7.2 Estimate Costs

It is the process of developing an approximation of the cost of resource needed to complete project work.

The key benefit: determines the monetary resources for the project.

Frequency: periodically as needed.

Process/ Org.Assets	Input	The process	Output	Process/ Org. Assets
Project Management Plan	Cost management plan	7.2 Estimate Costs	Cost estimates	Project Documents
	Quality management plan		Basis of estimate
	Scope baseline		Assumption log
Project Documents	Lesson learned register		Lesson learned register
	Project schedule		Risk register
	Resource requirements
	Risk register
Enterprise/Organization	Enterprise environment factors
	Organizational process assets

A cost estimate - a quantitative assessment of the likely costs for resources required to complete the activity, prediction. Includes the identification and consideration of costing alternatives to initiate and complete the project, cost trade-offs, risks.

Cost estimate is usually expressed in units of currency. Sometimes in time of work.

Cost estimates are refined during the project.

Cost are estimated for all resources that will be charged to the project:

• Labor
• Materials
• Equipment
• Services,
• Cost of financing (services?)
• Contingency costs

Level of details:

• By an activity
• In summary

7.2.1 Inputs

7.2.1.1 Project Management Plan

• Cost management plan. Estimating methods, level of precision, accuracy.
• Quality management plan. Activities, resources.
• Scope baseline. Project scope statement, WBS, WBS dictionary.
  • Project scope statement. Funding constraints, financial assumptions, constraints.
  • WBS. Relationships.
  • WBS dictionary. Identification of the deliverables, description of the work.

7.2.1.2 Project documents

Include:

• Lesson learned register.
• Project schedule. Type, quantity, amount of time, including non-direct (time -> interest amount).
• Resource requirements. Types, quantities.
• Risk register. Details of risks, responses.

7.2.1.3 Enterprise environmental Factors.

Include:

• Market conditions. What products, services from whom under what terms and conditions. Local/global.
• Published commercial information. Price lists, resource price estimation databases.
• Exchange rates and inflation.

7.2.1.4 Organizational Process Assets

Include:

• Cost estimating policies.
• Cost estimating templates.
• Historical information and lesson learned.

7.2.2 Tools and Techniques

7.2.2.1 Expert Judgement

• Previous similar projects;
• Information in industry, discipline, application area.
• Cost estimating methods.

7.2.2.2 Analogous Estimating

Using values from previous projects that are similar to the current:

• Scope,
• Cost,
• Budget,
• Duration,
• Measures scale.

7.2.2.3 Parametric Estimating

A statistical relationship: project parameter -> cost.

7.2.2.4 Bottom-up Estimating

1. An activity is estimated.
2. Activity estimates are summarized to the higher level.

Accuracy depends on the activities size.

7.2.2.5 Three-Point Estimating

(Most likely + Optimistic + Pessimistic)/3

(4 * Most likely + Optimistic + Pessimistic)/6

7.2.2.6 Data Analysis

• Alternatives analysis.
• Reserve analysis. Contingency reserves (allowances).
• Cost of quality.

7.2.2.7 PMIS

7.2.2.8 Decision Making

Voting.

7.2.3 Outputs

7.2.3.1 Cost Estimates

Quantitative assessment of the probable costs to complete project work + contingency amounts to account risks + management reserve for unplanned work. In summary/detail form. Assessment is applied to all resources needed to accomplish a work. Indirect costs can be included at the activity level or at higher level.

7.2.3.2 Basis of Estimates

The documentation has to provide complete understanding of how the cost estimate was derive.

Include:

• Documentation of the basis of the estimate,
• Doc-ion of all assumptions made,
• Doc-ion of any known constraints,
• Documentation of identified risks,
• Indication of the range of possible estimates.
• Indication of the confidence level of the final estimate.

7.2.3.3 Project Documents Updates

Include:

• Assumption log.
• Lesson learned register.
• Risk register.