ACAP Cost Estimating Methodologies 2 — Questions and Answers
Question 1: What is the 'PRICE H' model and for what type of cost does it estimate?
- PRICE H is a parametric hardware cost estimating model that estimates development and production costs of electronic and mechanical hardware systems (Correct answer)
- PRICE H is a life cycle cost tool for estimating housing and facility costs
- PRICE H is a DoD-mandated cost estimating model for Army helicopter programs specifically
- PRICE H estimates only software costs using hardware parameters as proxies
Correct answer: PRICE H is a parametric hardware cost estimating model that estimates development and production costs of electronic and mechanical hardware systems
PRICE H (now part of the PRICE True suite) is a widely used parametric model that estimates hardware development and manufacturing costs based on physical and complexity parameters.
Question 2: What distinguishes a 'will-cost' estimate from a 'should-cost' estimate?
- Will-cost projects what the program is expected to cost given current plans and management; should-cost projects what the program could cost under optimal management and efficiency (Correct answer)
- Will-cost is prepared by the contractor; should-cost is prepared by the government
- Will-cost applies only to production; should-cost applies only to development
- Will-cost uses parametric methods; should-cost uses engineering build-up
Correct answer: Will-cost projects what the program is expected to cost given current plans and management; should-cost projects what the program could cost under optimal management and efficiency
Will-cost is a realistic projection based on current program status and historical tendencies, while should-cost challenges inefficiencies to identify achievable cost reduction opportunities.
Question 3: What is the 'COCOMO II' model used for in Army cost analysis?
- Estimating software development costs based on source lines of code, scale factors, and cost drivers (Correct answer)
- Estimating communications equipment procurement costs
- Estimating combat systems operational and maintenance costs
- Estimating contractor overhead rates for cost-type contracts
Correct answer: Estimating software development costs based on source lines of code, scale factors, and cost drivers
COCOMO II (Constructive Cost Model) is a widely used parametric software cost estimating model that uses SLOC and adjustment factors to estimate software development effort and cost.
Question 4: What is 'labor rate' and how does it affect engineering build-up cost estimates?
- The hourly cost of labor including wages, benefits, and overhead; it directly multiplies labor hours to produce labor cost in build-up estimates (Correct answer)
- The rate at which engineers complete tasks measured in tasks per hour
- The ratio of labor cost to material cost in a production contract
- The escalation percentage applied to contractor labor in future years
Correct answer: The hourly cost of labor including wages, benefits, and overhead; it directly multiplies labor hours to produce labor cost in build-up estimates
Fully burdened labor rates capture total employee cost (base pay, benefits, and indirect overhead), and when multiplied by estimated labor hours yield the labor cost component of the estimate.
Question 5: What is the purpose of a 'cost model validation' in Army cost analysis?
- To verify that the cost model produces accurate results by testing it against known historical data and comparing its outputs to actuals (Correct answer)
- To obtain OSD approval before using a parametric model in a program estimate
- To confirm that the model's inputs match the contractor's proposed costs
- To ensure the model is consistent with the program's acquisition strategy
Correct answer: To verify that the cost model produces accurate results by testing it against known historical data and comparing its outputs to actuals
Validation checks whether the model's predictions match actual historical outcomes, providing confidence that it will produce reliable estimates for new programs.
Question 6: In parametric cost estimating, what is 'extrapolation risk'?
- The increased uncertainty when applying a CER to a new system whose technical parameters fall outside the range of the historical data used to develop the CER (Correct answer)
- The risk that inflation rates will change before the estimate is finalized
- The uncertainty introduced by using data from international programs in a US cost model
- The probability that the parametric model will be replaced before the program completes
Correct answer: The increased uncertainty when applying a CER to a new system whose technical parameters fall outside the range of the historical data used to develop the CER
CERs are only statistically validated within the range of their historical data; applying them outside that range (extrapolation) introduces unknown error because the relationship may not hold.
ACAP Cost Estimating Methodologies 2
What is the 'PRICE H' model and for what type of cost does it estimate?