The sections that follow describe each type of task in greater detail. The
example cost model described in Chapter 3 illustrates how each one can be
used.
Summary tasks A Summary task serves as a cost summary for a set of related subtasks. A
Summary task does not actually have a cost estimating relationship of its
own; its cost is simply the sum of the cost of all the subtasks under it.
Summary tasks can have other Summary tasks beneath them, so you can
build multi-level task structures to represent complex task hierarchy
relationships.

Parametric tasks A Parametric task is used in a cost model to predict the cost of a work
element based on specific user-defined parameters and past project cost data.
The cost model designer specifies the parameters and provides historical
project data to CostMetrix ModelBuilder, which then derives mathematical
cost estimating relationships (i.e. algorithms) that predict cost based on the
parameter values.
The general form of a Parametric task cost equation is shown below for
labor, material and ODC costs derived based on a parametric relationship.
Labor Cost = fL(P1, P2, P3 ...) in units of labor hours
Material Cost = fM(P1, P2, P3 ...) in units of $
ODC Cost = fO(P1, P2, P3 ...) in units of $
where P1, P2, P3 ... are user-defined parameters and fL(P1, P2, P3 ...), fM(P1, P2, P3
...), and fO(P1, P2, P3 ...) are functions which are derived by CostMetrix
ModelBuilder based on the historical cost data entered by the cost model
designer.
When you activate a Parametric task in CostMetrix Estimator, it will present

a list of parameters for which you must enter values based on the specific
project you are estimating. CostMetrix Estimator will then automatically
calculate the labor, material and ODC cost estimates for that task.
Fixed Cost tasks A Fixed Cost task produces a fixed cost estimate. In other words, the cost is
always the same. It is not a variable amount that depends on project
parameters or variables. Fixed Cost tasks are commonly used for fixed setup
or tooling charges. The cost estimate for this type of task is pre-defined by
the cost model designer. It is not parametrically derived from prior cost data
by CostMetrix ModelBuilder.
The general form of a Fixed Cost task cost equation is shown below for
labor, material and ODC costs.
Labor Cost = CL in units of labor hours
Material Cost = CM in units of $
ODC Cost = CO in units of $
where CL, CM, and CO are constants defined by the cost model designer.
When you activate a Fixed Cost task in CostMetrix Estimator, the cost is
added directly to the project estimate. No parameter values are required.

Level of Effort A Level of Effort task produces a cost estimate that is duration dependent.
tasks That is, it is proportional to the duration of the task. The cost (be it labor,
material, ODC, or some combination of these) is incurred at a constant rate
during a fixed period of performance. The cost model designer predefines
the cost per week for this type of task; it is not parametrically derived from
prior cost data by CostMetrix ModelBuilder.
The general form of the Level of Effort task cost equation is shown below for
labor, material and ODC costs.
Labor Cost = LL * t in units of labor hours
Material Cost = LM * t in units of $
ODC Cost = LO * t in units of $
where LL, LM, and LO are constants (hours/week or $/week) defined by the cost
model designer and t is the duration of the task in weeks.
When you activate a Level of Effort task in CostMetrix Estimator, you must
specify the start and end dates of the task. The cost of the task is then
computed by CostMetrix Estimator based on the cost per week specified in
the cost model.
Explicit Formula An Explicit Formula task is used in a cost model when the cost model
tasks designer defines a cost estimating relationship explicitly, rather than having
CostMetrix ModelBuilder derive it from historical project data. The formula
for the cost calculation is specified in the cost model and can include
parameter values entered at the time that the project estimate is prepared.
The general form of the Explicit Formula task cost equation is shown below
for labor, material and ODC costs derived based on a parametric
relationship.
Labor Cost = fL(P1, P2, P3 ..., CiL) in units of labor hours
Material Cost = fM(P1, P2, P3 ..., CiM) in units of $
ODC Cost = fO(P1, P2, P3 ..., CiO) in units of $
where fL(P1, P2, P3 ..., CiL), fM(P1, P2, P3 ..., CiM), and fO(P1, P2, P3 ..., CiO) are explicit
functions entered by the cost model designer, P1, P2, P3... are parameter values
entered by the estimator, and CiL, CiM, and CiO are the labor, material, and ODC
costs of other tasks in the cost model.

When you activate an Explicit Formula task in CostMetrix Estimator, it may

present a list of parameters for which you must enter values based on the
specific project you are estimating. CostMetrix Estimator will then
automatically calculate the labor, material and ODC cost estimates for that
task.
Manual Entry A Manual Entry task is used in a cost model when the cost estimate for a
tasks task must be entered manually by the estimator. This task type is often used
in cases where subcontractors provide separate estimates for specific parts of
an overall project. Manual Entry tasks can also be used when no other basis
is available to predefine the method of estimation. In such cases, bottoms-up
estimating methods can be used until adequate historical cost data is
accumulated with which you can convert the Manual Entry task into a
Parametric task. You can also add Manual Entry tasks to the cost estimate in
CostMetrix Estimator for tasks that were not anticipated when the cost
model was designed.
No algorithms are used for Manual Entry tasks. All manual entry cost
estimate data are entered by the estimator in separate labor, material, and
ODC categories.
Parameters Parameters are the project variables that have a direct impact on project
cost. If you are a circuit board designer, the number of components on the
circuit board might be one of the parameters in your cost model for
estimating the cost of designing it. The inference is that cost increases as the
number of components increases. Likewise, if you are a civil engineer, the
length of a bridge might be a parameter in your cost model to estimate the
cost to construct it. CostMetrix Estimator can handle simple linear cost
relationships as well as complex nonlinear relationships between parameter
values and cost.
Parameters are not limited to numerical quantities. They can also be non-
numerical values such as complexity factors, quality factors, etc. For
example, if you were a carpet installer, you would have padding in several
quality grades at different costs. Your cost model might have a parameter for
the quality grade with several different grade values (Grade A, Grade B,
...etc.).
CostMetrix Estimator utilizes four different types of parameters, each of

which is described below.

Quantity The simplest parameter type is a quantity parameter, which is a simple

parameters numerical value such inches, acres, number of showers, components on the
circuit board, etc. CostMetrix Estimator will list each quantity parameter and
can display the units you should use when entering the values.
A cost model may have predefined limits on the range of acceptable values
for quantity parameters. You may not be able to enter values above a certain
maximum or below a certain minimum. This is sometimes implemented in a
cost model to limit parameter values to a range of known validity.
Scale parameters In the real world, not every parameter has a simple numerical value. For
example, complexity factors and quality factors typically don’t have a
natural numerical value. For these, it is often best to rank them on a relative
basis. Scale and grade parameters were created to address these cases.
A scale parameter is a parameter with a specified numerical range that is

presented with a set of descriptive reference values. This parameter type is
often used for variables that may be somewhat subjective or difficult to
quantify otherwise.
CostMetrix Estimator will show each scale parameter along with its list of
reference values and descriptions. You can use these descriptions as
reference points when assigning a value for each future project when
creating estimates. For example, suppose you have a design complexity scale
parameter with a range from 1 to 5. The name of a past project could be
associated with each integer reference value. You could compare the
complexity of a future project you are estimating to the known complexity of
the past projects listed in the scale definition and pick a numerical value that
is appropriate. In other words, you would rank the parameter value in
relation to the other known projects.
Unlike a grade parameter, which must be assigned one of the specific values
in the grade list, a scale parameter is a continuous range and you may
interpolate between the predefined reference values. For example, you could
enter 3.5 for the complexity value if you thought it fell between the 3 and 4
reference values.
Grade parameters A grade parameter is a non-numerical parameter that can be used to define a
variable that must be one of several specific values. Assume for example,
you develop software for commercial and military customers. If the cost of
military software development is typically higher than commercial software
development, you might have a grade parameter with two possible values;
commercial and military. A grade parameter must have a value
corresponding to one of the discrete values in the list of options. CostMetrix
Estimator will show each grade parameter along with a list of valid inputs.

Computed Computed parameters are calculated automatically by CostMetrix Estimator

parameters based on a formula entered by the cost model designer. As an estimator, you
never have to directly enter a value for a computed parameter. CostMetrix
Estimator will prompt you for any related parameter values that may be
needed to calculate the value of a computed parameter.
Cost categories Project costs fall into three types; labor, material, and other direct costs
(ODC). Labor costs are the hourly pay and/or salary costs associated with
the personnel performing or supporting the work. Since salaries and pay
rates change with time, CostMetrix Estimator computes labor estimates in
units of labor hours. It then calculates labor cost estimates by multiplying the
estimated labor hours by the labor rates (i.e. $/hr) that will be in effect at the
time the work will be performed.
Material costs consist of the purchased materials, supplies, or parts required

or consumed in the actual execution of the work. For example, a contractor’s
material might include lumber, nails, saw blades, cement, insulation, etc.
ODC is a general category that covers all costs that are not labor or
materials. Common examples are travel and reproduction expenses, legal
fees, licenses and permits, finance charges, etc.
Within these three broad cost types are a number of specific cost categories.
Labor categories correspond to the pay grades or salary grades of the
personnel on the job. For example, labor categories could be Project
Manager, Sr. Engineer, Machinist, Clerk, etc. Each labor category has a
specific direct labor rate ($/hr) associated with it.
Material categories could include Raw Materials, Parts, Supplies, etc.,

whereas ODC categories might be Equipment Rental, Travel, Legal Fees,
etc. Material and ODC categories are used in a cost model to distinguish
between various types of expenses.
Cost Types in
each Task
Other Direct
Labor Material
Costs (ODC)
Project Manager Raw Material Travel
Sr. Engineer Purchased Parts Reproduction
Engineer 1 Supplies Subcontracts
. . .
. . .
. . .

The cost models you use should include the appropriate labor, material and
ODC categories for your bidding purposes. For example, if all material costs
are to be lumped together, only one material category called Material might
be included in the model. If the cost model designer collected and sorted
different types of material into specific categories, CostMetrix Estimator
will provide a breakdown of the material estimates into those categories. The
same is true for labor and ODC.
Escalation factors If you performed two identical projects a year apart in time, you would
probably not incur the same material or ODC expenses. Even if all other
project variables could be controlled and held constant, inflation will usually
cause material and ODC costs to rise from year to year. This factor should be
accounted for in a cost estimating system. Inflation of material and ODC
costs with time is handled by escalation factors in CostMetrix Estimator.
Escalation is an accounting term for material inflation. CostMetrix

ModelBuilder cost models include escalation factors for prior years, which
are used to adjust the actual material and ODC costs in the database up to the
date the cost model is compiled. CostMetrix Estimator allows you to enter
projected escalation factors for future years. It will then adjust the material
and ODC estimates to account for escalation from the cost model compile
date, up to the midpoint of the specified period of performance for each task.
All this is handled automatically for you. You just have to provide the
escalation factors if you want to take advantage of this feature.
Cost vs. price The terms cost and price are often confused when discussing cost estimating
systems. Using a literal interpretation, the cost is what your company or
business pays to execute a project. The price is what you charge your
customer for the project. The difference between the cost and the price is
your profit or fee.
CostMetrix Estimator can add a fee to your estimates to produce a project

price (i.e. cost proposal) if you desire. And it can produce reports from
summary-level to very detailed with your company logo on them, which you
can provide directly to customers for project proposals.
Overhead and CostMetrix Estimator uses a traditional method of applying overhead and
G&A general and administrative (G&A) expenses. CostMetrix Estimator first
calculates costs at the direct level, i.e. costs without overhead or G&A
expense applied. It allows you to enter the burden rates, which are applied to
labor, material, and ODC expenses. It will then apply the overhead and
G&A rates you specify and the fee, if any, with subtotals provided at each
level.

Summary This chapter described some of the key terms used in CostMetrix Estimator
and explained some of the main concepts of the program. Of course, it is
easier to learn how these principles are applied while actually using the
software. Therefore, Chapter 3 is presented in the form of a tutorial, building
a sample project cost estimate. After reading Chapters 1 and 2 and installing
CostMetrix Estimator on your system, you are ready to begin Chapter 3 and
start using the program.


3 Creating a Cost Estimate
This chapter is a tutorial that guides you step-by-step through the creation of
a sample cost estimate, along the way showing you how to use the features
of CostMetrix Estimator. As you progress you’ll learn about:
ú Opening a new cost estimate

ú Entering estimate summary information and the estimator’s résumé
ú Selecting the cost model
ú Selecting the tasks that apply to the project
ú Entering the task parameter values and start and end dates
ú Entering bid rates and escalation
ú Estimating with fixed cost, level of effort, and explicit formula tasks
ú Using manual entry tasks
ú Bidding itemized travel expenses
ú Documenting groundrules and assumptions
ú Viewing the cost summary
New users should work through the sample estimate described in this chapter
to become familiar with the features and functions of CostMetrix Estimator.
Keep in mind that this is a sample cost model designed primarily for training
purposes. The tasks and parameters you use day-to-day will depend upon the
cost models you use.
Opening a new In this chapter you’ll create a cost estimate for a fictitious company called
cost estimate Johnson Turbopump Technology that designs and manufactures turbopumps
for research and industrial applications. In this exercise, you will play the
role of J.D. Phillips, a Project Manager at JTT in the Engineering
Department, who is creating a cost estimate for a proposal to design a new
pump code named Cyclone.
To get started, launch CostMetrix Estimator and examine the main window
on your screen. You can resize the window by dragging the lower right hand
corner to the desired proportions. When you close CostMetrix Estimator it
will remember your window size and position preferences for your next
session. The data fields on this window are presently blank and some buttons
are disabled because a cost estimate has not been opened yet. You must start

Chapter 3 Creating a Cost Estimate 25
a new cost estimate or open an existing estimate file (with a .cef extension)
to activate these controls.
Before starting a new cost estimate, take a look at the key features of the
main window. Directly below the main menu is the speedbutton bar which
provides quick access to commonly used functions, such as starting a new
estimate, saving an open estimate, or changing display fonts. Pause your
mouse over each button for a moment to see a brief description of each
button’s function.
Speedbuttons Main Function Buttons
Project summary
information
Task information
Task List panel
Splitter bar Task direct cost display
Next to the button bar are the main function buttons. In the creation of a cost
estimate, you will generally progress from left to right through the functions
accessed by these buttons. You will use each of these functions as you
progress through this lesson.
The left side of the main window contains the Task List, which will display a
hierarchical menu of the work elements in the cost model. Each item in the
list is called a Task because each represents a discrete element of work. It’s
organized in a hierarchical outline that can contain multiple levels of tasks
and subtasks to represent very complex job structures. You can increase the
width of the Task List section to accommodate long task names by clicking

26 Chapter 3 Creating a Cost Estimate
the mouse pointer on the vertical splitter bar along its right hand edge and
dragging it to the right.
The upper right region of the window is the Project Summary, which
contains key top-level information about the project you are estimating. The
information displayed in this section will come from the Project Information
dialog box, which you will use shortly.
Below the Project Summary is the Task Detail section where detailed
information about each task is displayed and entered.
The lower right region of the window is the Task Direct Cost section, which
displays the cost estimate computed by CostMetrix Estimator for the
selected task, excluding overhead, G&A, and fee, if any.
Select New from the File menu now to start a new cost estimate.
Entering project The Project Information dialog box shown below will appear whenever a
summary cost estimate is started or opened. It allows you to enter top-level infor-
information mation about the estimate and the author. It can be reopened and edited at
any time in the cost estimate creation process by clicking on the Project Info
button in the main window.
The upper section includes information about the project that you are
currently estimating. A description of each item is given below.

Project Name: The name of the project you are estimating.
Project No.: Used to assign a unique project number to each

project in your company or department.
Task Name: If your estimate is only one part of a larger

project, use this line to enter a secondary
descriptive name for the specific part of the
project your estimate covers. For example, the
Project Name could be “Project Alpha” and the
Task Name could be “Electrical Systems
Design”.
Estimate Rev.: A user-assigned estimate revision letter or

number. Used to identify successive revisions of
the same estimate. Two commonly used
sequences are - (dash) for the original and A, B,
C ... for subsequent revisions; and 1 for the
original and, 2, 3 ... for subsequent revisions.
Proposal No.: Used to assign a unique number to each

proposal produced by your company or
department.
WBS Item No.: This is the work breakdown structure number of

the work being estimated (only applies if your
company uses Work Breakdown Structures).
Option/Bid Code: Option codes (sometimes called bid codes) are

used when a proposal includes one or more
options. The basic program and options are
given separate codes to identify how to sort the
cost summary.
Customer/Requestor: The customer name (or requestor name for

internal cost estimates).
Project Start Date: The planned start date of the project.
Responsible Org.: The name of the organization responsible for

this project work breakdown item.
Responsible Code: The organization code or ID of the organization

responsible for this project work breakdown
item.
Performing Org.: The name of the organization performing this
project work breakdown item. (Sometimes the

responsible organization and the performing

organization are not the same.)
Performing Code The organization code or ID of the organization

performing the work for this work breakdown
item.
Brief Project Description: A brief description of the work to be performed.

This text will appear on the estimate cover sheet
(Schedule 1) as the project description.
Cost Model: This is the name of the cost model used to create
the estimate (handled automatically by
CostMetrix Estimator).
Cost Model Compile Date: This is the date the cost model was compiled
(handled automatically by CostMetrix
Estimator).
The lower section of the dialog box identifies the cost estimator and the
organization making the estimate. These fields should be self-explanatory.
Enter the project information into the Project Information dialog box as
shown in the figure on page 26 for the Cyclone project.
NOTE: At the time this manual was written, the project dates for this estimate were in
the future. However, by the time you read it, the example dates may be in the past.
Remember that the dates used in this example are purely for illustration. Obviously,
you will normally use CostMetrix Estimator to estimate future projects.
In the bottom left hand corner of this dialog box is a button labeled
Estimator’s Résumé. Click on this button to open the Estimator’s Résumé
dialog box (you can also open this dialog box by selecting Estimator’s
Résumé from the View menu). The estimator’s résumé is a brief description
of the qualifications of the person creating the estimate, which will appear
on the estimate cover sheet report (Schedule 1 on the Reports dialog box).
Enter the brief résumé shown in the dialog box on the next page.

You can also import the résumé from a simple text file, eliminating the
repetition of typing it in for each estimate. Start by typing a short résumé
using the Windows Notepad program. Save it as an ASCII text (.txt) file. To
import it into CostMetrix Estimator, follow the steps below.
Importing a résumé:
1. Click on the Import button on the Estimator’s Resume dialog box. The
Open dialog box will appear.
2. Select the (.txt file) that contains the résumé you wish to import and
click Open. The résumé is imported.
and then click on the OK button to close the window.
Click on the OK button to close the Estimator’s Resume dialog box, then
click OK again to close the Project Information dialog box and return to the
main window. You will now see the project name, task name, proposal
number, etc., listed in the Project Summary section for immediate reference.
Before going on, save the new cost estimate file using a name of your choice
such as CycloneBid.cef by selecting Save As from the File menu and
navigating to a convenient directory for storing user data.
NOTE: If you are using an evaluation version of CostMetrix Estimator, or if you have
not registered your software and entered the Personal Authorization Code, you will
not be able to save your file at this time. Instead, you will see a registration dialog
box. If you are evaluating CostMetrix Estimator, simply continue on with the tutorial
without saving.

Importing project Instead of typing in the project summary information for each cost estimate,
summary you can import this information from an existing cost estimate. This saves
information time if you are creating several cost estimates in a series where most of the
project summary information is the same.
Importing project summary information:

1. Click on the Import from File… button on the Project Information
dialog box. The Import Project Information dialog box will appear.
2. Select the cost estimate (.cef file) that contains the information you wish
to import and click Open. The project information is imported.
You can now edit the information to suit the cost estimate you are creating.
Notice that the estimator’s resume is also imported with the summary
information.
Selecting the cost The next step is to select the cost model to use for this estimate. CostMetrix
model Estimator is a general-purpose estimator so you could have many different
cost models for estimating different types of projects based on the needs of
your company. You can select the cost model to use for this estimate using
one of the main function buttons or from the File menu.
Selecting a cost model for a cost estimate:

1. Click on the Cost Model button on the main window
or
2. Use the Select Cost Model… option under the File menu
Either of these methods will bring up an Open file dialog box. For this
exercise, you will use a cost model included in your CostMetrix Estimator
Examples folder called JTPump8.cmf. This cost model was designed using
CostMetrix ModelBuilder and was installed on your hard drive for this
tutorial when you installed CostMetrix Estimator.
3. Navigate to the Examples subfolder of the CostMetrix Estimator

installation folder and select the JTPump8.cmf file. Click on the Open
button in the dialog box to load this cost model into CostMetrix
Estimator.
NOTE: Once you select the cost model for an estimate, it is locked in. You cannot
change the cost model for an estimate after you have selected it. Notice that the
Cost Model button is disabled after you select the cost model.

Browsing the Task After the cost model is loaded, CostMetrix Estimator will display a list of
List tasks on the left-hand side of the main window. The first task in this cost
model is called Requirements Development.
Each task in the list has a check box next to it. You will use these check
boxes to select the tasks that apply to this cost estimate. When a task check
box is checked it is called an “active” task, meaning it is part of the current
cost estimate. When a task check box is unchecked it is called an “inactive”
task, meaning it is not included in the current cost estimate. Checking the
box is called “activating” the task, and unchecking it is called “deactivating”
the task.
When a new cost estimate is started, none of the task check boxes are
checked, so all of the tasks are inactive in the estimate by default. You must
select each task that applies to the project you are estimating by checking the
appropriate check boxes.
Task selected here Task type and description shown here
Before you activate any tasks, click on each task name in the Task List in
sequence and read the task descriptions displayed in the Task Detail section.
Based on these descriptions, you can decide which tasks should be included
in the project cost estimate you are creating.

The task type is also displayed as you click each task name. The six possible
task types are discussed in Chapter 2. Knowing the type of a task tells you
something about how CostMetrix Estimator calculates the cost, and what
type of task information might be needed from you to do so. For example, a
Parametric task is calculated based on a cost estimating relationship using
specific parameter values. Therefore, you can expect to enter parameter
values in the Task Detail section when you activate a Parametric task.
Similarly, a Level of Effort task is calculated based on the duration of the
task. Therefore, you should expect to enter start and end dates when you
activate a Level of Effort task. In general, the type of information that is
needed to calculate the cost of a task will be apparent by the information that
is displayed in the Task Detail section when you activate the task.
Activating a After becoming familiar with the task descriptions, you can activate the tasks
parametric task that should be included in your cost estimate. You don’t have to activate
tasks in any particular order. Keep in mind that a cost model might include
tasks that are not needed for every project. You should only activate the ones
that are applicable.
Start activating tasks for this example cost estimate by checking the box next
to the Design Layout task. This happens to be a Parametric task, so the
parameter table in the Task Detail section becomes enabled as soon as the
task is activated.
Below the task description are the task Start Date and End Date fields. By
default, the project start date (from Project Information dialog box) is
automatically entered into these fields. In general, the first step after
activating a task should be to adjust these dates if appropriate to the planned
start and end dates for this specific task.
Entering task start and end dates:

1. Select the date text in the Start Date field.
2. Enter “11/15/2001” for the start date of this example.
3. Select the date text in the End Date field.
4. Enter “1/7/2002” for the end date of this example.
FYI: Why are task start and end dates important? CostMetrix Estimator adjusts
material and ODC estimates based on escalation factors using the midpoint between
the start and end dates of each task (see page 21 for a discussion of escalation).
Therefore, task start and end dates are required for CostMetrix Estimator to make
accurate escalation adjustments. In addition, the costs of Level of Effort tasks are
based on the task duration defined by the task start and end dates.

Task checked here Parameter values entered here Task direct cost shown here
Below the task start and end dates you will see the parameter table. For this
task, there should be five parameters listed; a computed parameter called # of
Parts, two quantity parameters called # of Stages and New Design Fraction,
a scale parameter called Pressure Ratio, and a grade parameter called Pump
Type. These five parameter values are required to calculate the cost of the
Design Layout task. A JTT pump designer would be familiar with each of
these parameters. For the rest of us, here is a brief description of each
parameter.
# of Parts The number of individual parts in the

pump design.
# of Stages The number of compression stages in the

pump design.
Pressure Ratio The ratio of outlet pressure to inlet

pressure.
Pump Type Two types apply; a “dry” type that

operates outside the working fluid, and a
“submersible” type that can be immersed
in the working fluid.

New Design Fraction The fraction of the design that is new,

versus reused from prior designs. A new
design fraction of 0.6 means it is 60% new
and 40% adapted from an older design.
Obviously, this requires judgement on the
part of the estimator.
The next step is to enter values for the parameters displayed for this task.
Entering the value for a quantity parameter:

1. Click the mouse in the Value field of the # of Stages parameter.
2. Type “2” for this example and press the Enter key.
Notice that the computed parameter value changes to 61.82 as soon as you
hit the enter key. That is because # of Parts is a computed parameter and its
value is calculated by CostMetrix Estimator based on the value of # of
Stages. The formula for # of Parts was defined in the cost model. You never
have to enter the value for computed parameters directly. CostMetrix
Estimator will always calculate them based on the formula in the cost model.
The next parameter is Pressure Ratio, which is a scale parameter. Whenever

a scale parameter is listed in the table, you can see the range of scale
reference values by invoking a drop-down list in the value field of the table.
This is done by triple-clicking in the Value cell of the table to enable the
drop-down list arrow, which will appear at the right hand edge of the cell.
Do this now and you will see a list of scale values starting with 1 = 1/1 to
4/1 and ending with 5 = 101/1 to 150/1. This means that the pressure ratio
parameter has a valid range of values between 1 and 5, with each numerical
value corresponding to the pressure ratio values shown. Assume that the
pump in this example will have a pressure ratio of 25/1.
Entering the value for a scale parameter

1. Triple click in the Value cell of the table to enable the drop-down list.
2. Click the mouse on the drop-down arrow to see a list of valid scale
values with descriptions.
3. Select a value of “3” for this example (11/1 to 50/1) and press the Enter
key.
This selection has a numerical value of 3 corresponding to a pressure ratio

between 11/1 and 50/1. Notice that the text entered in the table is “3” and
the description 3 = 11/1 to 50/1 disappears when you hit the enter key.
That’s because the value of a scale parameter is a decimal (floating point)
number. The scale reference descriptions in the drop-down list are there just
to help you understand the range of valid values for that parameter and what
they mean.

You can also enter the value of a scale parameter by directly entering the
numerical value in the field. The value should be between the largest and
smallest values listed in the drop-down list, but you can interpolate between
the reference values. For example, an entry of 2.7 would indicate that a
parameter value is between the 2 and 3 reference values, but judged to be
somewhat closer to 3.
After Pressure Ratio is the Pump Type parameter, which is a grade

parameter. The cost model designer has defined two types of pumps that
apply to the Design Layout task; Dry and Submersible. Whenever a grade
parameter is listed in the table, you can see the valid grade values by
invoking a drop-down list in the value field of the table.
Entering the value for a grade parameter

1. Triple click in the Value cell of the table to enable the drop-down list.
2. Click the mouse on the drop-down arrow to see a list of valid grade
values with descriptions.
3. Select a value of Submersible for this example and press the Enter key.
The value of the grade parameter is “Submersible”. There is no

corresponding numerical value that you can enter directly. You must select
one of the values listed in the drop-down list for grade parameters.
At the bottom of the parameter list is New Design Fraction. A value of 1

means that the pump is an entirely new design. A value of 0.6 means the
pump is 60% new design. In other words, it is 40% adapted from a previous
design.
Entering the value of a quantity parameter with range limits:

1. Click the mouse in the value field of the New Design Fraction
parameter.
2. Type “-1” for this example and press the Enter key.
A message appears telling you that the parameter value is out of range and
the value is reset to “0” which is the minimum valid value.
3. Click the mouse in the value field of the New Design Fraction
parameter.
4. Type “1.5” for this example and press the Enter key.
A message appears telling you that the parameter value is out of range and
the value is reset to “1” which is the maximum valid value. Accept a value of
“1” for this parameter.

Therefore, maximum valid value for this parameter is 1.0 and the minimum
valid value is 0. You can enter any value between those limits, but any value
outside that range will generate an error message as illustrated above.
If you have a long parameter name that does not fit within the width of the
column in the table, you can resize the parameter table columns. Try the
following steps.
Resizing parameter columns:

1. Drag the boundary divider between the first and second columns in the
title row of the parameter table to resize the parameter name column just
as you would to resize the width of the columns of a spreadsheet. Don’t
worry about making the other columns fit nicely in the table.
2. Click once on the title row of the table and the Value column will resize
to clean up the table column widths based on the available space.
Next to the task start and end dates is the Performance Factor entry field
(abbreviated PF), which is the percent of the task that will be performed. It is
a proportional scaling factor and should contain a value between 1 and 100.
It is 100 by default for each task, meaning the complete task is being bid. For
example, if you change the value to 70, CostMetrix Estimator will scale the
estimate for this task to 70% of the cost of the complete task.
When would you want to enter a Performance Factor value less than 100
percent? One example is when a task is already partially completed and you
are estimating the cost to complete it. Leave the performance factor set at
100 for this example.
Entering bid rates The cost estimate for this task is shown below the Task Detail section. You
should see 484.7 labor hours in this example if you use the JTPump8.cmf file
on the installation disk. Notice that CostMetrix Estimator displays $0.00 for
labor dollars. That is because it currently has no labor bid rates for the 484.7
labor hours in the estimate for this task. CostMetrix Estimator needs to know
the labor bid rates to calculate the actual labor cost in dollars.
Click on the Rates button at the top of the window to open the Rates dialog
box.
Entering bid rates for a cost estimate:

1. Click on the Rates button at the top of the main window to open the
Rates dialog box.
2. Enter the labor rates, burden rates, overhead rate, general and
administrative rate, and fee that apply to the cost estimate.
The labor categories shown are those that were predefined in the cost model.
The labor rates are initially all set to zero when a new cost estimate is
started. Therefore, you should enter the appropriate labor rates for each
category that will be in effect at the calendar midpoint of the project.
Labor costs will be displayed as $0.00 until you enter the rates. For any
categories that don’t apply to your organization, just leave the values set to
$0.00 and they will have no effect on the cost estimate.
The fee can be either a percent of the total cost, or a fixed dollar amount. If a
fixed dollar fee is entered, CostMetrix Estimator will automatically zero out
the fixed percent fee value, and vice versa.
CostMetrix Estimator will convert labor hour estimates to dollar cost

estimates based on the rates entered. Enter the labor, burden, overhead, and
G&A rates now, as well as fee, as shown in the figure above for the Cyclone
project example so your cost estimate will match this example.
Now close the Rates dialog box. As soon as you press the OK button,
CostMetrix Estimator will recalculate the cost of all the tasks in the estimate
based on the new rates. Notice that the direct labor cost estimate for this task
is now $29,189.11, displayed below the parameter table as shown in the
enlarged view below.

Cost display Whenever you select an activated task, CostMetrix Estimator displays the
options direct cost with burden in the Task Direct Cost section of the main window.
It also displays the estimate total cost including overhead, general and
administrative expenses, and fee (if any) in the lower right hand corner of
the status bar. So at any time you can see the direct cost of the selected task
and the total (out-the-door) price of the cost estimate simultaneously.
Alternatively, CostMetrix Estimator also lets you change the display in the
status bar to show any one of the four cost options
total labor hours in the estimate

total direct labor cost
total direct material cost
total direct ODC
To change the status bar display, use the right mouse button to click on the
status bar cost display to evoke a pop-up menu of options. Click on the
option of choice and the display will change accordingly.
Importing bid You can import bid rates into CostMetrix Estimator from an external file so
rates you don’t have to type them in manually each time you prepare an estimate.
CostMetrix Estimator can read rates from a comma delimited text file (.csv
extenstion), which is easily created using most spreadsheet programs such
Microsoft Excel. Here is how to create a bid rate file and import it into
CostMetrix Estimator.
Creating an importable bid rate file:

1. Create a simple spreadsheet with two columns of data starting in cell 1A
(i.e., the upper left hand corner). In the first column, enter the labor
categories your organization commonly uses. Note: You must use the
same category name spelling as used in the cost model for Estimator to
match them up properly. For example, Sr. Engineer won’t match with
Senior Engineer.
2. In the second column enter the rate in dollars per hour. A sample is
included in the CostMetrix Estimator application folder.
3. After these entries, you can also enter your burden, overhead, G and A,
and fee, using the keywords shown in the table below. For a fixed dollar
value fee, use the keyword Fixed $ in the first column. For a fixed
percent fee use the keyword Fixed Percent.
4. Save the file in comma delimited text format (.csv extenstion), which is
a standard file format for most spreadsheet programs.
Importing bid rates into CostMetrix Estimator:

1. Click on the Import button on the Rates dialog box.

2. Select the file you saved above with the .csv extension and click Open.
The rates will be loaded into the appropriate fields on the Rates dialog
box.
When importing, CostMetrix Estimator reads the value in the left column
first. If that text matches one of the labor categories in your cost model, it
reads the value from the right column and loads it into the labor category
rates table. If the labor category is not used in your cost estimate, CostMetrix
Estimator ignores it.
Sr. Engineer 47.82

Engineer 1 33.94
Engineer 2 37.18
Sr. Admin 20.21
Admin 1 18.83
Admin 2 21.57
Clerk 12.88
Sr. Designer 29.58
Designer 24.19
Draftsman 1 22.76
Draftsman 2 26.39
Project Manager 24.88
Safety Manager 21.19
Office Manager 17.38
Design Supervisor 19.55
Designer 1 15.21
Construction Foreman 22.73
Labor Burden 42.3
Material Burden 18.7
ODC Burden 23.9
Overhead Rate 21.9
G and A 9.4
Fixed Percent 12
If the left column contains one of the keywords for burden, overhead,
general and administrative expense, or fee as shown above, it reads the value
in the right column and loads it into the appropriate rates field.
TIP: Since bid rates usually change with time, some companies make projections of
bid rates into the future by quarter or year for bidding purposes. Try creating a .csv
file of bid rates for each rate period covering the next few years. Then, when you
prepare cost estimates, simply select the file that has rates at or near the midpoint of
your project schedule.

Viewing the cost The direct labor cost summary shows 495.5 hours of labor, but these labor
breakdown report hours are distributed over several labor categories. CostMetrix Estimator
calculates the cost by multiplying the hours in each labor category by the
labor rates you entered for those categories.
One of the reports in CostMetrix Estimator shows you the cost category
breakdown for each task. Click on the Reports button to see the list of
available reports. The Reports dialog box will appear as shown below.
You can select one or more reports on this dialog box by selecting the
associated check boxes, then click View/Print to see the report. If you leave
the Check for Preview Before Print option selected, the report will be
displayed on screen in the Report Viewer, after which you can choose to
print the report or close it without printing.
Both summary and detail reports are available. In general, a subset of these
is adequate to support internal estimates, commercial proposals, or even
DoD proposals.
As an exercise, select the Schedule 5 - Direct Cost Breakdown by Task

report and click View/Print. You will see the report shown on the next page.
It shows that the 484.7 labor hours estimated for the Design Layout task is
broken down into 396.0 hours of Sr. Engineer, 41.2 hours of Admin 2, 34.6
hours of Clerk, and 12.9 hours of Admin 1.
FYI: Notice that this is a Parametric task. CostMetrix ModelBuilder derived the
breakdown of costs by category from actual historical cost data. Cost estimates
based on actual historical cost data are considered to be much more credible than
estimates based on an individual’s personal assessment.

For comparison, try viewing Schedule 1b - Direct Cost Summary and

Schedule 8 – Proposal Cost Summary. The best way to become familiar with
each type of report is to browse each one.
Report Viewer controls
Try experimenting with the controls on the Report Viewer. You can change
the zoom factor, scroll through multi-page reports, print it, or even save it to
disk for viewing later.
You may see a generic logo on the report on your screen. You’ll learn how
to change that to your company logo on page 71. In addition, in Chapter 4
you will learn how to generate reports directly in Microsoft Word which
allows you to save them in a format that can be opened by a common word
processor, and allows you more options for customizing your report formats.
Close the report now and return to the main window.
Viewing the CER The cost estimating relationships for each task in a good cost model are not
arbitrary. They are developed based on a logical analysis of facts, historical
basis
data, and experience. In CostMetrix, the CERs for parametric tasks are
derived by the Solver in ModelBuilder based on documented historical cost
data. In the cases of fixed cost, level of effort, and explicit formula tasks, the
cost model developer should provide a reasonable and supportable basis for
the CERs in the cost model.

CostMetrix ModelBuilder includes a place for a brief description of the basis

of the CERs for each task (or a reference to an external document that
describes it in detail). To view it, click on the CER Basis… button on the
main screen. If the Design Layout task is selected, you will see the
description shown below. This description is the default entered by
ModelBuilder whenever a parametric task is created. The cost model
designer can replace it with his own description if he prefers, and you can
edit it here as well. You can also select another task in the drop-down list at
the top of the dialog box to view or edit the CER Basis description for that
task.
FYI: Schedule 1d on the Reports dialog box shows all task names and their CER
basis descriptions.
Activating another To activate additional tasks for a cost estimate, simply check the box next to
Parametric task the task names. Go ahead and check the box next to the CFD Analysis task in
the Task List to activate it.
Entering start and end dates for the CFD Analysis task:
1. As soon as the task is activated the default start date will be highlighted
for editing. Enter “1/7/2002” to change it.
2. Press the tab key. The end date will be highlighted automatically.
3. Enter “2/2/2002” as the end date of this task.
CostMetrix Estimator will not allow you to enter a task start date that is later
than the end date. If you try, it will automatically change the end date to
match the start date. Likewise, you cannot enter a task end date that is earlier
than the start dates. In that case, it will automatically change the start date to

match the end date. Whenever it makes an automatic date change,

CostMetrix Estimator will issue a beep to warn you to recheck the dates for
correctness.
Notice that the values of the parameters for this task, # of Stages, Pressure
Ratio, and New Design Fraction, are already listed in the table in the Task
Detail section. That’s because you entered these values for the Design
Layout task.
NOTE: Each parameter in a cost model has a unique name. Therefore, every time
you see the parameter # of Stages in this cost estimate, it refers to the same variable
and has the same value every place it is referenced.
Flow Rate is a quantity parameter that refers to the volume of fluid the pump
can process in a unit of time. If the units of a parameter are defined in the
cost model, you can easily display them.
Displaying the units of a parameter:

1. Click on the parameter name in the table and pause the mouse.
2. The parameter units will be displayed in a hint box next to the cursor.
Try it now, and you will see a hint that displays “cfm” which a pump
designer will recognize as meaning cubic feet per minute.
Enter a value of “85” for the Flow Rate for this estimate.

If you change a parameter value, CostMetrix Estimator will update the value
of that parameter in all tasks where it is referenced. For example, change the
Pressure Ratio value to “4” in the CFD Analysis task, then click on the
Design Layout task and you’ll see that the value of Pressure Ratio is “4”
there also.
Leave the Pressure Ratio value set to “4” for this example.
Click on the CFD Analysis task again in the Task List and notice that the
ODC cost estimate is $820.77. Whenever you see material or ODC costs in
the estimate, it should remind you to consider escalation rates.
Entering You can enter escalation rates for material and ODC through the Rates
escalation rates dialog box. Follow this procedure to enter or edit escalation rates.
Opening the Escalation Factors dialog box:

1. Click on the Rates button to display the Rates dialog box.
2. Click on the Escalation Factors button in the lower left corner. This
opens the Escalation Factors dialog box.

The two tabs on this dialog box contain escalation percentage tables for the
20-year period, starting with the year the cost model was compiled. One tab
is for material escalation factors and the other is for ODC escalation factors.
Initially, all values will be zero. Enter 2.8 for the value of material escalation
for the year 2002. Then click on the ODC tab and enter 2.7 for the value of
ODC escalation for the year 2002. In this cost estimate, escalation entries
beyond 2002 are not needed because this project will be completed during
the year 2002.
Notice that the ODC cost estimate for the CFD Analysis task increased to
$821.93 after you entered the escalation factors. In other words, the ODC
cost was adjusted at the annual rates listed in the table from the compilation
date of the cost model up to the midpoint of the period of performance of the
task in which it was incurred.
Importing escalation rates:

To make it easier and faster to enter escalation rates, CostMetrix Estimator
allows you to import them from an escalation rates file on your hard disk or
network. CostMetrix Estimator uses the comma-separated variables (.csv)
file format which can be easily created using a text editor or a spreadsheet
program such as Microsoft Excel.

Year Material ODC

1990 1.8 1.8
1991 1.9 1.9
1992 2 2
1993 2.1 2.1
1994 2.2 2.2
1995 2.3 2.3
1996 1.7 1.4
1997 1.6 1.2
1998 1.9 1.8
1999 2.1 2
2000 2.8 2.8
2001 0 0
2002 2.8 2.7
2003 3.1 3.1
2004 3.2 3.2
2005 3.3 3.3
2006 3.4 3.4
2007 3.5 3.5
2008 3.6 3.6
The figure above shows an example spreadsheet table with escalation rates
from 1990 through 2008. The first column is the year, the second column is
the annual escalation rate for material, and the third column is the annual
escalation rate for ODC.
To import escalation rates, create a spreadsheet with rates applicable to your

material and ODC types and save it in the .csv format. Use actual rates for
past years and projections of future rates for future years (past rates are used
by CostMetrix ModelBuilder only). An example is included in the program
folder where CostMetrix Estimator is installed. To try it, click on the Import
button on the Escalation dialog box. Select the file named Escalation.csv
using the Open dialog box and click on the Open button. CostMetrix
Estimator will import the material and ODC rates listed in the table shown
above.
NOTE: One escalation rates file can be created for use with both CostMetrix
ModelBuilder and CostMetrix Estimator. If it is placed on a network file server, all
users can access it and maintenance is simplified. CostMetrix Estimator only uses
the rates in the table for the years listed in the CostMetrix Estimator Escalation dialog
box. All other years are ignored.
Click OK to close the Escalation Factors dialog box, then close the Rates
dialog box by clicking the OK button on it also.

Summary tasks Click the mouse on the Analyses task in the Task List. Notice that the task
name is gray meaning it is disabled. You cannot activate a summary task
directly. Since CFD Analysis is activated under it, the Analyses task displays
the labor, material, and ODC costs of all of the active tasks indented below
it. In this case, there is only one active task below Analyses in the Task List,
so the summary cost of Analyses is exactly equal to the cost of the CFD
Analysis task. Click on CFD Analysis and Analyses tasks alternately to see
that the task costs are in fact the same.
If you double click on the Analyses task, all the tasks under it will collapse
and be hidden from view. Double click again on Analyses and the subtask
will expand and be visible again.
Activating other Check the box next to the Stress Analysis task in the Task List to activate it.
Parametric tasks
Entering start and end dates for the Stress Analysis task:
1. As soon as the task is activated, the default start date will be highlighted
3. Enter “2/2/2002” as the end date for this task.
Notice that the cost of this task is being calculated based on the # of Parts, #
of Stages, and New Design Fraction parameters, the values of which were
previously entered in the table in the Task Detail section for the Design
Layout task. Some parameters are used to calculate the cost of more than one
task. If you edit a parameter value in one task, the new value will be used for
all other tasks that depend on that parameter.
Check the box next to the Drafting task in the task list to activate it.
Entering start and end dates for the Drafting task:

1. As soon as the task is activated, the default start date will be highlighted
Start and end dates should be entered for every task because CostMetrix
Estimator needs the task dates to properly calculate escalation for material
and ODC.
The main screen should now look like the figure below with the Drafting
task selected.

Displaying the So far, you have activated four Parametric tasks for your cost estimate. You
cost summary can quickly review the direct cost estimate for each task by clicking on the
task names in the Task List to see the direct labor, material, and ODC
estimates in the Task Direct Cost section of the main window. To see the
total of the cost of all active tasks in your estimate, click on the Cost
Summary button. Try it now.
The Cost Estimate Summary window has four sections. The Labor Summary
section shows all labor categories in the estimate and the hours estimated for
each, the total number of labor hours, the total direct labor cost in dollars,
the labor burden expense, and the total labor cost with burden. The Material
Summary and ODC Summary sections show the same type of detailed
breakdown. The bottom section shows a subtotal of the total labor, material,
and ODC cost with burden, and the overhead, G&A, and fee with subtotals
at each level.

Close the Cost Estimate Summary window using the OK button to return to
the main window.
Activating a Fixed Requirements Development is a Fixed Cost task. This can be confirmed by
Cost task clicking on the task name to see the type in the Task Detail section. Activate
the Requirements Development task now by checking its check box.
Entering start and end dates for the Requirements Development task:
for editing. Leave the date set at the default value of “11/1/2001”.
That is all that’s required for a Fixed Cost task. No parameter values are
necessary because the cost model designer has pre-defined the labor,
material, and ODC estimates as fixed values. Notice the task estimate in the
Task Direct Cost section.

Activating an Design Review is an Explicit Formula task. Click on the task name to see the
Explicit Formula Explicit type designator in the Task Detail section. This type of task may
task require parameter entries, depending on whether the cost model designer
included any in the cost formula. If there are parameter values in the
formula, they will appear in the parameter list when you activate the task.
Activate Design Review now by checking its check box.
Entering start and end dates for the Design Review task:
The formula for this task calculates the Design Review labor based on the
New Design Fraction parameter. If the value of the New Design Fraction
parameter had not already been entered, you would need to enter it now.

Displaying all By default, CostMetrix Estimator only displays the parameters that are
active parameters associated with the currently selected task. Notice that the Parameter table
displays Parameters of Selected Task above the parameter name. This mode
is useful for showing which parameters influence the cost of each task.
However, it is possible to view all active parameters simultaneously,
regardless of which task is selected, an alternate mode that can be helpful
when reviewing the parameter values to make sure all values are entered
properly.
Displaying all active parameters:

1. Select Preferences from the Edit menu.
2. Under the Parameter Display options, select Show all active parameters.
3. Close the Preferences dialog box.
You will now see all active parameters listed in the Task Detail section. The
table displays All Active Parameters above the parameter names to let you
know you are in this mode. Note that the parameter list no longer changes as
you switch from task to task.

Title shows parameter display mode
You can also click the right mouse button over the parameter table to invoke
a context-sensitive menu that will allow you to quickly switch between the
two parameter display modes.
Changing the parameter display mode using the right mouse button:
1. Click the right mouse button over the parameter table. A context-
sensitive menu will appear that includes Only Show Parameters of
Selected Task.
2. Click on this menu item and the parameter display changes to only list
the parameters of the currently selected task.
3. Click the right mouse button over the parameter table again. A context-
sensitive menu will appear that includes Show All Active Parameters.
Reset the parameter display mode to display only the parameters of the
selected task for the rest of this exercise.
Activating a Level Project Management is a Level of Effort task. This can be confirmed by
of Effort task clicking on the task name to see the type in the Task Detail section. Activate
this task now by checking its check box.
The cost of a Level of Effort task is calculated based on the duration of the
task, which CostMetrix Estimator determines by the start and end dates you

enter. Notice that the cost is initially zero because the task start and end
dates are the same.
Entering start and end dates for the Project Management task:
for editing. Leave the date set at the default value of “11/1/2001”.
That is all that’s required for a Level of Effort task. Notice the task estimate
in the Task Direct Cost section.
Activating a Bearing Life is a Manual Entry task, which means you must enter the cost
Manual Entry task estimates for this task manually. Activate this task now by checking its check
box.
Entering start and end dates for the Bearing Life task:

There are no parameters for a Manual Entry task, so the parameter table is
disabled. At the moment, there are no costs associated with this task. You
must enter them using the Manual Entry button, which became enabled as
soon as the task was activated. Click on it now to open the Manual Entry
Detail dialog box.
The Manual Entry Detail dialog box has three tabs, one each for labor,
material, and ODC. On the right side of the labor tab is a list of labor
categories defined in this cost model.
Assigning labor costs to the Bearing Life task:

1. Click on the Sr. Engineer labor category in the labor category catalog on
the right side of this dialog box.
2. Click on the left-pointing arrow button to assign this labor category to
this task. The labor category will appear in the table on the left.
3. Enter “36” in the Hours column next to Sr. Engineer.
4. Click on the Admin 1 labor category in the labor category catalog on the
right side of this dialog box.
5. Click on the left-pointing arrow button to assign this labor category to
this task. The labor category will appear in the table on the left.
6. Enter “4” in the Hours column next to Admin 1.

To remove a labor estimate, simply select it in the list on the left and click
the right-pointing arrow button. This moves it out of the active list for this
task.
Next click on the Other Direct Costs tab to enter ODC cost estimates. The
ODC categories defined in this cost model are Office Expense, Data
Processing, and Blueprints. But what if you need to enter costs in a category
not listed? The New button under the catalog allows you to do just that.
Adding a cost If you want to enter costs in a category other than those pre-defined in the
category to the cost model, you can easily add it. Here’s an example.
estimate
Defining a new ODC category for the Bearing Life task:
1. Click on the New button under the catalog of ODC categories. The New
ODC Category dialog box will appear.
2. Enter Bearing Consultant Fees for the name of this new ODC category.
3. Enter “OCS” for the ODC code and “TriboSciences, Inc.” for the
supplier/source.
4. Click on the OK button to close the New ODC Category dialog box
The ODC and supplier/source are optional information. If entered, they are
displayed on the Schedule 3 - ODC Summary report.

The Bearing Consultant Fees cost category now appears in the ODC list. It
is now available to be assigned to Manual Entry tasks as needed. With
Bearing Consultant Fees highlighted, click on the left-pointing arrow button
to add it to the Bearing Life task. Enter “850” (dollars) as the ODC cost for
this task as shown below.
Now click on the Material tab of the Manual Entry Detail dialog box so you
can create a material category and enter material costs for this task.
Defining a new material category for the Bearing Life task:

1. With the mouse pointer over the empty Material Category list on the
right side of the dialog box, click the right mouse button and select New
Category from the pop-up list. . This is an alternate way of opening the
New Category dialog box.
2. Enter Wear Test Specimen for the name of this new material category.
3. Enter “PP” for the ODC code and “Inmark Sciences” for the
supplier/source.

4. Click on the OK button to close the New Material Category dialog box.
Use the left arrow button to assign this material category to this task and
enter $388.25 for the cost of this material as shown below.
FYI: You can delete cost categories you manually add to a cost estimate using the
Delete button under the catalog, if you decide you don’t need them. But CostMetrix
Estimator will not let you delete a cost category that is predefined in the cost model.
If you need to edit the category code or supplier information you entered for
a cost category, click on the category in the catalog with the right mouse
button. A context sensitive menu will appear that includes Edit Details…
Select it and a dialog box will appear that allows you to edit the description
or supplier.

Click on the OK button of the Manual Entry Detail dialog box to close it and
return to the main window. Notice that the 40 labor hours you entered are
reflected in the Task Direct Cost section. The wear test specimen expense of
$388.25 becomes $460.85 with material burden, and the bearing consultant
fees become $1,053.15 with ODC burden.
WARNING: If you add a labor category to a cost estimate, don’t forget to go back to
the Rates dialog box and enter the appropriate labor bid rate for the new category.
Adding tasks to What if you need to bid one or more tasks that are not predefined in the cost
the Task List model? You can simply add new Manual Entry tasks to the estimate to
handle such situations.
For example, suppose you determine that thermal analysis is needed for this
project, but it was not a task that was anticipated when the cost model was
designed. The best long-term solution would be to add it to the cost model,
but in a pinch you can add a Manual Entry task to an estimate using
CostMetrix Estimator.
Adding a Thermal Analysis task to the cost model:

1. Click the mouse on any one of the tasks under the Analyses summary
task.

2. Click the right mouse button to see a context sensitive menu list, which
includes Insert New Task and Delete Task.
3. Select Insert New Task. The New Task dialog box will appear.
4. Enter Thermal Analysis for the task name and click the OK button.
Thermal Analysis will be added to the list of analysis tasks under Analyses.
You can now activate this new task and enter a cost estimate, just as if it
were a predefined Manual Entry task in the cost model.
NOTE: The Insert New Task function places the new task at the end of the currently
selected segment of the Task List. If you highlight a subtask of a summary task and
select Insert New Task, it will add the new task at that same level of the task
hierarchy.
But first, you should add a description of this task to the task database. When
you select a Manual Entry task that has been added to a cost estimate, the
task description field background changes to white, indicating that you can
enter or edit the text.
Adding a task description for the Thermal Analysis task:

1. Click the mouse inside the Description box in the Task Detail section.
2. Enter the following task description for the Thermal Analysis task:
Steady state thermal analysis with temperature predictions.
This new description will be included with the other task descriptions in the
cost model on the Schedule 1c - Task Descriptions report.
FYI: You can delete a task you manually add to a cost estimate using the Delete
Task option on the right mouse button menu in the Task List, but CostMetrix
Estimator won’t let you delete a task that is predefined in the cost model. You can
also use the Insert New Task and Delete Task options under the Edit menu if you
prefer them to the context-sensitive right mouse menu.

Activate the Thermal Analysis task now by checking its check box.
Entering start and end dates for the Thermal Analysis task:
Click on the Manual Entry button and enter 64 hours of Sr. Engineer labor
and 40 hours of Engineer 1 for the task. Then click the OK button to close
the Manual Entry Detail dialog box.
Entering the task Whenever you add a task to a cost estimate, you should enter the basis of the
CER basis cost estimate for that task. To do this, first select the Thermal Analysis task
in the task list. Then click the CER Basis… button to open the CER Basis
dialog box. Click in the box where the description resides and type the
following:
This cost estimate is based on a proposal provided by Harrison-Tanner, the

analysis consulting firm selected for this project. See documentation
provided with this estimate.
This description will be added to the others shown on the Task CER Basis
report.

Itemizing travel Travel costs can be treated like any other ODC cost in CostMetrix
expenses ModelBuilder and CostMetrix Estimator. Travel costs can be derived from
historical cost data, or they can be part of Fixed Cost, Level of Effort, or
Explicit Formula tasks. You can also add a travel expense ODC category
and bid travel expenses as a manual entry to your cost estimate. By default,
CostMetrix Estimator will report travel expenses on the ODC Summary
Report with other ODC expenses.
Some companies require that travel expenses be itemized separately with an

explanation of the purpose of the travel, destination, and number of trips.
CostMetrix Estimator can do this using a special ODC category called Sched
6 Liaison Travel. If an ODC category by this name exists in the cost model,
or if it is added to a cost estimate using this exact cost category name,
CostMetrix Estimator will allow you to assign it to any Manual Entry task
and specify the purpose of the travel, destination, and number of trips on a
task-by-task basis. A special report (Schedule 6 – Liaison Travel Costs) is
also included to document this type of travel cost detail.
Follow these steps to use Sched 6 Liaison Travel expenses. First, select the
Bearing Life task in the Task List, then click the Manual Entry button to
access the Manual Entry Detail dialog box. You will now add itemized
travel expenses to this task to see how it works.
Defining the Sched 6 Liaison Travel cost category:

1. Click on the Other Direct Costs tab of the Manual Entry Detail dialog
box

2. Click on the New button to create a new ODC cost category.

3. Enter “Sched 6 Liaison Travel” for the category name. The category
name must match exactly or you will not be able to add trip detail
information. Enter “OLT” for the ODC code, and “Travel Expense
Guide” for the supplier/source as shown below.
4. Click on the OK button to close the New ODC Category dialog box.
Entering Sched 6 Liaison Travel costs:

1. Click on the left-pointing arrow to add the new Sched 6 Liaison Travel
ODC category to the expense table for this task.
2. Enter $416.72 for the cost in the Dollars column as shown below.
So far you have created the special ODC category and entered travel costs
for the Bearing Life task. You can now enter specific travel details for this
task, which will appear on the Schedule 6 report.

Entering travel details for the Bearing Life task:

1. Place the mouse anywhere within the table of assigned ODC categories
on the left side of the dialog box and click the right mouse button. A
pop-up menu will appear that includes Travel Details…
2. Click on this menu item with the left mouse button to open the Travel
Details dialog box. Here you can enter the purpose of the trip, the
destination, and the number of persons making the trip.
3. Enter the information shown below for this example.
4. Click on the OK button to close the Travel Details dialog box.
You can edit this information at any time by clicking on the right mouse
button in the ODC cost table to access the Travel Details… pop-up menu.
However, the Manual Entry Detail dialog box must first be open to the
specific task with the Schedule 6 travel expenses.

Next you will see how travel details are reported on Schedule 6. Close the
Manual Entry Detail dialog box by clicking on the OK button, then open the
Reports dialog box by clicking the Reports button on the main window.
Select the Schedule 6 – Liaison Travel Costs report and click the View/Print
button.
The report that appears shows the specific travel cost detail you just entered.
If you had Sched 6 Liaison Travel costs in several tasks, each would appear
on a separate line on this report.
TIP: Itemized travel expenses can only be assigned to a Manual Entry task. What if
you need to associate itemized travel expenses with another type of task, such as
the Design Review task, which is an Explicit Formula type? Simply insert a new
Manual Entry task into the estimate specifically for the travel expenses. For example,
the task name could be called “Design Review Travel”. Then just enter the itemized
travel expenses as described in this section.

NOTE: Sched 6 Liaison Travel costs do not appear on the Schedule 3 - ODC
Summary report.
Documenting There are frequently specific groundrules or assumptions that go along with
groundrules and each cost estimate. It is important to document these groundrules and
assumptions assumptions and include them with the cost estimate because it may only be
valid if those conditions are met. CostMetrix Estimator allows you to
document groundrules and assumptions with the cost estimate so you don’t
need to keep separate external records that might get lost or overlooked.
Follow these steps to enter groundrules and assumptions into your cost
estimate.
Entering groundrules and assumptions:

1. Select the Groundrules/Assumptions option from the View menu to
open the Groundrules and Assumptions dialog box.
2. To add the first item, click on the Add Item button.
3. Click the mouse in the description field and type the first groundrule or
assumption. For example enter:
This cost estimate is based on the assumption that full funding is authorized
at the start of the project so no schedule interruptions will be encountered.
4. Click on Add Item again to enter the second groundrule. For this item
enter:
Requirements for this pump are based on the 1998 marketing survey report.

You can add as many items to this list as you need. Simply use the Add Item
button to add to the list, and use the Delete Item button to remove any
unwanted items. You can also use the up and down arrow buttons to reorder
your items. Groundrule descriptions can be up to 240 characters long.
A report is available in CostMetrix Estimator that lists all of the groundrules

and assumptions for your cost estimate documentation. Try viewing
Schedule 1a - Groundrules and Assumption.
You can also import groundrules and assumptions from a text file on your
hard disk or network. This is convenient if your organization frequently uses
standard groundrules and assumptions. You can import the standard set and
add to or edit them as needed.
The groundrules should be created with a text editor such as Windows

Notepad. Simply type in the groundrules/assumptions with one item on each
line of the text file (turn off word wrapping in Notepad to see each line of
text on a single line) and save it with a .txt extension.

Importing groundrules and assumptions from a text file:

1. Use the Import button on the Groundrules and Assumptions dialog box.
2. When the Open dialog box appears, navigate to and select the text file
that contains the standard groundrules and assumptions. The items are
imported.
Save your cost estimate now using the name Cyclone.cef. You will use it as
you continue this tutorial in the next chapter.
Summary In this chapter you learned the mechanics of creating a cost estimate with
CostMetrix Estimator. You opened a new cost estimate file, selected the cost
model, and performed the necessary steps to select pertinent tasks, enter
parameter values, and assemble other important cost estimating information.
In the next chapter you will learn how to present the results in ways that will
help you assess the reasonability of the estimate, evaluate cost risk, and
document the results.

4 Getting Results
In chapter 3 you learned how to construct a sample cost estimate using
CostMetrix Estimator. You opened a new cost estimate file, selected the cost
model, and performed the necessary steps to select pertinent tasks, enter
parameter values, and assemble other important cost estimating information.
In this chapter you will learn how to make the most of the results.
CostMetrix Estimator makes it easy to document your cost estimates and
gives you useful ways to view and present the results. In this chapter you
will learn about:
ú Viewing and printing summary and detail reports

ú Generating reports using Micorsoft Word
ú Assessing cost risk
ú Bid metrics
ú Generating charts of calendarized cost and resources
Review the cost To begin this phase of the tutorial, open the cost estimate file you saved at
estimate the end of Chapter 3, or open the sample cost estimate in the CostMetrix
Estimator program folder called CycloneBid.cef.
At this point your cost estimate is almost done. You have activated all the
tasks needed for the Cyclone project and you have entered all the necessary
parameter values and task dates. You even added a supplemental task and
entered itemized travel expenses and logged several assumptions about the
cost estimate.
Before you go on to documenting the estimate, it is usually prudent to

quickly review the estimate to make sure it is complete and accurate. Here
are a few tips for reviewing a cost estimate.
1. Set the parameter display mode to show all active parameters and make
sure all parameter values are accurate.
2. Make sure every task has the correct start and end dates, especially Level
of Effort tasks, which require those dates to accurately calculate cost.

Chapter 4 Getting Results 69
3. Double check the bid rates to make sure they are correct for the period of
performance.
4. Review the Cost Summary to make sure that the total estimate is
reasonable and meets your cost requirements. If you have a cost target to
meet, compare your estimate with the target. To meet a cost target, you
may need to change the scope of the work you are planning to perform
or the parameter values you assumed for those tasks. This process is
called design-to-cost, where you tailor the project to meet a cost target.
If you need to make changes, CostMetrix Estimator will recalculate the task
estimates automatically as you make them, whether they are rate changes,
parameter changes, or task start and end date changes. Tuning your estimate
to meet your goals is easy because CostMetrix Estimator does all the
recalculation for you instantly.
Cost estimate When you are satisfied with your estimate, it is time to print reports.
reports CostMetrix Estimator provides a comprehensive set of reports you can view
or print to document your cost estimate. These reports have been formatted
so you can use them either for internal company purposes or they can be
presented directly to your customers in cost proposals. The reports provided
with CostMetrix Estimator, combined with the cost model documentation
provided by CostMetrix ModelBuilder, give you a completely auditable
package for submission with DoD cost proposals.
There are two ways to view and print these reports. You can use the internal
Report Viewer, which is the default method, or you can generate the reports
directly in Microsoft Word 97 or Word 2000, if you have one of those
programs installed on your system. Unless otherwise stated the description
that follows applies to both methods.
At any point during the cost estimate creation, you have access to these
reports through the Reports button. You can also access the reports through
the printer speedbutton on the main window, or by selecting Print Reports...
from the File menu. All of these methods will bring up the Reports dialog
box.
There are seventeen different report types that are designed to document
every important aspect of your cost estimate. They are identified as Schedule
1 through Schedule 10, plus subtypes Schedule 1a through Schedule 1g.
The best way to become familiar with each type of report is to view each
using the sample cost estimate as an example. You can also browse through
the sample reports in Appendix A of this manual.
Open and inspect the other types of reports as well to become more familiar
with them. A brief description of each type of report is given below.

70 Chapter 4 Getting Results
Schedule 1 – Proposal Cost Includes the project description,

Estimate rationale, and estimator’s résumé.
Schedule 1a – Groundrules and Lists specific groundrules and

Assumptions assumptions for the estimate.
Schedule 1b – Direct Cost Lists the total direct labor, material, and
Summary ODC costs for the project by category.
Schedule 1c – Task Lists the name and description of each

Descriptions task included in the cost estimate.
Nonactivated tasks are not included.
Schedule 1d – Task CER Basis Lists the CER basis description for each
task in the cost model.
Schedule 1e – Cost Estimate Lists all the parameter names, types, and
Parameters values used to derive the estimate.
Schedule 1f – Task Start/End Lists the start date, end date, and
Dates performance factor for each task in the
estimate.
Schedule 1g – Escalation Lists the material and escalation factors

Factors by year.
Schedule 2 – Direct Material Summarizes direct material estimates by

List type.
Schedule 3 – ODC Summary Summarizes other direct cost estimates

by type.
Schedule 4 – Direct Cost Lists the direct labor hours, labor

Summary by Task dollars, material dollars, ODC dollars,
and total dollars by task.
Schedule 5 – Direct Cost Lists the direct cost of each task by cost
Breakdown by Task category.
Schedule 6 – Liaison Travel Details itemized liaison travel expenses

Costs by task.
Schedule 7 – Proposal Bid Lists the direct hourly labor rates,

Rates burden rates, overhead and G&A rates,
and fee used in the cost estimate.
Schedule 8 – Proposal Cost Summarizes the cost estimate from

Summary direct labor, material, and ODC cost to
price with overhead, G&A, and fee.

Schedule 9 – Bid Metrics Shows the value of key cost metrics

defined in the cost model.
Schedule 10 – Cost Risk Shows the potential cost variance (risk)

Analysis for each task and the total project
As you can see, these reports provide a tremendous amount deal of detail.
Two clicks of the mouse provide a complete set of reports that fully
document your cost estimate. A subset of these reports will usually satisfy
most needs for internal cost estimate review or for presentation directly to a
customer in a cost proposal.
You can select all the reports you want to view or print from the Reports
dialog box and click on the View/Print button. CostMetrix Estimator will
cycle through each report you selected in the order listed. When using the
internal report generator, make sure the Check for Preview before Print
option is selected so the Report Viewer will appear on the screen. If this
option is turned off, the report will go directly to the system default printer
without a preview.
A sample of each report is included in Appendix A for the Cyclone project

estimate created in this chapter. In the next few sections, you will learn
about some of the ways you can customize your reports when using the
internal Report Viewer.
Customizing the CostMetrix Estimator allows you to add some custom features to report
report logo forms generated by the internal Report Viewer. First, you can add your
company logo in the top right corner of each page. The logo image comes
from a bitmap file (.bmp) or Windows metafile (.wmf) stored in the
CostMetrix Estimator program folder on your hard disk. When CostMetrix
Estimator is installed, a generic logo called logo.bmp is placed in this folder.
To put your own company logo on your reports, create a bitmap or metafile
of your logo and save it in the CostMetrix Estimator program folder, using
the name logo.bmp or logo.wmf respectively. The logo image will be scaled
to fit into a rectangular box, 1.4 inches wide by 0.65 inches tall on the report
page. Therefore, your logo bitmap frame should be about twice as wide as it
is tall to allow it to scale proportionately in both the horizontal and vertical
directions.
You can create a bitmap logo using the Windows Paint application or any
one of many drawing or illustration programs. You might want to include a
narrow white border around the image to make it fit nicely on the report.
You can create a metafile logo using Microsoft Powerpoint. Open a new
presentation then select File/Slide Setup. Set the size of your slide to 11
inches wide by 5.1 inches high to establish the correct proportions. Then

create the logo using the tools in Powerpoint. Be sure to save it as a .wmf
metafile instead of the default .ppt presentation format.
By default, CostMetrix Estimator looks for a bitmap when it is first installed.

If you prefer to use a metafile file, select Preferences... under the Edit menu
and select metafile for the logo image file type. If you don’t want a logo on
your reports, simply move the logo file out of the CostMetrix Estimator
directory.
Customizing the The internal Report Viewer generates a header for each report that contains a
report header text frame that can be used to display a brief declaration of proprietary rights
or disclosure restrictions pertaining to the information contained in it.
CostMetrix Estimator looks for a text file called Header.txt in the
CostMetrix Estimator program folder. If this file exists, it inserts the text
contained in it into a text frame directly below the title of the report. The
sample reports in Appendix A show a sample declaration statement, which is
installed with CostMetrix Estimator. You can edit or replace this file as
needed for your business.
Customizing the The rationale is an explanation of how the estimate was derived and why it
rationale is reasonable. Most government contract proposals require that the rationale
be provided for all cost estimates.
With traditional bottoms-up estimating techniques, the rationale can be very

laborious and time consuming to generate. One advantage of a well-
documented cost model is how it simplifies the generation of rationale. If the
cost model accuracy is validated using historical cost data, and the results
are well documented, the estimator can simply refer to the use of the cost
model as the rationale for the entire cost estimate. Task-by-task rationale is
not required.
When certain tasks in the estimate are generated using methods other than
parametric CERs derived directly from historical data, a statement of the
basis of each non-parametric CER reinforces the rationale and supports the
cost estimate justification.
This approach has been used extensively on government contract proposals,

and has successfully passed detailed audits by the Defense Contract Audit
Agency. When the cost model documentation is complete, auditors respond
favorably because it simplifies their auditing job. They only have to confirm
the reasonableness of the parameters entered into the cost estimate.
Open the Schedule 1 report (using the internal Report Viewer) to see how it
is laid out. The proposal number, project name, task name, and other
information in the top several lines comes from the Project Information
dialog box. CostMetrix Estimator determines the period of performance from
the earliest task start date and the latest task end date. The task statement

also comes directly from the Project Information dialog box. The estimator’s
resume comes from the Estimator’s Resume dialog box. The estimator’s
name and current date are automatically entered at the bottom of the page
next to the approval signature line.
logo.bmp
Header.txt or logo.wmf
Basis.txt
Rationale.txt
A declaration should be included in the rationale that explains that a

validated cost model was used, and directs the auditor to the location of the
cost model documentation, which can be provided on demand for inspection
and audit. A sample statement of this type is shown below.
This estimate was derived using a parametric cost estimating system. A
parametric cost estimate is one that uses Cost Estimating Relationships
(CERs) and associated mathematical algorithms to establish cost estimates.
This cost model was developed using historical cost data accumulated by
the bidding organization and standard statistical methods of data analysis
and reduction to determine and validate the accuracy of the Cost Estimating
Relationships (CERs). The cost model design and validation documentation
is available for inspection in the Engineering Dept., Building 6, room 2107.
CostMetrix Estimator lets you place a declaration such as this on Schedule 1.

Simply write out a short description on a word processor and save it as a
simple text file on your hard disk in the CostMetrix Estimator folder using
the name Rationale.txt. If this file exists, CostMetrix Estimator will insert it
below the heading Rationale on Schedule 1 when the internal Report Viewer
is used. The sample rationale description shown above was installed on your
hard drive with CostMetrix Estimator as an example. You can use this one as
a template for your own custom rationale statement.

You can also customize the text displayed directly below the Rationale
heading on Schedule 1. The text for this is contained in a file called Basis.txt
in the CostMetrix Estimator folder, which you can easily edit.
Report Viewer The internal Report Viewer includes several simple controls as illustrated
controls below. A hint at the function of each button can be seen by holding the
mouse pointer over the button and pausing a moment.
Zoom to width Open

Save
Zoom to 100% Print
Zoom to fit Printer Setup
The three buttons on the far left are the zoom controls which set the size of
the report image on your screen. The first button zoom the full page image to
fit the window on your screen; the second displays the image at 100%; and
the third zooms the page until the width fills the window.
The next four buttons control which page is visible for multi-page reports.
Remember, each report on the Reports dialog box can have multiple pages if
necessary to display the information requested.
The printer button with the blue wrench is the Printer Setup button, which
allows you to change the destination printer and its properties. The second
printer button sends the report to the printer.
The disc button is used to save reports to disk. Two file formats are available
when using the internal Report Viewer, and these are discussed in the next
section.
Finally the folder icon is used to open a report file that was saved to disc in a
previous session.
Saving reports In general, the easiest way to generate reports is to open the cost estimate
with CostMetrix Estimator and view or print the desired reports with the
Report Viewer. Occasionally, you may want to save a report for future use
apart from the cost estimate. The Report Viewer includes the capability to
save reports to your hard drive. Two file formats are allowed:
.QRP The CostMetrix Estimator report format which provides

WYSIWYG previews.

.XLS Microsoft Excel format which provides report text and data in a
spreadsheet form.
To save a report, open it with the Report Viewer and use the Save button on
the tool bar. (The save button has a floppy disk icon.) On the Save Report
dialog box, use the Save as type: drop-down list to select the desired file
type.
Here are some of the factors you may want to consider when selecting the
file type.
1. QRP format saves the report exactly as you see it on the screen. You can
use the Archived Reports feature on the View menu of CostMetrix
Estimator to open, view, and print any reports you may have saved in
QRP format.
2. The XLS format is useful if you want to capture the data in a report in a
format readable by Excel, but it does not provide a WYSIWYG transfer
of borders and logos. The XLS format saves the text on a report only and
places it in the nearest cell of an equally spaced spreadsheet grid.
Using Microsoft One of the new features in Version 3 is the ability to generate reports
Word to generate directly in Microsoft Word. This has several potential benefits including
reports additional options for customizing your reports and it facilitates the
electronic archiving and delivery of proposal documents.
This option is only available if you have Microsoft Word 97 or Word 2000
installed on your system. CostMetrix Estimator launches Word through
Windows automation techniques and constructs each report in realtime. It
does this with the help of templates installed in a subfolder called Word
Templates in the CostMetrix Estimator install folder.
To generate a report in Microsoft Word, simply select the report on the

Reports dialog box and click on the Use MS Word checkbox before clicking
the View/Print button. If the Microsoft Word application is already open, it
will become active and the report will be generated. If the Microsoft Word
application is not open, it will be launched and the report will be generated.
Each report you generate is created as a separate document in Word.
You can also set the report option on the Preferences dialog box to send all
reports directly to Word by default.
You can customize reports generated in MS Word by customizing the

Customizing templates from which they are generated. Each template has a .dot extension
reports generated and is named after the report it is associated with. For example, open
in MS Word Schedule 1.dot and you will see the document shown below.

The body of the document contains bookmarks that represent certain

information about the cost estimate. For example, Proposal_No is a
bookmark that represents the proposal number in the estimate. If this
bookmark exists, CostMetrix Estimator will substitute that bookmark with
the actual proposal number shown in the Project Information dialog box. It
does not matter where this bookmark is positioned on the body of the
document. Therefore you can customize the format and move items around
as you see fit. You are also free to leave bookmarks out of your custom
formats and CostMetrix Estimator will ignore them.
Modify the templates as you see fit, then save them in the Word Templates
folder using the same names. CostMetrix will use them to build your reports
in Microsoft Word.
NOTE: These templates have no effect on the reports generated in the built-in Report
Viewer.
Cost risk analysis Have you ever had to defend the accuracy of your cost estimate? How
confident are you that your estimate is accurate? Could the actual cost be
higher? If so, how much higher is it likely to go? Ten percent higher? 50%
higher? 200% higher? Or might the actual cost be significantly lower than
the estimate? These are important questions that every company must ask,

especially when bidding fixed price projects. These are questions that
CostMetrix can help you answer.
This is an area of cost estimating called risk analysis, and it has to do with
quantifying the uncertainty in a cost estimate. One of the advantages of
CostMetrix is that risk analysis comes along as a natural byproduct of
analyzing cost data based on historical performance. The ModelBuilder
Solver automatically generates much of the information needed to provide a
quality cost risk analysis with every cost estimate.
The first step is to understand that CostMetrix Estimator produces what’s

commonly called a “nominal” or “most probable” cost estimate. That’s just
another way of saying that each estimate is actually an average cost for that
type of project. According to this approach, if you performed ten projects of
this type, some would cost more than the estimate, some would cost less, but
overall they would average out to match the “most probable” cost estimate.
How much more or less any individual project could vary from this estimate
depends on the type of project, variability of the processes used to perform
the project, technical and administrative risks, etc. The Solver can help you
quantify these uncertainties.
One of the powerful characteristics of the CostMetrix ModelBuilder Solver,

is that it calculates the variances of your historical project costs each time it
runs. These variances are determined by calculating how well the cost
estimating relationships predict the cost of the past projects in its database.
Cost estimating is by nature a statistical process. In other words, each

estimate deals with probabilities. For any given estimate, CostMetrix is
designed to predict the cost that is “most likely” to occur. In other words,
any cost higher or lower than the prediction has a lower probability of
occurring, and the probability decreases as the cost gets further from the
prediction value. This trend is illustrated in the figure below.
1.2
1
P robability of oc c urranc e
0.8
0.6
0.4
0.2
0
0 < < <2c os t lower 4 6 $
A vg 8 c os t higher10> > > 12

Assume for a moment that you are a cost analyst (perhaps you are in fact)
and you were evaluating the actual cost records for one hundred projects
involving circuit board assembly. Assume that the projects were all
fundamentally the same so there are no major technical differences to
account for between the projects. First, you calculate the average cost by
simply summing the project costs and dividing by the number of projects.
Then, you compare the cost of each project to the average and notice that
eight of the one hundred are within ±5% of the average cost. Going further
you determine that 41 of the one hundred are within ±10% of the average
cost, 50 are within 12% of the average cost, and 78 are within ±20% of the
average cost. Finally, you notice that all the sample projects are within ±25%
of the average cost. If you go further and plot these data points on a graph,
you find that it looks much like the figure shown above.
This analysis tells you something very valuable about this type of project.
First, you now know the average cost and you can use that fact alone for
estimating the cost of future projects of this type. But also, you know the
range of uncertainty of the cost estimate. Since all the sample projects were
within ±25% of the average, and you had a significantly large number of
sample projects on which to base the analysis, it is reasonable to assume that
future projects will be within ±25% of the average cost. While it is possible
that a future project could fall outside that range, it is very unlikely.
The analysis also tells you that half of the sample projects were within 12%
of the average cost estimate. Therefore, for future projects, a cost variation
of ±12% should be expected as average based on historical trends.
Therefore, in any cost estimate there are three truly important pieces of
information. The first is the average cost which is the middle of the probable
range of costs. Next is the “typical” error which tells you how much cost
variation is normal or common. Third is the “maximum” error which is the
maximum cost variation that could occur under most circumstance.

1.2
P robability of oc c urranc e
0.8
0.6
0.4
0.2
0
0 - M 2ax % - Ty4p % 6 $
A vg + - 8Ty p % 10ax %
+ M 12
CostMetrix uses these concepts of “typical” error and “maximum” error, to

help you gauge your confidence level in your bids. Remember, the true
statistical uncertainty depends upon many factors including how many
sample data points are considered, the similarity of future projects to the past
projects on which the CERs are based, etc.
The CostMetrix ModelBuilder Solver uses built-in statistical functions to

calculate the “typical” error and “maximum” error for the cost estimating
relationships it derives based on your historical data. The accuracy of the
calculations depends on the number of data points. Generally, the calculation
of cost risk becomes more accurate as more cost data is compiled.
Starting with Version 3.0, CostMetrix ModelBuilder compiles the variance

information for each parametric task into the cost model for use by
CostMetrix Estimator. ModelBuilder also compiles the typical error and
maximum error statistics for non-parametric tasks such as explicit formula
and fixed cost tasks if they are entered by the cost model designer. For
manual entry tasks, the cost estimator can enter the typical error and
maximum error as percentages of the average cost.
Displaying and Click on the Risk button on the main window for the CycloneBid.cef cost
entering cost risk estimate. The Cost Risk window will be displayed to show the “Typical %”
information and “Maximum %” cost variances for each task. Notice that each task has
separate labor, material, and ODC cost risk categories.

The percentages displayed here were values stored in the cost model file.
The values for parametric tasks were calculated by the CostMetrix
ModelBuilder Solver based on an analysis of the cost variance of projects in
the historical database. The values for fixed cost, explicit, and level of effort
tasks were defined by the cost model developer.
The cost risk percentages for Manual Entry tasks are generally determined
by the cost estimator because they can’t normally be determined in advance
by the cost model designer. The Cost Risk window shows values of zero for
the two manual entry tasks in this estimate, one of which was predefined in
the cost model and one of which was added when the cost estimate was
being created (see chapter 3). To include these tasks in the cost risk analysis
you must enter the known or estimated cost risk factors at this time.
Click in the “Typ. %” column of the labor cost risk table next to the Bearing
Life task. Enter “23” then tab to the “Max. %” column and enter “38”. For
the Thermal Analysis task enter “5” for the Typ. % and “15” for the Max. %.
Now change to the Material tab and enter 5% typical risk and 10%
maximum material cost risk for the Bearing Life task. On the ODC tab enter
8% typical risk and 18% maximum ODC cost risk for the Bearing Life task.
Don’t enter anything for the Thermal Analysis ODC cost risk because there
are no ODC costs for this task. Close the Cost Risk window by clicking on
the OK button.
The Cost Risk Open the Reports dialog box, and select Schedule 10 – Cost Risk Analysis.
Analysis report This report lists each task in the estimate and displays five columns of costs
for each task. The middle column is the average cost, which corresponds to

the costs shown on the Estimator main window, and the nominal costs
shown on the other reports.
The two left columns show the “typical” low cost and “maximum” low cost
for each task. The two right columns show the “typical” high cost and
“maximum” high cost for each task. In other words, based on historical
precedence, the actual cost will probably fall between the low typical and
high typical costs with the single “most probable” cost being the average.
How can you benefit from this information? First, you can see that the least
this project is likely to cost is about $227,000 (with burden, overhead, G&A
and fee), and that is assuming it goes essentially perfectly. The most it is
likely to cost is $298,000, but that is also fairly unlikely. Under most
circumstances, the project cost should be between $244,000 and $281,000,
the typical range limits. You can use this information to determine your
actual bid price depending on your target market, competitive position, and
tolerance of risk.
You can also use the Cost Risk Analysis report to see which tasks contribute
the most to the cost risk in actual dollars. In this case, Project Management is
the biggest contributor, so you might put most extra attention to structuring
the project management team to minimize the risks.
Charts CostMetrix Estimator makes it easy to review your cost estimate results from
many perspectives. Not only can you display total cost and task-by-task cost,
you can also graph cost on a timeline basis during the project, i.e., a

calendarized cost breakdown. This is often useful for resource planning

purposes (manpower and facilities) and to ensure that the cost profile of the
project is reasonable. If the costs vary greatly from month to month, you may
want to revise task start dates or durations to smooth out the profile.
To see the calendarized cost breakdown, click on the Charts button on the
main window. The Charts window shown below will open. This window
allows you to view a graph of your cost estimate data on a month-by-month
basis. It initially opens with the Labor Hrs cost type selected, meaning it is
plotting labor hours by month. The Cost Category selection box on the right
indicates that All labor categories are included.
The bar chart shows the labor hours expended each month of the project,
which starts in March 1999 and ends in July 1999. You can see in this
example that a significant increase in labor occurs between the months of
April and May. If the level of effort is beyond the capabilities of your staff,
you might want to increase the duration of the tasks, or plan on hiring or
subcontracting part of the effort.
You can pick values off the chart using the mouse. For example, click the
right mouse button with the cursor over one of the bars to see the month and
exact value of that bar.
You can also limit the plotted data to a specific labor category. For example,
click on the small arrow at the right of the Cost Category box to see a drop-
down list of the labor categories in the cost estimate. Using the mouse, click

on Sr. Engineer. The plotted data changes to show only the Sr. Engineer
labor hours on a month-by-month basis as shown below.
You can also see the labor costs plotted in units of direct dollars instead of
hours by selecting the Labor $ option under Cost Type. Or you can see
material direct cost, ODC cost, or total cost by selecting the desired option.
For example, pick the ODC $ cost type and the Office Expense cost category
and you will see the following chart.

Chart options The charting toolbar gives you control over useful charting functions and lets
you tailor the format of the chart itself. You can see a description of the
function of each button on this toolbar by clicking on the tool bar using the
right mouse button. The basic functions are described in the figures below.
Pareto chart
Area chart Fit to curve
Print chart Pie chart
Copy chart data as text Point chart

Copy chart as bitmap Line chart
Export chart to file Vertical bar chart
Import chart from file Horizontal bar chart
Use the export and import chart buttons to save a chart to disk and reopen it
later. The button with the camera image on it allows you to copy the chart
image as a bitmap that can be pasted into another document such as a word
processor. Or you can copy the chart data as text using the button with the
scissors icon, then paste it into a table or spreadsheet in another document.
Other chart options
Chart tools
Change fonts
Edit titles
Turn horizontal grid on/off

Show/hide legend
3D perspective control
Turn 3D on/off
The Chart tools button allows you to display a palette of colors and patterns
for the chart elements. You can customize the colors and patterns of chart

elements and CostMetrix Estimator will remember the settings. For example,
try displaying the color palette, then drag and drop individual color chips
onto the various parts of your chart to see the effect.
For another example, select Total $ and the Pareto chart button to see the
cost by month plotted in a vertical bar chart with a cumulative cost line
graph overlaid. Try experimenting with the other charting controls to find
the types that suit your needs best.
Bid Metrics Bid metrics are key measures that you or your customers use to evaluate
your cost estimates. For example, engineering departments sometimes use
hours per drawing or hours per part as a key measure of the reasonableness
of a cost estimate. A CostMetrix ModelBuilder cost model can include
custom bid metric formulas, which can be used by CostMetrix Estimator to
calculate and report the bid metrics for each cost estimate prepared.
Schedule 9 is a report of all the Bid Metrics in a cost model. Select it on the
Reports dialog box to view the value of all bid metrics based on the current
tasks selected and parameter values entered.
Exporting When you finish a cost estimate, you can export the task data to Microsoft
schedule data to Project, and with almost no effort you can have a baseline schedule to go
MS Project with your cost estimate. The export function is found under the File menu.
Exporting schedule data from CostMetrix Estimator:

1. Select Export/To MS Project under the file menu.

2. In the Save As dialog box, enter the name for a File that will contain the
schedule information and click the Save button.
CostMetrix Estimator saves the data in the comma separated variable format
(.csv). This file can be opened directly by Microsoft Project as a schedule
containing all tasks and task dates with the same hierarchy shown in the cost
estimate.
The first time you import CostMetrix Estimator data into Microsoft Project,
an import map must be created. Microsoft Project will then save the map for
the next time you import CostMetrix Estimator data. The first time you
import data, use the following procedure:
Import data into Microsoft Project:

1. Open Microsoft Project and select Open under the File menu.
2. In the Files of type: drop-down list, select CSV(.csv).
3. Navigate to the file exported from CostMetrix Estimator, select it, and
click on the Open button. The Import Format dialog box will appear.
4. Enter “CostMetrix Estimator Import Map” in the Import map name:
edit box.
5. On the Options tab, select the Tasks button under Data to
Import/Export.
6. Select the Task Mapping tab. For Method of incorporating imported:
select Place into a new project. Click on the OK button.
7. Click Open on the Import Format dialog box. The schedule data appears
in a new project.
The next time you import CostMetrix Estimator data into Microsoft Project,
the CostMetrix Estimator Import Map will already exist and you can simply
select it on the Import Format dialog box.
Summary In this chapter you learned how to display the results of your cost estimate in
ways that will help you assess the reasonability of the estimate, evaluate cost
risk, and document the results. By now you should have an idea of the power
and flexibility that CostMetrix Estimator gives you in cost estimating. You
are now ready to create rapid, high-quality cost estimates using CostMetrix
Estimator and CostMetrix ModelBuilder cost models created specifically for
your business.


Appendix A Sample Cost Estimate Reports
Schedule 1 – Proposal Cost Estimate (Cover Sheet)

Schedule 1a – Groundrules and Assumptions
Schedule 1b – Direct Cost Summary
Schedule 1c – Task Descriptions
Schedule 1d – Basis of Estimate
Schedule 1e – Cost Estimate Parameters
Schedule 1f – Task Start/End Dates
Schedule 1g – Escalation Factors
Schedule 2 – Direct Material List
Schedule 3 – ODC Summary
Schedule 4 – Direct Cost Summary by Task
Schedule 5 – Direct Cost Breakdown by Task
Schedule 6 – Liaison Travel Costs
Schedule 7 – Proposal Bid Rates
Schedule 8 – Proposal Cost Summary
Schedule 9 – Bid Metrics
Schedule 10 – Cost Risk Analysis
88 CostMetrix Estimator User’s Guide

CostMetrix Estimator User’s Guide 89
Schedule 1 – Direct Labor Tasks and Rationale
PROPOSAL COST ESTIMATE
INFORMATION CONTAINED HEREIN IS PROPIETARY and shall not be duplicated, used or

SCHEDULE 1 disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is
awarded to this offeror as a result of or in connection with the submission of this data, you shall
have the right to duplicate, use, or disclose the data to the extent provided in the contract.
COST ESTIMATE RATIONALE PAGE OF

PROPOSAL NO. PROJECT DESCRIPTION DEPARTMENT
99-16 Project Cyclone PAGE OF
WBS NO. TASK DESCRIPTION OPTION CODE

KG16EX Pump Design AA
RESPONSIBLE ORG TITLE ORG CODE PERFORMING ORG TITLE ORG CODE
New Product Development Div. 19 Engineering Dept. Div. 41
MO/YR MO/YR
PERIOD OF PERFORMANCE FROM 11/2001 THRU 03/2002
BRIEF TASK STATEMENT:
This estimate is for the design and analysis for the new Cyclone series of turbo pumps.
RATIONALE:
DESCRIBE BASIS OF ESTIMATE, INCLUDING WORK EXPERIENCE, DEGREE OF DIFFICULTY, PERSONAL KNOWLEDGE, AND HISTORICAL DATA.
HISTORICAL DATA MUST BE TRACEABLE TO RECORDS OF ACCOUNT AND MUST BE AUDITABLE TO WRITTEN DOCUMENTED SOURCES.
This estimate was derived using a parametric cost estimating system. A parametric cost estimate is one
that uses Cost Estimating Relationships (CERs) and associated mathematical algorithms to establish
cost estimates. This cost model was developed using historical cost data accumulated by the bidding
organization and standard statistical methods of data analysis and reduction to determine and validate the
accuracy of the Cost Estimating Relationships (CERs). The cost model design and validation
documentation is available for inspection in the Engineering Dept. Building 6, room 2107.
COST MODEL NAME: Pump Design Cost Model

COMPILE DATE: 04/22/2001
ESTIMATOR’S RESUME
J.D. Phillips is a Project Manager with 12 years of experience in pump design and development. He has
been with Johnson Turbopump Technology for 9 years and has 5 years experience estimating project cost.
PREPARED BY: DATE APPROVED BY: DATE
J.D. Phillips 04/25/2001

Schedule 1a – Groundrules and Assumptions
GROUNDRULES AND ASSUMPTIONS

SCHEDULE 1a disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Groundrules and assumptions:
1 This cost estimate is based on the assumptions that full funding is authorized at the start of
the project so no schedule interruptions will be encountered.
2 Requirements for this pump are based on the 1998 marketing survey report.

Schedule 1b – Direct Cost Summary by Category
DIRECT COST SUMMARY

SCHEDULE 1b disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Direct cost summary by category:
Labor Category Hours

Sr. Engineer 1061.3
Clerk 187.9
Admin 2 43.7
Admin 1 133.5
Sr. Designer 249.5
Draftsman 1 634.2
Draftsman 2 529.1
Engineer 2 421.6
Engineer 1 237.3
Material Category Dollars

Wear Test Specimens $388.25
ODC Category Dollars

Office Expense $1,555.38
Blueprints $613.63
Data Processing $1,019.69
Bearing Consultant Fees $850.00
Sched 6 Liaison Travel $416.72

Schedule 1c – Tasks Descriptions
TASK DESCRIPTIONS

SCHEDULE 1c disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Tasks included in this estimate:
Task Description
Requirements Development This task consists of defining pump performance, schedule, and
cost requirements and release of a product specification.
Design Layout This task consists of making a master layout of the pump
design configuration from which detail drawings and analyses
can be performed. It also includes 1st cut analysis for element
sizing.
Drafting This task consists of making production quality drawings for

manufacturing.
CFD Analysis Computational fluid dynamics analysis to predict flow rate,

pressure ratio, cavitation conditions, and efficiency.
Stress Analysis This task consists of stress analysis on pump internal

components and pressure chambers.
Bearing Life This task consists of bearing life prediction.
Thermal Analysis Steady state thermal analysis with temperature predictions.
Design Review This task consists of preparation for and conducting the pump
critical design review.
Project Management This task consists of project supervision and reporting to upper
management.

Schedule 1d – Basis of Estimate
BASIS OF ESTIMATE

SCHEDULE 1d disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Tasks included in this estimate:
Task Basis of Cost Estimating Relationship

Requirements Development The CER for this task is based on the average cost of
requirements development recorded on six prior projects and
documented in DM 99-163.
Design Layout The cost estimating relationships for this task were derived by
CostMetrix ModelBuilder based on a parametric analysis of the
historical cost data contained in this cost model.
Drafting The cost estimating relationships for this task were derived by
CFD Analysis The cost estimating relationships for this task were derived by
Stress Analysis The cost estimating relationships for this task were derived by
Bearing Life This analysis is contracted to an outside engineering firm which

will provide the basis of the estimate.
Thermal Analysis This cost estimate is based on a proposal provided by Harrison-

Tanner, the analysis consulting firm selected for this project.
See documentation provided with this estimate.
Design Review This CER was developed by Dave Wilson based on prior personal
experience.
Project Management This CER was developed by Dave Wilson based on prior
personal experience.

Schedule 1e – Parameters
COST ESTIMATE PARAMETERS

SCHEDULE 1e disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Parameters and values used in this estimate:
Parameter Type Value
# of Parts Computed 61.82

# of Stages Quan 2
Pressure Ratio Scale 4
Pump Type Grade Submersible
New Design Fraction Quan 1
Flow Rate Quan 85

Schedule 1f – Task Dates and Performance Factors
TASK START/END DATES

SCHEDULE 1f disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Proposed tasks and planned start/end dates:
Task Start Date End Date Perf. Factor
Requirements Development 11/01/2001 11/15/2001 100

Design Layout 11/15/2001 01/07/2002 100
Drafting 02/03/2002 03/15/2002 100
CFD Analysis 01/07/2002 02/02/2002 100
Stress Analysis 01/07/2002 02/02/2002 100
Bearing Life 01/07/2002 01/18/2002 100
Thermal Analysis 01/07/2002 02/02/2002 100
Design Review 01/27/2002 02/02/2002 100
Project Management 11/01/2001 03/15/2002 100

Schedule 1g – Escalation Factors
ESCALATION FACTORS

SCHEDULE 1g disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is


Future year material and ODC escalation factors:
Year Material % ODC %
2001 0 0
2002 2.8 2.7
2003 3.1 3.1
2004 3.2 3.2
2005 3.3 3.3
2006 3.4 3.4
2007 3.5 3.5
2008 3.6 3.6
2009 0 0
2010 0 0
2011 0 0
2012 0 0
2013 0 0
2014 0 0
2015 0 0
2016 0 0
2017 0 0
2018 0 0
2019 0 0
2020 0 0

Schedule 2 – Direct Material List
DIRECT MATERIAL LIST



ITEM PART NUMBER COST (UNBURDENED)

NO. OR EQUIVALENT MATERIAL TYPE SUPPLIER/SOURCE CODE QTY UNIT TOTAL
1 Various Wear Test Specimens Inmark Sciences PP lot N/A $388.25

Schedule 3 – ODC Summary
OTHER DIRECT COSTS SUMMARY



SHOW ALL DIRECT CHARGES FOR OUTSIDE SERVICES, COMPUTER COSTS, REPRODUCTION, TABULATION, SUB-CONTRACT
SERVICES, AND ALL OTHER COSTS NOT OTHERWISE SHOWN ON FORMS FOR DIRECT MATERIAL, DATA, OR TRAVEL.
ITEM UNIT TOTAL

NO. ODC TYPE SUPPLIER/SOURCE COST QUANTITY COST
1 Office Expense Stationery Supply Co. N/A lot $1,555.38
2 Blueprints Media Graphics Supply N/A lot $613.63
3 Data Processing Corporate Data Processing N/A lot $1,019.69
4 Bearing Consultant Fees TriboSciences Inc. N/A lot $850.00

Schedule 4 – Direct Cost Summary by Task
DIRECT COST SUMMARY BY TASK

PAGE OF

Direct cost summary by task:
Task Labor Hrs Labor $ Matl $ ODC $ Total $
Requirements Development 34.5 1,352.80 0.00 147.90 1,500.70

Design Layout 513.4 21,729.38 0.00 0.00 21,729.38
Drafting 1,551.2 37,560.06 0.00 722.65 38,282.71
CFD Analysis 214.6 7,981.16 0.00 663.38 8,644.54
Stress Analysis 553.8 21,806.02 0.00 356.31 22,162.33
Bearing Life 40.0 1,796.84 388.25 1,266.72 3,451.81
Thermal Analysis 104.0 4,418.08 0.00 0.00 4,418.08
Design Review 56.0 2,058.45 0.00 0.00 2,058.45
Project Management 430.7 20,596.76 0.00 1,298.46 21,895.22

Schedule 5 – Direct Cost Breakdown by Task
DIRECT COST BREAKDOWN BY TASK

PAGE OF

Task: Requirements Development Labor Category Direct Hours

Sr. Engineer 26.0
Clerk 8.5
Material Category Direct $

<None> <None>
ODC Category Direct $

Office Expense 147.90
Task: Design Layout Labor Category Direct Hours

Sr. Engineer 419.4
Admin 2 43.7
Clerk 36.6
Admin 1 13.7

<None> <None>

<None> <None>
Task: Drafting Labor Category Direct Hours

Sr. Designer 249.5
Draftsman 1 634.2
Draftsman 2 529.1
Clerk 138.3

<None> <None>

Blueprints 613.63
Task: CFD Analysis Labor Category Direct Hours

Sr. Engineer 25.6
Engineer 2 105.8
Engineer 1 83.2

<None> <None>


PAGE OF


Data Processing 663.38
Task: Stress Analysis Labor Category Direct Hours

Sr. Engineer 149.1
Engineer 2 290.6
Engineer 1 114.1

<None> <None>

Data Processing 356.31
Task: Bearing Life Labor Category Direct Hours

Sr. Engineer 36.0
Admin 1 4.0

Wear Test Specimens 388.25

Bearing Consultant Fees 850.00
Sched 6 Liaison Travel 416.72
Task: Thermal Analysis Labor Category Direct Hours

Sr. Engineer 64.0
Engineer 1 40.0

<None> <None>

<None> <None>
Task: Design Review Labor Category Direct Hours

Sr. Engineer 19.6
Engineer 2 25.2
Admin 1 6.7
Clerk 4.5


PAGE OF


<None> <None>

<None> <None>
Task: Project Management Labor Category Direct Hours

Sr. Engineer 321.6
Admin 1 109.1

<None> <None>


Schedule 6 – Liaison Travel Costs
LIAISON TRAVEL COSTS



TRIP COSTS
DESTINATION/ # OF COST PER TOTAL

TASK ZONE BRIEF PURPOSE MANTRIPS TRIP COST
Bearing Life Boston, MA Pick up wear test coupons 1 $416.72 $416.72

Schedule 7 – Proposal Bid Rates
PROPOSAL BID RATES

PAGE OF

Burden Rates: Overhead/General and Administrative:

Labor burden: 42.3 % Overhead: 21.9%
Material burden: 18.7 % G&A: 9.4 %
ODC burden 23.9 %
Fee: 12 %
Labor Rates:
Task $/hr
Sr. Engineer $47.82

Engineer 1 $33.94
Engineer 2 $37.18
Admin 1 $18.83
Admin 2 $21.57
Clerk $12.88
Sr. Designer $29.58
Draftsman 1 $22.76
Draftsman 2 $26.39

Schedule 8 – Proposal Cost Summary
PROPOSAL COST SUMMARY

disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is
SCHEDULE 8 awarded to this offeror as a result of or in connection with the submission of this data, you shall
PAGE OF

Proposal Cost Summary:
Category Hours Direct $ Burden Total $
Labor 3,498.2 $119,299.54 $50,463.71 $169,763.24
Material $388.25 $72.60 $460.85
Other Direct Costs $4,455.42 $1,064.84 $5,520.26
Subtotal $175,744.36
Overhead Expense $38,488.01
G&A Expense $20,137.84
Subtotal $234,370.22
Fee $28,124.43
Total Price $262,494.64

Schedule 9 – Bid Metrics
BID METRICS

disclosed in whole or in part for any purpose other than to evaluate the proposal. If a contract is
SCHEDULE 9 awarded to this offeror as a result of or in connection with the submission of this data, you shall
PAGE OF

Value Description
56.6 Total hours per part
456.2 Analysis hours per stage
0.4 Design ODC $ per design labor hour

Schedule 10 – Cost Risk Analysis
COST RISK ANALYSIS

PAGE OF

Cost range by task:
Task - Maximum - Typical Avg $ + Typical + Maximum
Requirements Development 1,466.64 1,782.88 2,108.28 2,433.69 2,749.93

Design Layout 29,529.47 29,993.28 30,920.91 31,848.54 32,312.35
Drafting 53,494.15 53,943.22 54,343.32 54,743.43 55,192.50
CFD Analysis 10,851.29 11,394.72 12,179.11 12,963.51 13,506.94
Stress Analysis 29,681.97 30,248.90 31,471.43 32,693.96 33,260.88
Bearing Life 3,287.01 3,850.53 4,587.22 5,323.91 5,887.43
Thermal Analysis 5343.89 5,972.58 6,286.93 6,601.27 7,229.97
Design Review 2451.72 2,647.97 2,929.17 3,210.37 3,406.63
Project Management 15,922.32 23,357.41 30,917.98 38,478.55 45,913.64
Total of all Tasks with Burden 152,028.45 163,191.50 175,744.36 188,297.22 199,460.26
Cost Range @ Total Price 227,072.18 243,745.48 262,494.64 281,243.81 297,917.11

Index
Delete Task menu · 57
A
E
Activating a task · 30
Activating explicit formula tasks · 48 Entering task dates · 31
Activating fixed cost tasks · 47 Escalation
Activating level of effort tasks · 50 importing · 44
Activating manual entry tasks · 51 Escalation factors · 21
Activating parametric tasks · 31 Escalation Factors dialog box · 43
Adding cost categories · 53 Estimate Rev: · 26
Adding tasks · 56 Estimator’s Resume · 27
Estimator’s Resume dialog box · 27
Explicit Formula tasks · 17
B Exporting data to Microsoft Project · 82
Basis.txt · 70
Bid metrics · 82 F
Bid rates
entering · 35 Fixed Cost tasks · 16
importing · 37
Bidding itemized travel expenses · 59
Bitmap logo · 68 G
G&A · 21
C General and administrative expenses · 21
Grade parameters · 19
CER · 8 entering · 34
CER Basis Groundrules and assumptions · 62
editing · 41 importing · 63
entering · 58
viewing · 40
Chart options · 80 H
Charts
displaying · 78 Help, online · 12
Computed parameters · 19
Cost breakdown · 39
Cost categories · 20
adding · 53 I
Cost display
options · 36 Importing
Cost Estimate Summary · 46 bid rates · 37
Cost Estimating Relationship · 8 groundrules and assumptions · 63
Cost Model Build Date: · 27 Project Information · 29
Cost models · 2 Insert New Task menu · 57
commercial · 2
history of · 7
proprietary · 3 L
Cost risk analysis · 73, 76
Cost Summary button · 46 Labor categories · 20
Cost variability · 74 Labor costs · 19
Customer/Requestor: · 26 Level of Effort tasks · 16
Liaison travel · 59
Logo, report
D bitmap · 68
customizing · 68
Deactivating a task · 30 metafile · 68

M Q
Main function buttons · 24 QRP format for reports · 71
Main window · 23 Quantity parameter · 18
Manual Entry button · 52
Manual Entry Detail dialog box · 52
Manual Entry tasks · 18 R
assigning costs · 52
Material categories · 20 Rand Corporation · 7
Maximum error · 75, 76 Rates button · 35
Metafile logo · 68 Rates dialog box · 35, 37
Most probable cost · 74 Rationale
customizing · 69
Rationale.txt · 70
O Report header
customizing · 69
ODC categories · 20 Report logo image
Option/Bid Code · 26 changing · 68
Overhead expenses · 21 Report Viewer · 39
controls · 71
Reports
P customizing in Word · 72
generating in Microsoft Word · 72
Parameter display list of available · 66
resizing columns · 35 QRP format · 72
Parameters · 18 saving · 71
Computed · 19 viewing · 66
displaying all · 49 viewing and printing · 66
displaying units · 42 XLS format · 72
entering a grade value · 34 Reports button · 66
entering a quantity value · 32 Responsible Code · 26
entering a scale value · 33 Responsible Org · 26
Range limits · 34
Scale · 19
Parametric Cost Estimating Handbook · 8 S
Parametric tasks · 15
PCM/Estimator Saving reports · 71
benefits · 11 Scale parameters · 19
description · 9 entering · 33
how it works · 13 Sched 6 Liaison Travel · 59
installing the software · 12 Selecting a cost model · 29
uninstalling the software · 12 Software installation · 12
Performance factor · 35 Speed button bar · 24
Performing Code · 27 Starting a new cost estimate · 23
Performing Org · 26 Summary tasks
Preferences · 69 activating · 45
Price vs. cost · 21 System requirements · 11
Printer button · 66
Process variability · 10
Project Description · 27 T
Project Info button · 25
Project Information · 25 Task Detail section · 25, 30
importing · 29 Task Direct Cost section · 25
Project Information dialog box · 25 Task List · 15, 24
Project Name · 26 Task Name · 26
Project No · 26 Tasks · 24
Project Start Date · 26 explicit formula · 17
Project Summary · 25 fixed cost · 16
Proposal No · 26 level of effort · 17

manual entry · 18
parametric · 16
W
summary · 15
types · 15 WBS · 15
Travel costs · 59 WBS element · 15
Travel detail WBS Item No · 26
entering · 60 Word templates · 73
Typical error · 75
X
V
XLS format for reports · 71
View/Print button · 68

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information and fax this form to (208) 279-7016. We will review your comments and fax back a
response.
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Parametric Cost Estimating Software

Parametric Cost Estimating Software

Copyright  1999, 2000, 2001 NHYSOFT, Inc.

Parametric Cost Estimating Software

Copyright  1999, 2000, 2001 by NHYSOFT, Inc.

All rights reserved.

9th Edition, 010426

CostMetrix and CostMetrix Estimator are trademarks of NHYSOFT, Inc.

Parametric Cost Estimating Software

What is CostMetrix is a revolutionary software suite from NHYSOFT, Inc., designed

CostMetrix Estimator User’s Guide

automates the statistical analysis functions needed to extract parametric cost

ƒ Work elements displayed in a logical hierarchical tree

CostMetrix Estimator User’s Guide

generic algorithms and estimating methods based on a database of industry-

CostMetrix Estimator User’s Guide

1 Identifying the Parametric Opportunity

2 Preliminary Model Design 3 Information Systems Needs

5 Model Development 4 Data Collection/Analysis

6 Calibration/Validation 7 Estimating Policies/Procedures

9 External Approval Process 8 Internal Approval Process

steps where CostMetrix ModelBuilder and Estimator aid cost

CostMetrix ModelBuilder makes the process of developing, validating, and

CostMetrix Estimator User’s Guide

Consistently higher estimate quality with minimal estimator-to-estimator

Implement design-to-cost with a cost model – Since it facilitates rapid cost

Reduced cost of estimating – With a cost model, cost estimates can be

CostMetrix Estimator User’s Guide

Highly supportable cost estimates – A supportable cost estimate is one that

In a similar way, CostMetrix ModelBuilder models the cost of a complex

A cost model needs a user interface to make it useful for estimating.

These two tools, CostMetrix ModelBuilder and CostMetrix Estimator are an

CostMetrix Estimator User’s Guide

When cost estimates are prepared using CostMetrix Estimator, management

A Parametric task is employed when CostMetrix ModelBuilder is used to

An Explicit Formula task is used when the cost estimating relationship is a

CostMetrix Estimator User’s Guide

cost model is a group of cost estimating relationships used together to

Parametric cost modeling techniques were first developed in the 1950’s by

Rand concluded that well-designed parametric cost models are powerful

Initially, the U.S. government used parametric estimating techniques to

In 1994, the Department of Defense launched the Joint Government/Industry

CostMetrix Estimator User’s Guide

and has a wealth of useful information for anyone involved in cost

According to the Parametric Cost Estimating Handbook, it is important that

CostMetrix ModelBuilder was designed to make history-based parametric

CostMetrix Estimator was designed to allow a group of cost estimators to

A CostMetrix ModelBuilder cost model is not modified when a cost estimate

CostMetrix Estimator User’s Guide

It may not be obvious that a parametric estimate could be as reliable as a

The concept of cost estimating accuracy varies from business to business.

Competitive pressures often determine the accuracy a particular business

CostMetrix Estimator User’s Guide

An important factor in determining how accurate your cost estimating

1. Its accuracy is understood and quantitatively validated based on past

CostMetrix Estimator User’s Guide

♦ Microsoft Windows 95/98 or Windows NT 4.0 or later.

Installing To install CostMetrix Estimator on your computer:

Uninstalling If you need to uninstall CostMetrix Estimator to update to a newer version or

CostMetrix Estimator User’s Guide

The topics covered in this chapter are:

ú How CostMetrix Estimator works

CostMetrix Estimator allows you to customize each cost estimate by