Would A Cost Growth Factor In Estimates Help Alleviate Continuing Cost Overruns?
Brunner, K.
Tecolote Research, Inc.

A "Cost Growth" factor in estimates may help alleviate the overruns that the aerospace and other industries experience. Despite our best attempts to use the most current information, our inclusion of uncertainties for all quantifiable known events related to a project and a program, and our forecasting and budgeting to high confidence levels, programs still encounter shortfalls. These often result from extensive unplanned changes, optimism, technical baseline errors, cost distributions realized that are outside the range of the databases employed, political actions, 'Acts of God', and the like. Due to their 'unknown' nature, these influences are frequently and usually omitted from estimates, although they occur with regularity. A "Cost Growth" factor, tailored to program characteristics and specifics, could aid in minimizing these sources of errors, resulting in higher fidelity projections. This paper explores the need for and the development of such an adjustment in estimates, and potential consequences.