Cost estimation of software development and the implications for the program manager

Abstract

Cost estimation of computer software development is a critical problem for the Department of Defense. The acquisition of major weapons or hardware has been impacted cost overruns and schedule slippage in software development. Program managers are responsible for estimating a program's using the information provided by the contractor and the cost analysis divisions within the System Commands. This study first analyzes why variance exists between the different estimates for the same software project that are provided to the Program Manager as input to the budget estimate. This study then examines four methods that are used to understand and reduce the variance between the estimates to give the Program Manager more control over the software development cost estimation process. A set of five specific decision rules is developed for the Program Manager to implement in the cost estimation process. The intent of the study is to improve the accuracy of the cost estimate by reducing variance between the independently generated estimate submitted to the Program Manager.