Estimated Costs (Planning Process Group).

Estimated Costs (Planning Process Group).

Planning Process Group is an important part all knowledge areas of the PMBOK. It brings together different planning processes that are required to run a project. These processes are used to refine and define objectives, determine the scope of integrated efforts, and plan the way forward in order to achieve those objectives. We will now take a look at the “Estimate Costs Process” and some of its key elements. The Estimate Costs Process is often used in conjunction with the popular Determine Budget Process’ for smaller projects. It describes the cost methods/ techniques required within a particular project. Managers often require a budget/cost management plan to estimate the costs of tasks and how they can be budgeted and controlled. It includes task information, such as when and how it should be collected. It also contains valuable budgeted performance data and measured scope. It also includes planning information metrics such as currency and estimated costs that will be used as contracts for the project. These links can also lead to cost tracking systems within an organization. The cost details are not available at the time of project initiation. However, as the project progresses in the planning group, the scene changes. According to this definition, an estimate is a quantitative assessment of the likely amount or outcome. Cost estimates should include a predetermined measure of accuracy – actual figures plus/ minus x%. Inputs to the Estimate Costs process The accuracy metrics of cost estimations are dependent upon the accuracy of the scope of project. This in turn advises constraints such as dates, budget, or resources. It includes non-human costs such as tools and licenses. This information is also derived from the studies of Estimate Activity Duration and Risk Register and Estimate Activity Resources. Human resource plans and schedules also provide information about staffing such as hourly rates. Outputs of Estimated Costs It is important to update all documentation and the risk register in order to capture the assumptions and basis of estimates. Also, it is important to modify the project scope as needed. Below is a list that helps you categorize cost types: Material cost

Travel cost

Labor costs

Training costs

Overhead cost

Contingency reserve cost

Equipment costs

Supply costs

Alternative project approaches such as outsourcing can be used to estimate the cost of the project. Spread sheets, MS Projects, and expert judgment regarding different types of expenditures (direct/indirect costs) are all useful tools. This case uses common techniques such as Analogous Estimating. Expert judgment and historical information are used to estimate costs. These costs are derived based on similar phases/previous project and include factors such as weight, size, and complexity. Parametric Estimating uses historical data to calculate estimates and applies statistical relationships. Bottom up Estimating This method is the most accurate way to estimate costs. However, it requires detailed information about the project scope and can be very time-consuming. Three-Point Estimating (PERT) is when single figures are insufficient to estimate costs. This is due to the inclusion of too many unknown variables.