Final-cost estimates for research & development programs conditioned on realized costs

Managers and their analysts must estimate program costs and completion times. Most R&D programs, however, historically experienced significant schedule slips and incurred dramatic cost increases. Therefore, senior management wants risk assessment of on-going R&D programs. Gallagher and Lee propose a method that presents the probability of various final costs and completion times for an on-going R&D program. Since the approach relies on incurred costs, it avoids the problem of measuring against optimistic budget and schedule projections. Furthermore, while common methods only provide a point estimate, the proposed technique presents the likelihood the final program cost and completion time will be in any particular range. Program managers and their supervisors can use this information to assess the risk in continuing an R&D program.