The methods used to estimate the cost of the project during the selection phase are generally faster and consume fewer resources than those used to create detailed estimates in later phases. The estimates must be accurate enough so that the comparisons are meaningful, but the amount of time and resources used to make the estimates should be appropriate to the size and complexity of the project. To compare the simple paybacks or internal rates of return between projects, an estimate of the cost of each project is made. Estimating Costs to Compare and Select Projectsĭuring the conceptual phase when project selection occurs, economic factors are an important consideration in choosing between competing projects. Now you are ready to build your budget plan. That way, you know the assumptions made when you were coming up with the numbers.

It’s important to keep all of your supporting estimate information. Once you apply all the tools in this process, you will arrive at an estimate for how much your project will cost. It is the amount of money it takes to do the project right. Cost of quality is just a way of tracking the cost of those activities. Since it’s cheaper to find bugs earlier in the project than later, there are always quality costs associated with everything your project produces. Cost of quality: You will need to figure the cost of all your quality-related activities into the overall budget.Reserve analysis means putting some cash away in case of overruns. If you know that your project has a risk of something expensive happening, it is better to have some cash available to deal with it. Reserve analysis: You need to set aside some money for cost overruns.This tool is about evaluating those bids and choosing the one you will accept. You might even have more than one contractor bid on the job. Vendor bid analysis: Sometimes you will need to work with an external contractor to get your project done.Determining resource costs means figuring out what the rate for labour and materials will be. Any materials you use to build the project (e.g., wood or wiring) will be charged at a rate too. Determination of resource cost rates: People who will be working on the project all work at a specific rate.Here are some tools and techniques for estimating cost: This estimate will become more refined as time goes on and you learn more about the project. When you make an estimate early in the project without knowing much about it, that estimate is called a rough order-of-magnitude estimate (or a ballpark estimate). Often, when you come into a project, there is already an expectation of how much it will cost or how much time it will take. It is now possible to track the project according to that budget while the work is ongoing. Once this is compiled, you add up the cost estimates into a budget plan.

It is important to come up with detailed estimates for all the project costs. But no matter whether your project is big or small, and no matter how many resources and activities are in it, the process for figuring out the bottom line is always the same. That’s why no project plan is complete until you come up with a budget. If you had a bigger budget, you could probably get more people to do your project more quickly and deliver more.

Budget planning project management