12/13/2017

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Cost Estimating

It is not possible to know the final project cost of the project until the project is complete because it is difficult to accurately predict the future.

What can be done is to create an estimate? An estimate is more than pulling a random number out of the air, and adding 20 percent for good measure. A real estimate evolves as project details become available.

This is progressive elaboration. Project estimates start out broad, and as the project deliverables come into focus, it is possible to more accurately define the estimates.

Each estimate should provide an acceptable range of variance, the conditions of the estimates, and any assumptions made by the estimate provider.

A good estimate clearly defines what the project will accomplish, the assumptions made, how long the estimate is valid, and how much the project will cost, based on current information.

A good estimate presents to the stakeholder everything relevant to the proposed work, without holding back any secrets. If there's a disagreement in price, assumptions, or range variance, it's better to discuss this issue now, rather than a few weeks into the project execution.

An excerpt from Project Management Essentials by Deepak Pandey.

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