Independent Government Cost Estimate and the Statement of Work

The Independent Government Cost Estimate and the Statement of Work

Government Acquisition: BUS501

October 27, 2013

Importance of Independent Government Cost Estimate

Independent Government Cost Estimates (IGCE) is very important for an effective acquisition, both in the private as well as the Government sector. A cost estimate is the estimate in costs or price for the federal government services or supply purchases. The cost estimate is used in order to reserve funds for the acquisition, compare proposals from vendors/suppliers, and to determine if those proposed prices are reasonable.

Cost estimates usually include labor, overhead, benefits, general and administrative expenses, and other direct costs (ODC’s), such as travel, material, and subcontracting. Cost estimating is crucial to the acquisition process and is important to be done correctly. An inaccurate estimate can result in an incorrect decision to proceed with a project or acquisition, insufficient funds, or exceed the budget that can be used for other projects.

The IGCE must be carried out as an in-house estimate by the government and no information must be obtained from the contractors. IGCE is an estimate by the government of what the contractor should propose to government or private sector based on the statement of work (SOW).

Cost estimates have three primary purposes:

1. Reserve funds for the contract during the acquisition planning phase

2. A basis of comparison of the competitors that have submitted proposals

3. Determine that a proposal that is submitted by one vendor is reasonable

In creating an IGCE there are a few steps that need to be followed to conduct a competitive estimation. The first step is to know the requirement and project the services or products that are going to be acquired. In this case we must know about the actual purpose of this two million dollar acquisition and the SOW provides us with the purpose of the procurement.

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