Writing the Basis of Estimate (BoE): A Guide for Proposal Development

In federal government procurement, a Basis of Estimate (BOE) is usually requested during the proposal phase of a contract. It provides the relevant facts to support the cost and resource projections provided in the proposal, allowing the government to assess the project's realism, credibility, and correctness. This allows the government to make educated decisions about the contractor's capacity to complete the project's needs within the stated budget. Additionally, a Basis of Estimate (BOE) is often necessary when the Statement of Work (SoW) changes during the course of a contract. Modifications to the SoW can have an impact on the scope, cost, and schedule of a project, requiring a revised BOE. This updated BOE contributes to justifying the revised estimates and resources required to accommodate the changes, ensuring that the alterations are correctly evaluated and paid.

At its core, the BOE combines several critical elements, starting with the Work Breakdown Structure (WBS) element number and title, which connect the estimate to specific project components. These requirements are derived from the Statement of Work (SOW) and include a description of the tasks, required disciplines, deliverables, and any intended risk mitigation measures. Importantly, the BOE distinguishes between recurring and nonrecurring efforts, which helps to determine the scope and duration of project efforts. Next, the required resources are evaluated by cost element—labor, materials, subcontractors, and other direct costs—to create a framework for the estimate. It is vital to analyze and prepare the BOE keeping all aspects of the proposal in mind, including the technological solution, teaming partnerships, geographic locations, and programming strategies. This alignment ensures that the BOE agrees with the overall proposal approach and is tied to cost and schedule performance measures.

Creating a high-quality BOE entails seven steps: planning the estimate's development, selecting the appropriate estimating method, determining the scope of the effort, developing the execution plan, developing the resource estimate, time-phasing the resource estimate, and finally documenting the process and results. Each step is critical to ensuring that the BOE meets proposal standards and reaches the required level of information and accuracy.

Methodologies range from using historical data to using specialized estimating approaches such as analogies, cost estimating relationships (CERs), cost models, degree of effort, and task-based estimates. Each technique has its own set of estimating criteria and processes, ranging from using historical real costs for similar systems (analogy) to mathematical models that calculate project costs depending on project parameters.

A well-constructed BOE also includes a rigorous documentation strategy that captures all stages of estimate development. This documentation should include a thorough explanation of the estimating approach used, a breakdown of the calculations and modifications made, and reasons for all assumptions and data sources. It should be detailed enough to allow a non-technical reader to understand the rationale for resource requirements and estimation. Writing a clear and succinct explanation to support the BOE is crucial.

The Basis of Estimate is a fundamental component of project proposals. It provides an organized and precise process for justifying resource requirements, ensuring that all aspects of project execution are planned and accounted for. Organizations that follow the BOE principles can increase the credibility and accuracy of their project estimates, resulting in better project planning and execution.

The content on this site, including articles, images, and logos, is protected by copyright and intellectual property laws and is intended for educational and informational purposes only. It should not be considered legal advice. Laws and regulations may vary by jurisdiction and are subject to change. For legal advice, consult with a qualified attorney or legal professional.