In order to achieve accurate estimates in Project Management, cost estimating strategy is a must.
This cost estimating strategy is developed based on a three-step process. These steps lead to a more accurate cost estimate by incorporating the knowledge gained during the design phase of the project combined with knowledge from previous projects. With the adoption of this strategy, a strategy explanation should be included in the Project Management Plan.
Rough initial Estimates
The Initial Rough Estimate is developed during the Initiating Phase and is based on the information provided in the high-level scope along with information from previous projects the project manager has been involved with or from similar projects they have heard about. This Initial Rough Estimate will be presented as a part of the Concept Proposal.
During the Planning Phase, the project requirements will be developed by the analyst and the project manager for the customer’s review and approval and will further clarify and define the project estimates. More details are provided to the project team to allow them to help the project manager with project estimates. A detailed project schedule is created by the project manager to provide duration and effort for each task, the assignment of resources for each task, and a complete and detailed cost estimate of the project effort.
Final Detailed Project Estimate
The detailed project designs are created allowing the project manager to refine some of the project tasks and add the estimation of costs such as hardware, software, and items such as test equipment or additional space for the project team. At this point, the initial estimates created for the Concept Proposal can be updated or replaced to reconcile the more accurate total project cost information. The new estimate is communicated to the project stakeholders.