Also referred to as a ballpark estimate a guesstimate

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Also referred to as a ballpark estimate, a guesstimate, a swag,or a broad gauge.Done very early in a project, often three or more years prior toproject completion, or even before a project is officially startedto help PMs make project selection decisions.Accuracy is typically -50 percent to +100 percent, meaning theproject’s actual costs could be 50 percent below the ROMestimate or 100 percent above.A ROM estimate that actually cost $100,000 would range between$50,000 to $200,000. The accuracy range is often much wider for ITprojects.Often IT project estimates for software development are doubled because ofthe history of cost overruns17Information Technology Project Management, Fifth Edition, Copyright 2007
Cost EstimatingAbudgetary estimateis used to allocate moneyinto an organization’s budget.Many organizations develop budgets at least twoyears into the future.Budgetary estimates are made one to two years priorto project completion.The accuracy of budgetary estimates is typically-10% to +25%A budgetary estimate that actually costs $100,000would range between $90,000 to $125,000.18Information Technology Project Management, Fifth Edition, Copyright 2007
Cost EstimatingAdefinitive estimateprovides an accurate estimate ofproject costs (most accurate of the three types).Definitive estimates are used for making manypurchasing decisions for which accurate estimates arerequired and for estimating final project costs.For example, if a project involves purchasing 1000personal computers from an outside supplier in the nextthree months, a definitive estimate would be required toaid in evaluating supplier proposals and allocating thefunds to pay the chosen supplier.Definitive estimates are made one year or less prior toproject completionAccuracy range is normally -5% to +10%19Information Technology Project Management, Fifth Edition, Copyright 2007
Types of Cost Estimates20Information Technology Project Management, Fifth Edition, Copyright 2007It is important to provide supporting details(assumptions, project scope, WBS, etc) used incomputing estimates so that it will be easier to prepareupdates as needed or similar estimates on otherprojects.
Cost Management PlanAcost management planis a document thatdescribes how the organization will manage costvariance on the projectFor example, how to respond to proposals fromsuppliers that are higher or lower than estimatesA large percentage of total project costs are oftenlabor costs, so project managers must develop andtrack estimates for laborMany organizations estimate the number of people orhours they need by department or skill over the lifecycle of a project21Information Technology Project Management, Fifth Edition, Copyright 2007
Maximum Departmental Headcounts by Year22Information Technology Project Management, Fifth Edition, Copyright 2007The table below shows the maximum number of peopleNorthwestAirlines determined to assign to each year of the project bydepartmentNote the small number of contractors; contractors generally havehigher labor costs than in-house employees

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Term
Spring
Professor
A. RAOUL
Tags
Project Management, The Land, Project Cost Management, Information Technology Project, Technology Project Management

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