The underlying logic used to estimate the resources needed to execute a contract change action (including, but not limited to, a proposal1). The BoE can be parameterized in either dollars or hours, spread over time or a sequence of program milestones.
The BoE is not the estimate itself, but the methodology for arriving at the amount and spread. The pieces of the estimate will be “rolled up” to obtain a comprehensive resource profile (estimated expenditure as a function of time).
It is critical to understand that the estimate (and the BoE) does not literally represent the plan that will be executed. For example, it usually does not address “management reserves”, which will be subtracted from the total value. An estimate also will not typically address issues of personnel transfer on and off the project (see ramp-up and roll-off), or of materiel lead times. Such issues will typically result in an actual resource profile significantly different from the original estimate and, therefore, use logic quite different from the BoE.
Because the BoE will eventually be tempered by realities of personnel availability, management reserve, and the professional objectives of the Big Dogs, the BoE has limited long-term utility, and usually isn’t strongly related to an allocated budget. We usually put too much work into it, trying to logic our way through all of the details as if they will be executed exactly as estimated.
Footnotes- Easier to understand if you think of an initial proposal as “Change 0”.[↩]