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Cost Estimating System


The Code of Federal Regulations (CFR) Title 48 Chapter 2 Subchapter G Part 242 Subpart 242.70 – Contractor Business Systems states that acceptable contractor business systems are defined in the clause at Defense Federal Acquisition Regulation Supplement (DFARS) Part 252 Subpart 252.2 Section 252.242 Subsection 252.242-7005 – Contractor Business Systems.

The DFARS Subsection 252.215-7002 defines an acceptable estimating system as one that provides for the use of appropriate source data, utilizes sound estimating techniques and good judgment, maintains a consistent approach, adheres to established policies and procedures, and accomplishes the following functions:

  1. Establishes clear responsibility for preparation, review, and approval of cost estimates and budgets
  2. Provides a written description of the organization and duties of the personnel responsible for preparing, reviewing, and approving cost estimates and budgets
  3. Ensures that relevant personnel have sufficient training, experience, and guidance to perform estimating and budgeting tasks in accordance with the contractor's established procedures
  4. Identifies and documents the sources of data and the estimating methods and rationale used in developing cost estimates and budgets
  5. Provides for adequate supervision throughout the estimating and budgeting process
  6. Provides for consistent application of estimating and budgeting techniques
  7. Provides for detection and timely correction of errors
  8. Protects against cost duplication and omissions
  9. Provides for the use of historical experience, including historical vendor pricing data, where appropriate
  10. Requires the use of appropriate analytical methods
  11. Integrates data and information available from other management systems
  12. Requires management review including verification of compliance with the contractor’s estimating and budgeting policies, procedures, and practices
  13. Provides for the internal review of, and the accountability for, the acceptability of the estimating system including the budgetary data supporting indirect cost estimates and comparisons of projected results to actual results, and an analysis of any differences
  14. Provides procedures to update cost estimates and notify the Contracting Officer in a timely manner throughout the negotiation process
  15. Provides procedures that ensure subcontract prices are reasonable based on a documented review and analysis provided with the prime proposal, when practicable
  16. Provides estimating and budgeting practices that consistently generate sound proposals that are compliant with the provisions of the solicitation and are adequate to serve as a basis to reach a fair and reasonable price
  17. Has an adequate system description, including policies, procedures, and estimating and budgeting practices, that comply with the FAR and DFARS



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