Project is any collaborative enterprise which is undertaken to achieve a particular goal. Businesses all over the world are constrained by budgets and projects involve costs. Accurate estimation of project costs is very important. Estimating cost is defined as “The process of forecasting a future result in terms of cost, based upon information available at that time”. It will help in smooth execution of the project. It is vital for the success of the business. It is an integral part of project management. Good cost estimation depends to some extent on the support the activity gets from the top management. There are many cost estimating softwares like “Seer” available in the market.
Project Cost Estimation:
Team involved in estimating the cost of the project should take historical data from other similar projects to account. The more unique the project, the more of a challenge it is to get accurate cost estimates. The team should have a very good understanding of the contract or statement of work and other important and specific information related to the project. The team members should be skilled.
Estimates are only as good as the estimator. Sound estimating practices should be used. It is a good idea to document the estimating methodology. Risks and uncertainties involved in the project should be considered while estimating. Estimating project costs generally involves adding estimates of individual elements of the project. The Work Breakdown Structure (WBS) should not be flawed. If it is so, the estimates are sure to be inaccurate.
Preparing a detailed project schedule using tools like Microsoft Project, Excel, etc will help a great deal. It is safe to assume that resources will be productive only 80 per cent of the time. But rough approximations should be avoided as far as possible. Being too conservative while estimating costs can kill a viable project. It is good to have range estimates instead of single data point estimates. Views of an expert in the industry will be of great help.
Accurately estimating project costs is both an art and a science. One fact which the project manager estimating costs should remember is that estimates can never be exact. The same project under the same conditions will be estimated differently by five different estimators. But the project management team should strive for accuracy.