The Independent Government Cost Estimate is a significantly important portion of any federal acquisition. An IGCE refers to the government’s estimation of costs that any particular contractor may incur in providing supplies or performing services meant to achieve the government objectives. Therefore, the Independent Government Cost Estimate enables the government to reserve the required during the acquisition planning phase. The Independent Government Cost Estimate is normally comprised of directs costs charged to activities or services necessary to perform a specific contract. The direct costs may include labor overheads, general and administrative expenses, material overheads, fees as well as anticipated profits.
The Independent Government Cost Estimate helps the government to objectively evaluate the contractor proposals in the negotiated bidding process in order to ensure that the prices and costs are reasonable. Moreover, it is important to include the costs that are applicable to the statement of work. Moreover, the Independent Government Cost Estimate demonstrates the government’s due diligence with regards to proper estimation of anticipated costs involved in the contract (Remer & Buchanan, 2000). The contracting officer develops its pricing in the Independent Government Cost Estimate through examination of published price lists. Moreover, the Independent Government Cost Estimate must be conducted as a government’s own in-house estimate and no information should be solicited from the contractors.
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There are several steps that are required to be followed while developing an Independent Government Cost Estimate in order to facilitate competitive cost estimation. The first step involves identifying the project requirements as well as the services to be procured. As such, the purpose of the 52 million dollar procurement should be established. It is important to realize that the Statement of Work is very important in providing the purpose of the procurement. Furthermore, any work that is not included in the Statement of Work should not be included in the estimation. The milestones of the project should be declared in order to conduct a purposeful Independent Government Cost Estimate. As such, the milestones of the cost estimation completion and those of the project completion should be declared (Hamaker, 2007). It is important also to notice that every cost estimate is based on a forecast and therefore cannot be prepared with absolute authenticity and certainty.
The confidentiality of Independent Government Cost Estimate is incredibly important because it provides standard cost estimation. Therefore, the Independent Government Cost Estimate should not be declared public before examining the quotations from all the potential contractors and suppliers. The contents of the estimate should not be revealed because doing so may weaken the government’s negotiation position. As such, revelation of the cost estimate would prevent the government from receiving the best value under a given contract hence giving a single contractor an unfair advantage over others.
The government should limit the personnel who can access the Independent Government Cost Estimate in order to maintain its confidentiality. The government should also train the employees to never accept Independent Government Cost Estimate prepared by contractors especially those with an interest in the procurement. Therefore, training will educate the involved employees on the significance of strict confidentiality as well as making them understand that Independent Government Cost Estimate is the government’s estimate, not the contractor’s (Michael, 2011). Furthermore, the government should ensure that Independent Government Cost Estimate is performed by an independent entity not involved in proposing of the work estimated. As such, the preparer of the Independent Government Cost Estimate should be free from any subjectivity or bias while developing the estimate. However, contractors may provide Independent Government Cost Estimate on behalf of the government clients if they sign nondisclosure agreements, and do not have a vested interest in the project.
Sample Detailed Cost Estimate
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Independent Government Cost Estimate for 52 Million Dollar Procurement |
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Project Title: Radar and Camera Equipped Towers |
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| Period of Performance: From February 2016 to | February | 2026 | ||||||
Description of Cost Elements |
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| Direct Labor | Estimated Hours | Rate Per Hour | Estimated Cost | Total Estimate | ||||
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Worker Chief Worker Manager 20 workers |
10,000 20,000 50,000 |
$20 $10 $5 |
$200,000 $200,000 $5,000,000 |
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| Total Direct Labor Cost | $5,400,000 | |||||||
| Overhead | Rate | Total Labor | Estimated Cost | Total Estimated Cost | ||||
| 150% | 5,400,000 | 8,100,000 | $8,100,000 | |||||
| Material Services | Estimated Cost | Total Estimated Cost |
| Information Technology Support | $10,000,000 | $10,000,000 |
| Subcontractor and Consultants | $15,000,000 | $15,000,000 |
| Travel | $50,000 | $50,000 |
| Materials and Supplies | $24,000,000 | $24,000,000 |
| Reports | $32,500 | $32,500 |
| Reproduction | $5,000 | $5,000 |
| Contingencies | $5,000 | $5,000 |
| Name and Title | Signature | |
| Office Division and Branch | Date |
Types of Statements of Work
A Statement of Work refers to a complex and confidential document that contains the record of the deliverables of the project, work activities, milestones and the timeline that must be followed by a contractor in terms of accomplishing a particular project for a client. A Statement of Work comprises of a variety of elements ranging from the requirements of the project, the pricing and cost of the project as well as the Government regulations that impact the project (Martin, 2004). There are several types of Statements of Work and different entities produce their own set of customized Statements of Work. However, each and every Statement of Work comprises of some integral parts like purpose, scope of work, location, performance period, schedule of deliverables, industry standards, project acceptance criteria, special requirements and payment schedule. The purpose section of the Statement of Work attempts to explain the reason as to why the project is going to be accomplished. Therefore, the purpose of the projects is a significant component of the Statement of Work. The scope of work attempts to describe the rough details of the work regarding how the work will be carried out in the sites as well as the kind of labor that will be involved. The location section describes the exact location of the work. The performance period of the project refers to the time that is allowed to finish the project. Therefore, the performance period guides the contractor about the start time of a projects as well as the anticipated finish time. The schedule of deliverables gives a complete detail about the deliverables of the project. The industry standards and the acceptance criteria describe the industry standards that should be adhered to and the acceptable performance of the project respectively. The special requirements section advises on any special labor, special hardware or software that may be required. Finally, the payment schedule section describes when payment is expected to be made.
The most popular types of Statements of Work include Design Statement of Work, Unit Rate Statement of Work, and Performance Based Statement of Work. The Design statement of work tells the supplier how to perform the work. Therefore, it defines the buyer requirements that control the process that will be carried out by the supplier. The Unit Rate statement of work refers to a statement of work whose real deliverable is an hour of work and the material required to perform the service. The Performance Based statement of work structures all the aspects of the project around the purpose of the work to be performed by the supplier. Therefore, the Performance Based statement of work does not dictate how the work will be accomplished. Based on the several types of Statements of work, Performance Based statement of work is the most preferred for the above acquisition. Performance Based statement of work is suitable because it focuses on the purpose of the project and it leads to better results.
In conclusion, an Independent Government Cost Estimate is an important tool that is essential in facilitating any government acquisition. It helps the government to reserve the require amount of funds during the acquisition planning phase. It is therefore important to keep the contents of the IGCE confidential in order to strengthen the government’s negotiations regarding contracts. A statement of work is an important component that outlines the specific services that a supplier is expected to perform.
References
Hamaker, J. W. (2007). What Are Quality Cost Estimates? Or the 260 Hz Cost Estimate. Journal of Parametrics , 26 (1), 1-7.
Martin, M. G. (2004). Building the Foundation for Project Success—The Statement of Work. Field Guide to Project Management , 219.
Michael, I. (2011). How an Independent Government Cost Estimate can help you determine how much your contract should cost. Contract Management , June 2011, 1-8
Remer, D. S., & Buchanan, H. R. (2000). Estimating the cost for doing a cost estimate. International Journal of Production Economics , 66 (2), 101-104.
