For most projects, the highest costs will be connected to the team members. When you consider this, the wisest manner in which cost estimates should be made will be through the creation of a project schedule (via a program such as Microsoft Project), which has resource management functions that give you the ability to measure the different types and amounts of labor.
When cost estimates are made for projects, they are usually accomplished through the sum of estimates for the separate elements which make up the project. The pieces could differ in size, and while some only have a few chunks, others have thousands. These will often come in the form of packages or tasks.
Close Relation to Project Budgeting
Estimates which are made using the bottom-up approach will often be used by the contractors to offer support for the bid process which has been proposed. This may require a WBS to be used, and pricing must also be included so that the work packages can be included in the project.
While many people consider this method to be highly time consuming and quite tedious, it can bring about an estimate which is highly accurate should the work content be properly understood. The top down estimates are known for using rules and parametric models when it comes to estimating the relationships. The CERs will often be based on experience which is historical, and which offers data for the development of software.
In many cases, the cost goals for the project can be fit based on the money which is made available inside the budget. Because of this, it will be necessary for the project manager to take the time to come up with a cost estimate so that they can decide the feasibility of the project.
If the cost estimates are too high, it may be necessary for the PM to make adjustments for the project, as this will ensure the survivability of it. One term that PMs and those studying project management will want to become familiar with is Design to Cost. This is an important process that plays a crucial role in developing cost estimates for a project.
Design to Cost
With Design-to-Cost, the cost goals will be used for gaining and developing design parameters. Additionally, the issue of technical performance must be considered as well, especially when it comes to the trade off process for the system design.
In situations where the total value of the dollar must be contained, the design or definition for the project may address the trade-offs in terms of performance, those which fit inside the project for a cost scope which is specific. Cost which is described as a variable which is independent is a method which is affordable, and it is best used for the project scope.
This method will typically start off with a budget that is fixed, and it will then work backwards, through a process which is described as being iterative, and which is useful for the selection and priority for requirements. Through this, it can be gathered near the project scope for specific constraints in terms of the budget.
The costs may sometimes be determined with an accuracy which is acceptable, and this can be achieved based on cost data which is historical. It is also important to include a methodology which is documented and has a strong construction. This approach also requires placing as much detail as possible when it comes to the understanding of tasks.
Cost Estimates in Relation to Equipment
For projects where equipment is involved, experience has shown that cost data which seems analogous may not be. What this basically means is that the cost estimator must take the time to figure out what configurations have important similarities, as well as those changes which have been anticipated. It should also involve things such as spare parts and installation.
These principles may also be equally applied to the usage of costs for service contracts or even projects that have many similarities. It is critical to figure out the cost data that must be added in, and the cost data which should not be put in. It is critical to make use of the data costs which are available, and shape it through usage of complexity as well as size.