What is an Independent Government Cost Estimate?

An IGCE (also in construction related service an IGE) is a cost estimate developed by the Government Requiring Activity, based on the requirements of the Performance Work Statement (PWS) or Statement of Work (SOW). An IGCE is required for every new acquisition that exceeds the simplified acquisition threshold (SAT), or as otherwise specified.

How to Create an Independent Government Cost Estimate

✅ Objective, verifiable, current and granular local market cost data (no use of location factors or economic indexes)
✅ Well defined Statement of Work Support informed negotiations
✅ Standardized Data Architecture and Work Breakdown Structure (WBS) using industry standard terms, descriptions, and definitions  (expanded CSI Masteformat and/or expanded UNIFORMAT)
✅ Early and ongoing collaboration with Planning, Procurement, and Project Delivery Teams
✅ Experienced line-item construction cost estimators
✅ Detailed market research and full transparency throughout established processes

An independent government estimate or appropriate review of a contractor’s detailed line-time estimate for any repair, renovation, maintenance, or new construction activity are consistent with best management practice, if not a regulatory requirement to ensure fiduciary responsibility of the government organization.

Technical planning and professional procurement team collaboration and adherence to robust best management practices are needed to mitigate financial and environmental waste.   Sole focus upon “rapid procurement” and or maintaining the ‘status quo’ are both barriers to efficient lifecycle management of the build environment.

Five primary questions to be answered are:
1. How was the estimate made?
2. What assumptions were made?
3. What information/tools were used?
4. Where was the information obtained from?
5. How did previous estimates compare with prices paid?

 

 

Other considerations

#1. Some key statutes that govern the acquisition of products and services are:

• Competition in Contracting Act (CICA),
• Davis-Bacon Act (DBA), Federal Acquisition Reform Act
  Federal Acquisition Streamlining Act (FASA)
• Javits-Wagner-O’Day Act (JWOD)
  Procurement Integrity Act, Service Contract Act (SCA)
• Small Business Act.

#2. Total Ownership Cost (TOC) in Services Acquisition is defined as the sum of financial
resources needed to organize, train, support, sustain, manage, and operate the contract service
requirement while meeting mission goals, policies, and standards of readiness, environmental
compliance, safety, and quality of life concerns.

#3. The format and content of the IGCE will differ based on the type, complexity, and value of the
acquisition. The IGCE consists of the anticipated costs to include direct costs (labor, products,
equipment, travel, and transportation), indirect costs (burden on labor such as fringe benefits and
labor overhead), material overhead, general and administrative (G&A) expenses, and profit.

Direct Costs. As defined at FAR 2.101, direct cost means any cost that is identified specifically
with a particular final cost objective. Costs identified specifically with a contract are direct costs
of that contract.
Labor Costs are typically the most significant part of the IGCE in terms of dollars for either
services or construction contracts. Direct labor is the labor directly applied to the performance
of the contract requirements. The IGCE should identify the labor categories and the number of
hours required to perform the work, known as level of effort, for each category. Market
Research is necessary to determine the appropriate labor category and labor mix that supports
the PWS or SOW. Consideration should also be given to the geographical location and site

(Government versus contractor facility) in which the work will be performed.
In contracts for services and construction, direct labor may be covered by the Department of
Labor wage determinations (see References Section for links) and is considered non-exempt
(typically blue collar, but may cover some white-collar occupations, such as clerical, that do not
require a professional license or college degree). As non-exempt employees, they must be paid
no less than delineated on the associated wage determination or collective bargaining agreement
(CBA). The provisions that govern non-exempt are the Service Contract Act (SCA) for services
or the Davis-Bacon Act (DBA) for construction. The SCA Directory of Occupations and the
Bureau of Labor Statistics (see Reference Section for links) provide labor categories,
descriptions, and historical wage data. In contrast, management and professional salaried staff,
are not covered by a wage determination and are considered exempt (white collar occupations
that typically require a professional license or college degree). As exempt employees, they will
receive benefits and wages comparable to those in industry and Government.

Note: 4BT construction cost date includes “fringe costs” for all associated trades and are researched locally and independently.  Contractor profit and overhead are NOT included.

#4. An IGCE can contain any combination of cost estimation methods and expert opinions. The four
primary cost estimation methods used to develop cost estimates are:
Analogy (Top Down)
 Estimates are based on historical data of a similar item/system.
 Adjusts the known costs by adding or subtracting elements of material, time, and
economic or inflationary changes as necessary.
 Generally less costly and less time-consuming than other methods, but also generally
less accurate.
 Example: In the past when landscaping at location “A” was purchased, it was $20,000
for 100,000 square feet; therefore, estimates are made based on similar acquisitions.
Parametric (Statistical)
 Relies on statistical analysis to establish a relationship between a technical
characteristic and the cost of the system.
 When there is a simple mathematical relationship between two tasks/elements, it
is known as “Factor” cost estimating. For example, initial set-up is 10% of the
operation and maintenance cost.
 Measurable base units may include man-hours, trips, moves, units, and square feet.
 Use in early planning stages of a contract service when specific tasks/elements are not
yet known.
 Example: Painting: 500 square feet x $15 per square foot = $7,500.
Engineering (Bottom Up)
 Estimates are very detailed, separated into tasks/elements.
 The cost of individual tasks and elements are estimated to the greatest level of specified
detail.
 The task/element costs are then summarized or “rolled up” to higher levels.
 Cost and accuracy influenced by the size and complexity of tasks/elements.
 Example: An enterprise-wide telephone system with switches, components, and
handsets.
Actual Costs (Extrapolation)
 Typically associated with tasks/elements in progress or material items when taking the
actual cost of previous production lots.
 Adjusted for inflation, labor saving, production and technology changes, and other
factors.
In the absence of one of the four primary cost estimates, the MFT may have to rely on the
following cost estimation method:
Expert Opinion
 Relies on subject matter experts’ opinion of what something should cost.
 Typically used as a last-resort method.

#5. General Best practices
 Employ a Team Approach to include members of the Project / Technical Team, Procurement/Contracting,
General Counsel, and other stakeholders as appropriate.
 Understand the Requirement.
 Be sure to follow the internal review and approval processes.
 Be sure to:
• Engage early and often with other members the team.
• Thoroughly document IGCE methodologies, assumptions, sources, and calculations.
• Ensure estimate reflects the period of performance, inflated properly for multi-year
IGCEs and/or otherwise adjusted (example: updating unit price cost data regularly)
• Ensure current and detailed market research,
• Include the standard cost elements (e.g., direct labor, material, and equipment cost data sources), but also tailor to
meet specific needs.
• Ensure that the estimate is updated, as appropriate.

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