Friday, July 1, 2011

Project Cost Estimation Accuracy

Many time I experienced a dilemma when user is asking for estimated cost of Project instantly. As a project manager, It become utmost importance to say anything because, if it is over estimated you are going to have a bad name or may loose the project. If it is under estimated than your project will be a loss making lad. In my opinion to overcome such situation, we should give estimated cost but also update the user about the Accuracy tolerance in Cost Estimation. This will help user to be ready for listening something else when actual cost estimating is done. This will also help a project manager to throw away the unwarranted burden over head. As per prevalent market conditions, following is the accuracy in project cost estimation.

1. Rough Order of Magnitude - (-50% to 100% )against projected cost estimation.

2. Order of Magnitude  - (-25% to 75%).

3. Budgeted Estimates - (-10% to 25%).

4. Definitive Estimates - (-10% to 15%).

Project Manager must understand the time of giving estimates and accordingly explain about the accuracy. The magnitude of estimation accuracy can be decided based on the project phase. The more close you are to the project definitive estimation more accuracy is available.

Please do not forget that the progress is project and cost of changes is directly proportional.

Aman

2 comments:

dfm said...

This is based on what edition version of PMP edition?

shella said...

Project Management Body of Knowledge (PMBOK) Guide outlines standards and best practices that project management professionals must know and adapt towards achieving successful outcomes on each of the individual projects they manage. I also took my Online PMP Classes from PMstudy. You can have a look at their offerings.

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