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the estimates. For example, let’s say your most likely estimate is $120 per hour. The

optimistic estimate is $110 per hour, and the pessimistic estimate is $150 per hour. The
three-point estimate is calculated this way:

($120 + $110 + $150) / 3 = $126.67 per hour

The three-point estimate for this work is $126.67 per hour. This estimate is only as
good as the estimates given for the three points in the calculation. This estimate can
swing between accurate and poor based on the quality of the estimates provided by the

subject-matter experts.

Most of the estimating techniques discussed in this section can also be
used to determine the task durations on the project schedule.

Estimating Tips

Cost estimating can be complex, and cost estimates often turn into the official cost of
the project before you have the proper level of detail. You will probably never have all
the information that you’d like when calculating cost estimates, but that’s the nature of

project management. Here are some thoughts to keep in mind as you work through the
estimating process:

Brainstorm with your project team. Work with your team and other subject-
matter experts to make certain you’ve accounted for cost estimates that may not be so
obvious. For example, do any of your project team members require special training in
order to perform their duties on the project? Are there travel costs involved for team
members or consultants? Getting the team together to talk about other possible costs is

a good way to catch these items.

Communicate the type of estimate you are providing. Make certain your
stakeholders are aware of the types of estimates you’re using and the level of accuracy
they provide. If you’re preparing an analogous estimate based on a similar project, be
up front regarding the possibility of this estimate deviating from the actual cost of the
project.

In addition to emphasizing the potential inaccuracies of an analogous
estimate, provide stakeholders with a timeline for a definitive estimate. A project
sponsor is more willing to accept that your current estimate may be lower than the
actual cost of the project if they understand why the current estimate is vague and
what is being done to provide a more accurate estimate.

Make use of any available templates. Many companies have cost-estimating

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