Many contractors use parametric cost estimating for supplementary support or validation of estimates developed using other methods. This requires judgment in selecting which data will be used in developing the total cost estimate relied upon for the price proposal. Thus, if a contractor develops a proposal using both parametric data and discrete estimates, it would be prudent to disclose all pertinent facts to avoid later questions about completeness of the submission. This includes ensuring that, if parametric estimating procedures are part of the estimating system, they are properly disclosed. DCAA believes parametric estimating approaches are acceptable when they are properly implemented.
Auditors encounter it most often as a technique used in conjunction with other estimating methods.
For example, parametrics are often used for estimating costs of scrap and other such factors. The majority of the proposals audited are not developed solely based on parametric estimating techniques. The use of parametric estimating is most appropriate in such circumstances where historical data is not available as when the program is at the engineering concept stage, or when no bill of materials exists and the program definition is unclear. Contractors with good parametric cost estimating systems analyze their perspective proposal to determine the appropriate estimating technique for each part of the work breakdown structure.