Cost estimation models are mathematical algorithms or parametric equations used to estimate the costs of initiatives. There are tools that can be used for estimating the cost of an initiative, program, or system. For early childhood, tools from the Administration for Children and Families (ACF) have recently been created to assist with costing out program cost, cost of quality improvement, and professional development systems. States also may explore how the use of these tools may help with setting payment rates and projecting costs, particularly as revisions to the Child Care and Development Fund allow alternative rate-setting strategies. An overview of the tools follows:

• The Provider Cost of Quality Calculator is a new, easy-to-use, dynamic web-based tool that calculates the cost of quality based on site-level provider data. The tool helps state policymakers understand the costs associated with delivering high-quality early care and education. The tool can demonstrate whether there is a gap between the cost of providing quality services and the revenue sources available to support a program. Information on the size of the gap at different quality levels for various types of providers can inform the design of financial support and incentive packages.[63] Ohio, Rhode Island, and Washington have used the calculator to develop a set of dynamic models to estimate the cost of operating early learning programs at various levels of quality consistent with the state’s quality rating and improvement system (QRIS).[64]
• The Cost Estimation Model is an online tool designed to help state administrators determine costs of implementing all elements of a QRIS and explore scale-up options. The tool can be used to estimate the cost per year of phasing in a QRIS, the cost of certain elements, or the overall cost of a fully implemented QRIS.[65]
• CostOfChildCare.Org is a project of the Center for American Progress. The website includes an interactive tool designed to help advocates and policymakers understand the cost of child care and the benefits of a high-quality child care system that supports parents, early educators, and young children. This tool was not created by ACF.[67]

The reauthorization of the Child Care and Development Fund allows for new approaches to financing for child care subsidy programs and provides the opportunity to use alternative methods to gather data to determine rates paid for child care. The new language requires market surveys to be valid and reliable. There is more emphasis on ensuring that families have access to higher quality of care and proving how rates are determined, set, and implemented.
 
One alternative method that states may use to determine rates paid for care is a cost estimation model. Using a cost modeling method would allow states to see the true cost of care, including the cost of items such as professional development, materials, staffing ratios and size of a group, program size, enrollment changes, and employee compensation and benefits. This new costing methodology will help states understand the true cost of care beyond what the market is able to charge for a type of care.[68]