Estimating Project Costs

Elements of Cost Estimates

• Cost estimates consist of:
  • Cost related to task duration (duration × number of people × hourly cost of each person)
  • Number of trips to various locations required to perform the work
  • Quantity of materials and unit cost of each material

The S-Curve

• The S-curve represents cumulative probability (Y-axis) plotted against likely project cost (X-axis)
• The curve shows the probability of completing the project within a certain cost range
• For example, if the curve shows a 10% probability at a cost of $123,000, it means there is a 90% chance the project will cost more than $123,000

Factors Affecting Schedule Predictions

• Resource availability: Access to resources directly affects project completion time
• Number of workers: The number of workers and their skill levels affect project duration
• Project location: Environmental and legal factors can impact project duration

Estimating Cost and Schedule

• Cost prediction is the process of forecasting financial resources required to complete a project
• The schedule for each task is converted to a cost estimate for that task
• The project's business manager adds up cost estimates for every task and includes a management reserve to create a cost estimate for the entire project
• Three-point estimates can be created for cost, similar to schedule estimates

Predictions for Schedule and Cost

• Predicting schedule and cost are basic expectations for a good engineering project manager
• Predictions about cost depend significantly on schedule estimates
• Schedule is estimated before cost

Credible Schedule Prediction

• Define tasks through the creation of the work-breakdown structure
• Identify interdependencies between tasks
• Estimate the duration of each task in a statistical fashion
• Only the initial task in each chain is fixed to an actual calendar date; all other dates are derived from task interdependencies and task durations

Task Interdependencies

• Task-to-task dependencies can take various forms
• Examples include:
  • Two tasks, where the second is dependent upon the first
  • Multiple tasks awaiting the completion of a task
  • One task waiting upon the completion of multiple tasks
  • Two tasks, where the tasks are independent of each other