This lesson covers how to estimate costs. The estimate cost process focuses on making accurate estimates of the project budget. This creates the activity cost estimates and basis of estimates. [toggle_content title="Transcript"] The next area is estimate costs. Estimate cost process is focused on making accurate estimates of the project budget. This will create the activity cost estimates and the basis of the estimates. Your activity cost estimates is taking your resources and activities and applying dollar amounts to it. If you know who your people are how many hours you can figure out what the costs is going to be for that activity. The basis of estimates is your justification on how you came up with that dollar amount. If am using ten people I assume this risks it's going to cost a lot of money. Its best to hear that logic and why that budget is that a lot of money. Your inputs are the cost management plan which we just created...human resources management plan. You need to know who is available and what the cost is. Scope baseline is your WBS. Your WBS dictionary and your scope statement. You are going to use your WBS which encompasses other work to figure out how much it's going to cost using that information. Your project schedule is giving you the time frame of what it takes to get that project done. In your risk register, if you are calculating high risk for items that will have an impact on your budget. The tools for estimating costs are expert judgement. You might have past experience of what something costs and you are going to use that information to come up with a budget. Analogous estimating is comparing apples to apples or apples to oranges. It is using something similar that you know in trying to justify costs to that project. Parametric estimating is knowing if something costs for example $50 an hour and this task is going to take ten hours it is going to cost me $500. Parametric estimating is knowing every single item, putting a cost associated to it and then adding up the sum of the entire project. Very time consuming but can be accurate. Three point estimating is taking three points. You are taking the most likely, the pessimistic view and what you assume under normal conditions. You are taking all three of those, adding them up and dividing by three. Reserve analysis, this is taking the unknowns and trying to come up with a dollar amount. If I think this project is going to be a million dollars, but chances are there are things that I don't know about, I am going to throw a ten percent. So I am going to say this project is $1100000 to complete. For all the unknowns I am taking out of the $100,000 and doing my budget based on that. That would be part of my justification. The unknowns are there. For example a construction company...if you are building a new structure what could be one of those unknowns. You are going to assume ten percent extra for putting up a building. Cost of quality, the quality knowledge area is conformance to non-conformance to quality. If you have an item that has a very high quality to it it's going to cost more. Value bid analysis...you might want to subcontract the work out and that's when you are using the analysis. Is it better to have a subcontractor doing this or is it better to do this in house. Project management software could be...we like to use in my office, excel but it could be Microsoft project. It is using the software to come up with a budget. A summary of the estimate costs, your inputs are cost management plan, your HR management plan, scope baseline, project schedule and risk register. Your tools are expert judgement, analogous estimating, parametric estimating, reserve analysis, cost of quality, venue bid analysis, and project management software. Your output is your activity cost estimates and your basis of estimates. [/toggle_content]
Project Management Professional (PMP) - PMI
Our online PMP training course educates on how to initiate, plan and manage a project, as well as the process behind analyzing risk, monitoring and controlling project contracts and how to develop schedules and budgets.