Planning

Cost estimates

Cost estimates provide information on the cost of resources necessary to complete project work, including labor, equipment, supplies, services, facilities, and material. Estimates can be determined by developing an approximation for each work package using expert judgment or by using a quantitative method such as:

  • Parametric estimates
  • Analogous estimates
  • Three-point estimates

Cost estimates should include at least:

  • ID
  • Labor costs
  • Physical resource costs
  • Reserve
  • Estimate
  • Basis of estimates
  • Method
  • Assumptions
  • Range
  • Confidence level

Cost estimates can receive information from:

  • Cost management plan
  • Scope baseline
  • Project schedule
  • Quality management plan
  • Resource requirements
  • Risk register
  • Lessons learned register

They provide information to:

  • Cost baseline
  • Resource requirements
  • Risk register

Cost estimates are an output from the process 7.2 Estimate Costs in the PMBOK® Guide – Sixth Edition. Cost estimates are developed and then refined periodically as needed.

 

Tailoring tips

Consider the following tips to help tailor the cost estimates to meet your needs:

  • Cost estimates may include contingency reserve to account for risks related to uncertainty in the Cost estimates or ambiguity in the scope or resource
  • If considerations for the cost of quality, cost of financing, or indirect costs were included, add that information to your cost estimate.
  • Estimate costs at the level of accuracy and precision that suits your project needs. Rolling wave planning is often used for cost estimating; as more information is known about the scope and resources, cost estimates are refined and updated.
  • If using vendors, indicate the estimated cost and indicate the type of contract being used to account for possible fees and awards.

 

Alignment

The cost estimates should be aligned and consistent with the following documents:

  • Assumption log
  • Activity attributes
  • Project schedule
  • Resource requirements
  • Project team assignments

 

Document element Description
ID Unique identifier, such as the WBS ID or activity ID
Resource The resource (person, equipment, material) needed for the WBS deliverable
Labor costs The costs associated with team or outsourced resources
Physical costs Costs associated with material, equipment, supplies, or other physical resources Reserve
Reserve Document contingency reserve amounts, if any
Estimate The sum of the cost of labor, physical resources, and reserve costs
Basis of estimates Information such as cost per pound, duration of the work, square feet, etc.
Method The method used to estimate the cost, such as analogous, parametric, etc.
Assumptions/constraints Assumptions used to estimate the cost, such as the length of time the resource will be needed
Range The range of estimate
Confidence level The degree of confidence in the estimate

 

Form sample