For projects with a Total Project Cost (TPC) greater than or equal to $100M, The Office of Project Management (PM) will conduct an Independent Cost Review (ICR), and/or develop an Independent Cost Estimate (ICE) as they deem appropriate. This review validates the basis of the preliminary cost range for reasonableness and executability. It also includes a full accounting of life cycle costs to support the alternative selection process and budgetary decisions, and provides an assessment of whether the range reasonably bounds the alternatives to be analyzed in the next project phase. 

The cost estimate continues to be developed as the design matures, and a Basis of Estimate (BOE) is prepared to validate the cost estimate including uncertainties. Cost contingency is evaluated from uncertainties in the point estimate, and risks. 

An ICR or ICE is performed on a contractor-generated cost estimate, before the Performance Baseline (PB) is approved. The PB represents the performance plan against which the contractor is measured, as the contractor executes the total contract scope of work. An ICR of a contractor-generated cost estimate used in the development of a PB supports the management and maintenance of a PB. Therefore, it is critical that the project is fully prepared at CD-2 for the ICR/ICE since the cost will become one of the most significant parts of the projects PB. Cost estimates at this stage of a project must be credible, well-documented, accurate, and comprehensive. 

Cost estimates should be developed with input from subject matter experts and use vendor quotes or similar work recently completed where possible. Similarly, schedules and labor estimates should be developed by subject matter experts where possible; planning packages may be used for future work not sufficiently well defined to allow detailed schedule development.  Costs should be adjusted to reflect both escalation from prior-year costs where they are used, and also escalation into future years for planned activities and procurements. Overheads and burdens on labor and non-labor costs must also be escalated appropriately, with forward-pricing obtained from the OCFO Budget Office.

An ICR/ICE provides information and directions which can be used to independently examine the reasonableness of a cost estimate’s quality, assumptions, and risks. This applies to independent reviews of cost estimates for all phases of programs and projects. These estimates could include estimates of capital asset life cycle management activities, operating activities, and other costs to be incurred in the design, development, production, operation, maintenance, support, and final disposition of a system over its anticipated useful life span. These estimates encompass costs from pre-operations through operations to the end of the program/project life cycle, or to the end of the alternative.

Some cost estimate, or cost range, should be provided at each CD gateway, but the degree of rigor and detail for a cost estimate should be carefully defined, depending on the degree of confidence in project scale and scope that is reasonable to expect at that stage. Whatever figure or range that is provided should explicitly note relevant caveats concerning risks and uncertainties inherent in early estimates at CD-0 and CD-1 stages given the immature requirements definition at this juncture. 

Established methods and best practices will be used to develop, maintain, monitor, and communicate comprehensive, well-documented, accurate, credible, and defensible cost estimates. Cost estimates shall be developed, maintained, and documented in a manner consistent with methods and the best practices identified in DOE G 413.3-21, GAO Cost Estimating and Assessment Guide (GAO-09-3SP), and, as applicable, with the Federal Acquisition Regulation (e.g., FAR Subpart 15.4 – Contract Pricing; FAR Subpart 17.6 – Management and Operating Contracts), Office of Management and Budget Circular A-11, Preparation, Submission, and Execution of the Budget, and Department of EnergyAcquisition Regulation (DEAR) Subpart 915-4 – Contract Pricing.

Particular attention shall be directed to advancing design maturity to a sufficient level prior to establishing the Performance Baseline (PB). The project design will be considered sufficiently mature when the project has developed a cost estimate and all relevant organizations have a high degree of confidence that it will endure to project completion. In determining the sufficiency of the design level, factors such as project size, duration and complexity will be considered.