# NASA-CEH-APP-C

FileAction
NASA-CEH-APP-C Appendix C; Cost Estimating Methodologies.pdf

Appendix C; Cost Estimating Methodologies

Appendix C: Cost Estimating Methodologies

The cost estimator must select the most appropriate cost estimating methodology (or combination of
methodologies) for the data available to develop a high quality cost estimate. The three basic cost
estimating methods that can be used during a NASA project’s life cycle are analogy, parametric, and
engineering build-up (also called “grassroots”) as well as extrapolation from actuals using Earned Value
Management (EVM). This appendix provides details on the following three basic cost estimating methods
used during a NASA project’s life cycle:

C.1. Analogy Cost Estimating

C.2. Parametric Cost Estimating
C.2.1. Simple Linear Regression (SLR) Models
C.2.2. Simple Nonlinear Regression Models
C.2.3. Multiple Regression Models (Linear and Nonlinear)
C.2.4. Model Selection Process
0.2.5. Summary: Parametric Cost Estimating

C.3. Engineering Build-Up Cost Estimating (also called “Grassroots”)
C.3.1. Estimating the Cost of the Job
C.3.2. Pricing the Estimate (Rates/Pricing)
C.3.3. Documenting the Estimate—Basis of Estimate (BOE)
C.3.4. Summary: Engineering Build-Up Cost Estimating

For additional information on cost estimating methodologies, refer to the GAO Cost Estimating and
Assessment Guide at http://www.qao.qov/products/GAO—OQ—BSP.

Appendix C
Cost Estimating Methodologies 0-1 February 2015
NASA Cost Estimating Handbook Version 4.0

Figure 0-1 shows the three basic cost estimating methods that can be used during a NASA project’s life
cycle: analogy, parametric, and engineering build-up (also called “grassroots”), as well as extrapolation
from actuals using Earned Value Management (EVM).

When choosing a methodology, the analyst must remember that cost estimating is a forecast of future
costs based on the extrapolation of available historical cost and schedule data. The type of cost
estimating method used will depend on the adequacy of Project/Program definition, level of detail
required, availability of data, and time constraints. The analogy method finds the cost of a similar space
system, adjusts for differences, and estimates the cost of the new space system. The parametric method
uses a statistical relationship to relate cost to one or several technical or programmatic attributes (also
known as independent variables). The engineering build-up is a detailed cost estimate developed from
the bottom up by estimating the cost of every activity in a project’s Work Breakdown Structure (WBS).

Table 0-1 presents the strengths and weaknesses of each method and identifies some of the associated
applications.

Over the last 10 years we have developed hundreds of spreadsheet tools to help us with our structural analysis work. We have made these available through the Abbott Aerospace web site and the XL Viking project. We have now brought them into the technical library. They have been updated, improved and the collection has been expanded to cover more analysis methods than ever before.

## The XL-Viking Add-In for Excel

We created the XL-Viking Excel add-in to satisfy our own need to make Excel a better engineering tool. XL-Viking shows your Excel Formula in a way that makes sense and brings essential new functionality to Microsoft Excel by providing an additional user interface and easy to use functions.

The Indispensable Tool For Engineers, Mathematicians, Scientists, Accountants and Teaching Professionals!

## Technical Papers & Reports

This is our collection of public domain references. All of the material we make available has been placed in the public domain by the authors/owners. If you believe this is not the case and any of the library material is not in the public domain please let us know. If you have any reference material that you would like to see included in the library we would love to hear from you.

## Market Analysis and Market Information

Our newest addition to the library is an on-going series of articles on the aircraft and aerospace market. These are part quantitative and part qualitative and introduce a new aspect to the competencies within Abbott Aerospace.