Government Contracts Monitor

Short Take: More DoD Guidance on Cost Analysis

July 6, 2015

By: Lindsay Simmons

The Department of Defense just revised its policies and procedures for estimating and analyzing costs for DoD procurements.  The 39-page instruction includes guidance on the scope and timing of cost estimates and encourages DOD officials to think about efficiency, cost-effectiveness, and acquisition strategy while conducting their cost analyses.

According to DoD, “Independent and sound cost estimates are vital for effective acquisition decision making and oversight.  Cost estimates also support efficient and effective resource allocation decisions throughout the Planning, Programming, Budgeting, and Execution process.  [T]he concepts presented should to the greatest degree possible be applied to all DoD acquisition programs….”

As a few of the many charts contained in the new guidance show, DoD can sometimes, but not always, achieve significant savings when it engages in multi-year procurements, orders larger quantities of items, or uses one rather than multiple contractors.  The challenge, as it’s always been, is to determine what makes sense, when, and under what circumstances. 

Lindsay Simmons is responsible for this Short Take.
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