The PDF version 
Display Related Directives to this directive.
DOE G 430.1-1
CHAPTER 13
CHECK ESTIMATES
AND INDEPENDENT COST ESTIMATES
1. INTRODUCTION
Check estimates and independent cost estimates (ICEs) are tools that can be used to validate a
cost estimate. Estimate validation entails an objective review of the estimate to ensure that
estimate criteria and requirements have been met and a well documented, defensible estimate
has been developed. The validation procedure occurs late winter to early spring in the pre-
budgetary cycle. Validation is not a direct estimating function; however, estimators need to
be aware of the validation cycle to ensure that those projects that require validation are ready
for the validation process. This chapter describes check estimates and their procedures and
various types of ICEs. DOE Order 5700.2, Cost Estimating, Analysis, and Standardization,
also discusses these estimates and can be used as a reference.
2. CHECK ESTIMATES
A. General Definitions
Check estimates are one way that a field office can infuse quality assurance/quality
control practices into a cost estimate. These estimates should be developed and
performed by a third party who did not participate in the original cost estimate. An
"outsider" provides the opportunity for the estimate to be reviewed by a fresh observer.
Check estimators should be able to identify any weaknesses in estimate documentation or
methodology before these weaknesses have a negative effect on the estimate. For
example, if personnel performing the check estimate cannot follow the existing
documentation, chances are that the documentation is not sufficient to support the
estimate in the approval process.
B. Check Estimate Procedures
General procedures for performing a check estimate are outlined in the following
sections. A sample estimate review checklist is provided at the end of this chapter.
1. Review Background Data and Conditions
Before the estimate can be checked, the estimate parameters and requirements must
be understood by all personnel performing the check estimate. These conditions
provide the framework for the estimate and are what the estimate is compared
against. At this time, the check estimator may also want to modify the estimate
review checklist based on the estimate criteria.
2. Review Check Estimate Coverage and Scope
During this phase of the check estimate, the original estimate is reviewed and
compared against the information gathered in Part A. Check estimators must
assess if the estimate satisfies the criteria and conditions.
3. Evaluate the Estimate Methodology
Personnel performing the check estimate must be able to follow and check the
estimate methodology. Steps include verifying estimating techniques and sources
of estimate data. Check estimators should be able to clearly understand the origin
of all numerical data in the estimate.
4. Identify Uncertainties
During this phase of the check estimate, the check estimator should confirm all
uncertainties documented in the estimate. Check estimating personnel may also
identify other uncertainties in the estimate that were missed or glossed over. It is
better to note these uncertainties at this time so that a true, accurate estimate is
developed and used.
5. Complete Estimate Review Checklist
Once the estimate has been checked, the results of the check estimate must be
documented. Personnel may use an estimate review checklist or prepare a concise
written report that documents any findings in the check estimate. A sample
estimate review checklist has been included at the end of this chapter.
3. INDEPENDENT COST ESTIMATES
A. General Definition
ICEs are defined as estimates developed by FM-50 for the express purpose of serving as
an analytical tool to validate, cross-check, or analyze estimates developed in the
proponency channels. ICEs follow a specific procedure and may involve site visits. ICEs
are usually performed by a group of cost engineers, the estimator, schedulers, and
experts in other disciplines, as required, hereinafter referred to as the ICE team.
Estimates not performed by FM-50, but performed for the purpose of validating the
official project estimate, are referred to as check estimates or review estimates, not ICEs.
B. Independent Cost Estimate Types
The following techniques will be utilized by the ICE team depending on the stage of the
project, the level of documentation available, and the time available.
1. Documentation Review (Type I)
This type of review is not normally accomplished as an ICE, nor does it fulfill the
requirements necessary to support an Energy System Acquisition Advisory Board
(ESAAB) decision, since it only consists of an assessment of the documentation
available to support the estimate. It is merely an inventory of existing documents,
not a review, and determines that the required support documentation exists and
identifies missing data.
2. Reasonableness Review (Type II)
For this review, the ICE team reviews all available project documentation, receives
briefings from the project team, holds discussions with the project team, completes
sufficient analysis to assess the reasonableness of the project assumptions
supporting the cost and schedule estimates, ascertains the validity of those
assumptions, assesses the rationale for the methodology used, and checks the
completeness of the estimate. The result is a report that details findings and
recommendations.
3. Parametric Estimating Technique (Type III)
This technique, in addition to incorporating all the activities needed for a
reasonableness review, uses parametric techniques, factors, etc., to analyze project
costs and schedules and is usually accomplished at a summary (WBS) level.
The parametric techniques (including CERs and factors) should be based on
accepted historical cost/schedule analyses. At a minimum, these tools should be
based on historical estimates from which models have been derived, and, where
possible, from actual completed projects. An estimate with a minimum of
75 percent of the total project cost (TPC) based on parametric techniques is
classified as a parametric estimate.
4. Sampling Technique (Type IV)
This review also begins with the activities needed for a reasonableness review, but
in addition, it requires the ICE team to identify the key cost drivers. A "cost
driver" is a major estimate element whose sensitivity significantly impacts the TPC.
Detailed independent estimates must be developed, which should include vendor
quotes for major equipment and detailed estimates of other materials, labor, and
subcontracts. For the balance of the project costs, the project estimate may be used
(if deemed to be reasonable through the reasonableness review), or, if appropriate,
parametric techniques may be used for certain portions of the project costs. An
estimate that provides a detailed cost for all cost drivers is classified as a sampling
estimate.
5. Bottoms-up Estimating Technique (Type V)
This is the most detailed and extensive ICE effort, and begins with the activities
needed for a reasonableness review. In addition, it requires a detailed bottoms-up
independent estimate for both cost and schedule. This involves quantity take-offs,
vendor quotations, productivity analysis, use of historical information, and any
other means available to do a thorough and complete estimate of at least 75 percent
of the project's cost. It may not be possible to do a completely independent
estimate on some portions of the PSO estimate, and for those portions which
should not exceed 25 percent of the total estimate the project estimate may be
used if it has passed the test of reasonableness. In all cases, a total cost (both total
estimated cost (TEC) and TPC should be developed.
It must be recognized that all estimates will involve a combination of the techniques
described in this section, because varying levels of information will be available.
The accuracy of the estimate will be subjectively determined based on the weighted
totality of the information available.
6. Independent Cost Estimate Content
The ICE is a term that includes all those elements that impact a project's TPC.
Therefore, depending on the specific project involved, the ICE will address the
reasonableness of the project scope and such activities as:
direct project costs (equipment, material, labor subcontract),
indirect costs (overhead),
NEPA,
design/site,
project/construction management (manpower),
program management,
research and development,
startup,
offsite costs,
transportation,
operations,
remedial investigation/feasibility studies,
decommissioning and demolition,
contingency,
escalation,
interagency agreements,
schedule,
funding profile (including procurement plan),
progress to date (including estimate to complete), and
other costs outside DOE.
4. DOUBLE CHECKING THE ESTIMATE
After the estimate has been prepared, a check for completeness and correctness should be
made. This check includes but is not limited to the following.
Check mathematical extensions and additions for correctness;
Check takeoff for omissions or oversights. For example, a project that is primarily
mechanical in nature may have some electrical, structural, civil work, or demolition
required with it.
Compare the construction or cleanup labor hours with the schedule to determine a labor
force density. Evaluate whether the labor force density can adequately function on the
construction or cleanup site, whether shift work might be required, or whether the total
labor hours are adequate to complete the required work. These are judgment
considerations, but they are very helpful in finding inadequacies in the estimate.
Check the calculations of the indirect costs. Verify that the vendor quotations used as
direct costs do not include indirect costs.
Compare the construction or cleanup cost with any similar project for an order of
magnitude check.
Compare the current estimate with the previous estimate and explain any discrepancies.
ESTIMATE REVIEW CHECKLIST
WBS Number:
Review Date:
Review Location:
Program Name:
Reviewers' Names and Organizations:
Program Location:
Program Manager:
Yes
No
NA
Comments
A. Background Data and Conditions
Has a complete technical scope documentation,
including the following elements, been prepared for
the estimate.
____ Description of the work to be performed;
____ End condition or end product of work;
____ Performance criteria and requirements;
____ Discrete tasks and deliverables;
____ Resource requirements;
____ Sequence of events and discrete milestones;
____ Performance methodology and task plans; and
____ Work not included in the scope.
Are the major assumptions used in developing the
technical scope for the program clearly identified and
justified in the technical scope documentation?
Are technical logic diagrams and/or process flow
diagrams, where appropriate, included in the
technical scope documentation?
Have milestone log and milestone description sheets
been developed that contain descriptions of each
milestone associated with the program?
Is the rationale used to develop task descriptions and
logic diagrams, milestones, and resource
requirements explained in the technical scope
documentation?
Does the technical scope documentation for the
estimate include specific activities associated with the
work to be performed and activity-based resource
descriptions?
A. Background Data and Conditions (continued)
Has an activity dictionary been developed for the
program, including detailed descriptions of activities
associated with the work to be performed?
Does the technical scope documentation for the
estimate include descriptions of support activities
(e.g., occupational health and safety, quality
assurance, security, etc.) associated with the work to
be performed?
Is back-up documentation (such as production or
waste management plans, process technical and
engineering data, process output or throughput
projections, and historical operating data) available
for review, used in scope development, and
referenced in the technical scope documentation?
Is the technical scope for the estimate consistent with
the site mission, regulatory drivers and constraints,
and internal and external drivers and constraints
(e.g., consent orders, permit conditions, regulations,
orders, etc.) identified during the planning process?
B. Cost Estimate
Are historical cost data included in the cost estimate
for the activities for which costs have been estimated?
Do the historical data used to prepare the cost
estimate show each activity costed and show the cost
of conducting that activity, broken down into the
quantity associated with each activity and the labor
cost, material cost, and other costs incurred per unit
quantity?
Are indirect, overhead, or other costs that are
distributed among activities included in the cost
estimate clearly and individually identified?
Are direct costs that are associated with individual
activities included in the cost estimate clearly and
individually identified?
Are the indirect labor costs used throughout the cost
estimate approved and audited, and appropriately and
correctly identified?
Are unit labor costs broken down into direct costs
and indirect costs?
B. Cost Estimate (continued)
Has the cost estimate been updated in a timely
manner in response to relevant changes in its basis,
background data, or assumptions?
Are an appropriate change control document and an
estimate development history attached to the cost
estimate?
Does the estimate development history include an
itemized and chronological list of the changes made
to the cost estimate since initiation of its preparation,
and the rationale for each change?
Is an estimate purpose statement included in the cost
estimate? Does the estimate purpose statement
clearly describe the purpose of the estimate?
Is the scope of work for the program for which the
cost estimate was prepared adequately described and
consistent with the planning and technical scope
documentation developed through the planning and
scoping process?
Has an estimate-specific work breakdown structure
been developed for the program?
Does the estimate-specific WBS organize the work to
be performed in a logical and consistent manner?
Is the cost estimate activity-based?
Are activities, quantities, and unit costs associated
with the work to be performed clearly identified and
defined in the cost estimate?
Has an estimate-specific activity dictionary been
developed for the program?
Does the estimate-specific activity dictionary describe
all activities associated with the work to be
performed in a logical and consistent manner?
Does the estimate-specific activity dictionary describe
all activities associated with the work to be
performed in a logical and consistent manner?
Are the assumptions and exclusions upon which the
cost estimate is based clearly identified and defined
in the cost estimate?
B. Cost Estimate (continued)
Are time and cost assumptions and cost elements
associated with each activity clearly identified,
defined, and documented in the cost estimate? Cost
elements for program activities include:
- quantity;
- unit of measure;
- labor hours per unit;
- total labor hours;
- material usage rate per unit;
- total material cost;
- equipment usage rate per unit;
- total equipment cost;
- overhead rate; and
- total overhead allocated cost.
Are significant findings of the cost estimate preparer
identified during preparation of the cost estimate
included in the cost estimate?
Have estimate factors been used to adjust the cost
estimate? If so, have they been adequately
documented and appropriately applied?
Have escalation factors been used to escalate the cost
estimate?
If escalation factors provided by DOE Headquarters
have been used, have they been adequately
documented and appropriately applied?
If escalation rates other than the provided by DOE
Headquarters have been used, have they been audited
and approved by DOE Headquarters?
Are indirect rates used in the cost estimate
adequately documented and appropriately applied?
Are estimate summary and detailed reports included
in the cost estimate?
Do the estimate summary and detailed reports
provide cost totals for each activity in the activity
dictionary and for each cost element in the cost
estimate?
Is a schedule included with the cost estimate?
Are activities included in the schedule consistent
with those included in the technical scope
documentation, activity dictionary, and cost estimate?
B. Cost Estimate (continued)
Are milestones and deliverables included in the
schedule consistent with those included in the
technical scope documentation and cost estimate?
Is an estimate criteria document included in the cost
estimate?
Does the estimate criteria document clearly describe
the methodology by which the cost estimate was
developed?
Does the estimate criteria document clearly describe
the basis for the cost estimate and the assumptions
made in developing the cost estimate?
Has the entire cost estimate package (including
technical scope and schedule) for the program been
subject to peer review by individuals who were notinvolved in preparation of the cost estimate, but who
are qualified to have prepared the cost estimate
themselves?
Has the peer review considered the elements listed
below?
- the basis for the assumptions made in developing
the cost estimate;
- consistency of assumptions made in the cost
estimate, technical scope, and schedule;
- consistency of definitions of activities in the cost
estimate, technical scope, and schedule;
- consistency of durations of activities in the cost
estimate, technical scope, and schedule;
- documentation of productivity and unit cost data
for program activities; and
- appropriate use of indirect rates, escalation
factors, and other factors used by the cost
estimate preparer?
Have the findings and recommendations of the peer
review been documented in a peer review document?
Is the peer review document included with the cost
estimate documentation?
B. Cost Estimate (continued)
Have the findings and recommendations of the peer
review been addressed in revisions to the cost
estimate?
Are activities included in the schedule consistent
with those included in the technical scope
documentation, activity dictionary, and cost estimate?
<>