Page 196 - Project+

This chapter will cover cost estimating and cost budgeting, as well as
the risk activities and strategies for your project.

To many project managers, the most important components of a project plan are the
scope statement, schedule, and budget. As you probably recall, these also happen to
constitute the classic definition of the triple constraints. This doesn’t mean that other

components of the plan aren’t important. The communication plan and the risk
management plan, for example, are also important on any project.

Estimating Costs

Now that you’ve developed the project schedule and documented the project resource

requirements, you’re ready to begin estimating the cost to complete the work of the
project, determine the project budget, and estimate the total cost of the project.

Stakeholders have a way of declaring both cost and schedule estimates as
final. Make certain they are aware that these are estimates and that more
information will be known about total cost as the project progresses. Estimates
become final once you determine the cost baseline.

You can use a number of techniques to determine cost estimates. I’ll cover four in this
chapter, including analogous (also known as top-down), parametric, bottom-up, and
three-point estimates. I’ll also provide some tips to help you work through the
estimating process. Remember that these estimating techniques can be used for

estimating activity durations as well as costs.

Cost-Estimating Techniques

You can use several techniques to estimate project costs; you may use some or all of
these methods at various stages of project planning, or you may use one type of
estimating for certain types of activities and another method for the rest.

The estimating methods have varying degrees of accuracy, and each method can

produce different results, so it is important to communicate which method you are
using when you provide cost estimates. Let’s look at each of these estimating methods
in more detail and discuss how they work.

Analogous Estimating (Top-Down Estimating)

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