Cost estimating requires anticipating, sometimes far in advance, how much your project will cost. This takes practice, but the more we learn from others, the more likely our Cost estimates will provide realistic bases for Budget funding requests.

Here, then, are a few Tips you can use to improve your Cost Estimating:

   1)  Avoid scheduling people at 100% of their capacity. Efficiency and production suffer when people are scheduled at maximum levels for long periods of time. Choose instead to load at 90%. A simple way to do this is to add 10% to the standard time to do an Activity.

   2)  Determine if your organization budgets at "loaded" wages. That means, "Should I include overheads and benefits in my labour rates?" This is a large factor so you want to be sure.

   3)  Calculate your Cost Estimates at the lowest possible Activity level. This is the level at which individual responsibility is assigned, and it is the easiest at which to calculate costs. Then roll up the Cost Estimates into higher levels of reporting.

   4) Compare your Cost estimates to your WBS, and your Schedule. This will ensure nothing gets missed.

   5)  Include hidden charges. This includes taxes, duty, exchange, freight, and insurance. Find out if there are costs that other departments might charge to your project. Make a checklist of charges to remember about.

   6)  When invoices arrive for payment, match them to your Cost Estimates. You should be able to find every invoice covered in the Cost Estimate, at some level. If the invoice cannot matched to your Cost Estimate then either

  • you missed something in your estimating. This might require a budget change. Or

  • someone is making unauthorized commitments to your project. This needs to be investigated and corrected.

   7)  Add money to your budget for the cost of Quality. This includes all costs to prevent non-conformance and to correct non-conformance if it should occur. The cost of Quality is detailed later, in the project step about Quality.

   8)  Plan for the unexpected. Estimates are biased to be low, so be make sure your estimates are high enough. Remember Murphy's Law and expect something to go wrong. You won't be disappointed!