Central Limit Theorem Methodology for Bounding Point Estimates

Abstract

Abstract Cost estimating frequently requires methodologies that logically and consistently allow the analyst to transform very limited data into estimates that are repeatable and will withstand scrutiny. This paper focuses on a technique that converts subjective information into quantitative bounding of uncertain estimates. The technique was instituted at the US Army Missile Command in the 1980s and was validated by headquarters analysts. In a recent Independent Cost Estimate performed for a NASA program, the authors used the technique in the proven manner and introduced a new application. By applying the technique at three levels, the authors were able to determine appropriate levels of risk reserves and use that as a base for evaluation of available risk reserves for the program under review.