Establishing a project budget can be as straightforward as calculating what it is going to price to perform every task in the work breakdown structure and adding them to obtain a total budget. Even so, as any project manager who has developed a project budget knows, creating a project spending budget is rarely easy or straightforward (and normally not totally within your control!).
The complicating elements contain clients who want as significantly functionality as possible for the lowest price, organization development and sales staff who desires to win contracts, and senior managers who want to maximize profits. Furthermore, every person desires the item to function well and be effortless to use. The individual within the middle of this vested-interest conflict is the project manager.
And for those certified PMPs, there is a entire section within the PMBOK that talks about this topic. Planning in chapter 3 talks about estimating expenses and then spending budget as a part of the planning process and then chapter 7 “Project Cost Management” discusses the tactics and greatest practices for preparing budgets and managing the costs.
Just simply because producing an acceptable project budget isn’t simple doesn’t mean you may not have to do it. So, how can a project manager safeguard the hoped for success of the project and manage risks by not agreeing to do more than might be carried out?
Not the Dilbert way – of course. Checking out PMBOK, Chapter 7, they suggest beginning with project scope, which might demand the addition of design detail to create defendable cost numbers. You also will need the project schedule and info on staff availability. When you know what needs to be done, how swiftly and by whom, cost estimating can begin.
PMBOK lists many cost estimating methods that might be completed alone or in complementary fashion.
- Expert judgment – your experience on comparable tasks and projects, input from consultants
- Analogous estimating – other similar organization projects price history information
- Parametric estimating – Parametric Cost Estimating Handbook from NASA offers guidance, although somewhat dated. COCOMO II is used in standard waterfall style software development. Based on S. Chandrasekaran from St.Joseph’s College of Engineering, Agile software program development demands a different price estimating model which he describes in his paper, “Multi-criteria Approach for Agile Software Cost Estimating Model,” which could be discovered with other cost estimating articles.
- Bottom up
- 3 point estimating – most likely, optimistic, pessimistic
- Reserve analysis – with a contingency fund to cover uncertainty in estimates
- Price of quality – add in
My suggestion to you is “back up your estimates with data”. Be ready to justify costs and explain risks – in non-technical terms ?a of generating too optimistic assumptions. Try to accomplish reduction in scope commensurate with lowered budgets. Don’t really feel too badly in the event you lose a few of the price estimating battles. The actual key is to document your assumptions (like you will find 7 modules to design, or we will perform 2 week lengthy tests).
What has been your experience with cost estimating software projects inside the real world? Do you pad your estimates realizing you may need to settle for less? Or do you just add some contingency to duration and costs? Leave a comment and share your experience! 🙂