An IGCE is an estimate of the expected cost of a contract or task order. IGCEs are developed by government personnel before soliciting contractor proposals or making contract awards. A quality IGCE can support both program and contracting officials throughout the phases of the acquisition planning and award process. As shown in figure 1, in the pre-solicitation phase of a procurement, IGCEs help program offices— which for the purposes of this report refer to the offices or requiring activity that need the service—confirm that their estimated costs align with the contract requirements for the service being acquired. Further, IGCEs help establish contract cost goals to ensure funding is available to meet expected contract costs. Moreover, although not required by the Federal Acquisition Regulation (FAR) for most service contracts, IGCEs can support contracting officials in establishing cost or price objectives if they enter into contract negotiations. The FAR identifies the IGCE as one of several tools available to establish that the contractor’s cost or price is reasonable, and while determining price reasonableness by comparing proposed prices in a competition to one another or by comparing proposed prices to historical prices paid for the same or similar items is preferred, the FAR provides the contracting officer discretion on when to use what tools appropriate to the acquisition. Service contracts involve the time and effort of the contractor to perform an identifiable task, such as test and evaluation or facilities management, rather than furnish a good or product. Service contract IGCEs may be based on unit pricing—such as prices based per square foot like janitorial services—or individual cost elements. IGCEs for cost elements may be based on projected direct labor costs. Direct labor costs take into account the categories of labor—for example, a senior program manager or an entry-level research assistant—needed to meet the requirements of the service acquired, as well as the number of hours required from each labor category and the associated rates. IGCEs for service contracts may also include additional cost elements, such as: Indirect costs, which can include contractor overhead and fringe benefits, such as employee health insurance costs, if not incorporated into labor rates, and contract fee, if applicable; and Other direct costs, which may include materials required or travel. IGCEs can be developed for individual task orders under IDIQ contracts as well as the base IDIQ contract. When IGCEs based on cost elements are developed for task orders, some elements of the estimate, such as labor rates associated with certain labor categories, may be established in the base IDIQ contract. Depending on the estimating method used, the task order’s IGCE may still need to estimate the level of effort—such as number of people or hours expected—across the different labor categories to perform the required tasks. For the majority of the service contracts and orders we reviewed, an IGCE was prepared. In cases where no IGCE was prepared, agency officials generally told us that an IGCE was not necessary for task orders under an IDIQ contract, or that the contract work was for research and development, for which it was too difficult to predict the costs. However, we found cases where agency officials prepared IGCEs for task orders and for research and development contracts and found them useful. IGCEs are often developed by the program office’s contracting officer representative—who is assigned to support contracting officers in managing contractor performance—with varying levels of input and review from program office staff. All of the departments in our review have some guidance on IGCEs available—ranging from regulation to handbooks to checklists—with different emphasis on whether an IGCE is required. We found some cases where guidance dictated that an IGCE should have been prepared, but was not. Although the FAR does not require IGCEs for most service contracts, 62 of the 76 service contract files we reviewed included them, as shown in figure 2. These include awards ranging from a $600,000 task order for information technology services to a $163 million contract to support vaccine research and development. Agency officials cited various reasons to explain why 14—half of which were not competed—of the 76 contracts and task orders did not have IGCEs. Officials generally could not find the IGCE, or stated that they did not develop IGCEs for task order awards from IDIQ contracts or did not develop IGCEs for research and development services because the requirements are too difficult to estimate. Specifically we found: Task orders: For six task orders under IDIQ contracts within the Departments of Education, Defense (DOD), and Housing and Urban Development (HUD), officials noted that they did not develop IGCEs at the task order level. For two from the Department of Education, officials explained that the task orders—one valued at $32.5 million and the other at $433,000—were for volume-based loan services, where pricing was established with the contractors when the base IDIQ contract was awarded. According to senior Department of Education officials, the contracting officer determined that creating IGCEs at the task order level was not an efficient use of time and resources because pricing per loan was fixed at the base contract level. In another example, an Air Force contracting official, referring to a $1.8 million task order from a noncompetitive IDIQ contract for engineering and technical services, indicated that IGCEs for related task orders were not needed because the Air Force has been contracting for the services for more than 20 years and the task orders are routine at this point. Research and development: One competed contract and one noncompetitive task order we reviewed without IGCEs were DOD awards for research and development services. Officials explained that since requirements are not always fully understood before the proposals are received and analyzed—even in a noncompetitive procurement—it is difficult to develop useful IGCEs. For example, for a competed Air Force award, officials told us they relied on the contractors’ innovation to address requirements and the program office reviewed the proposals to ensure approaches were technically sound and achievable. However, in other instances, we found that agencies awarding task orders and research and development contracts that had developed IGCEs and found them to be useful. For example: Task orders: We reviewed 27 task orders from IDIQ contracts where IGCEs were developed. Army officials said they develop task order IGCEs even when the labor rates are pre-negotiated in the base IDIQ contract, in part because the IGCEs include other estimated costs, such as travel expenses and other direct costs, which help contracting officials understand the services the program office expects to receive. Officials for several task orders we reviewed cautioned that it is important for them to develop separate IGCEs specific to each task order because the base IDIQ contract may not contain the level of detail necessary to estimate requirements at the task order level. For example, an IGCE for a $5.3 million DHS task order for information technology included estimates for task-specific costs, such as labor for equipment set-up, installation, and operation costs. The program official noted that these costs were not detailed in the base IDIQ contract. Research and development: Eight of the research and development contract files we reviewed had IGCEs. Officials from HHS said that even when requirements are not fully understood, some labor categories and related elements can be estimated in advance to give officials points of comparison when reviewing proposals. According to DHS officials, they used the IGCE as the primary government estimate for the price analysis to determine price reasonableness once contract proposals were submitted. For most of the remaining contract awards where IGCEs were not available, officials told us that IGCEs had been developed but could not be located in the contract or task order files. In some cases, the contracts were more than 6 years old and staff turnover and file transfers made it difficult for us to obtain contract file documents. In a couple of cases, officials said they did not create IGCEs, but used other resources—such as audited rates—to examine costs and prices. Program and contracting officials share responsibility for many acquisition planning activities, but in the contracts we reviewed, staff in the program office were primarily responsible for developing IGCEs. Officials from the six departments we met with said that the contracting officer’s representative (COR)—usually a person within the program office—most often develops IGCEs. In some cases, CORs said they developed IGCEs autonomously, using their experience with prior efforts to estimate the level of effort necessary to meet requirements needed for the service being acquired. For example, for a Department of Education contract worth approximately $807,000, the COR explained that the program had worked with the contractor on a similar effort in the past and as a result, the COR had a thorough understanding of the labor categories and labor hours necessary to meet requirements, so did not need input from other sources to determine the level of work necessary. However in many cases, CORs received input from other program office officials, such as program managers or subject matter experts, during the IGCE development process. According to officials, IGCEs are often reviewed and approved within program offices as one of several documents in a procurement request, before being sent to contracting officials. Program office input ranges from informal discussions with peers and managers to formal acquisition planning reviews, involving multiple stakeholders. In at least four of the contracts we reviewed, officials said their IGCEs were developed with input from sources outside the program office. For example, The Army’s Prototype Integration Facility—which supports DOD program offices with design and development projects requiring a rapid response—assists in the development of contracts by assigning technical advisors to serve as CORs. An official from the facility told us the technical advisors primarily draw on experience from other efforts to help the program offices develop acquisition planning documents, including the IGCE. In at least two of the contracts we reviewed, the IGCEs were developed by officials who have professional cost estimating experience.