Basis of Estimate (BOE)

What is a basis of estimate?

A basis of estimate (BOE) explains how a proposed cost or resource estimate was developed. It connects the work to quantities, labor hours, rates, assumptions, source data, and calculation methods. A reviewer should be able to understand why the inputs fit the work and reproduce the calculation.

Why it matters

A total price does not explain whether the delivery plan is credible. The basis of estimate lets capture, delivery, and finance review the same assumptions. It also identifies what must change when a customer changes the scope. The solicitation determines what supporting detail belongs in the submitted proposal.

How to build one

Start with a defined work element and the output it must produce. Identify an estimating method, such as using comparable completed work or calculating resources task by task. Record the source period, quantities, productivity assumptions, rates, and exclusions. Explain why the comparison or method is appropriate.

Keep direct labor, travel, materials, subcontract effort, and indirect treatment identifiable. Reconcile the estimate with the technical approach and requested pricing format. Record uncertainties separately from confirmed inputs. The responsible pricing owner should review the calculations and approve the assumptions before they enter a customer response.

Worked example

For an illustrative training task, a company plans four sessions. Each session needs six instructor hours and three preparation hours. The estimate therefore includes 36 instructor hours. At an assumed direct labor cost of $50 per hour, direct labor totals $1,800 before other applicable costs.

The estimate also states the class size, delivery location, and whether materials or travel are included. If the customer adds two sessions, the team can recalculate the effort instead of applying an unexplained percentage increase. This example demonstrates the method; it does not recommend a market rate.

Common mistakes

Avoid copying historical totals without adjusting the scope or time period. Do not count the same work in both prime and subcontract estimates. A spreadsheet with no explanation can hide those mistakes even when its formulas are correct. Keep a version history so reviewers can identify which assumptions changed.

References and next steps

Federal Acquisition Regulation 15.408 includes instructions for applicable cost or pricing data submissions. Use the solicitation to determine which instructions apply. Connect the estimate to your GovCon market research guide.