Interestingly I interacted with one project manager in my recently concluded PMP®training sessions. His way of project handling surprised me. I was in dilemma how to convince that project manager on some specific points like estimating cost for the project etc. Finally he told me that estimating is nothing but calculating the cost incurred in the project. But he was unable to tell me any relevant process on estimating the project. I was surprised to see his confidence. Do you think he is right here? Obviously, it is total project cost, but there is a proper way to derive the same. As you are in the initial stage and the work is yet to be start, it means a lot of considerations are required here for estimating. At the end of training sessions he was fully satisfied with me and same as me. Let me explain you how he was convinced or in other words, what else factors (Inputs as per PMI®) required for estimating the same:

Scope baselines:

What work and only work you need to do to get the project objectives are mentioned in the scope baselines. Scope baselines generally consist of project scope statement, work breakdown structure, and work breakdown structure dictionary. As an ideal project manager you should know what else work you need to do or what work you need to estimate. You have to check - out of scope work so that you can estimate accurately. And all these information you can get from the scope baselines.

Project schedule:

You need to know your milestone dates for the estimation purpose. You must need to know when the particular activity is going to be finish. After knowing the same you can calculate the cost incurred for the same. May be for your projects; something need to be purchase, then you must need to know the timing for this purchasing or in other words you must need to know when this material really required for the project. Pricing can differ time over time and there can be different estimation in different time. Like, one item can be purchased in INR 3000 in the month of March, but when the same item you will purchase in the month of September, the pricing can fluctuate here. So, you must need to know the delivery schedule or milestone dates for your projects to make accurate cost estimation.

Human resource plan:

What rates you are paying to your staffs that you could get the information from the human resource plan only and it is your responsibility to include all those while estimating. You must know what else the reward system in your project is. That you can get from the human resource plan. Just remember that as reward system can boost up the entire team, motivates the team, you need to add the cost involved for this reward system while estimating. You should not ignore the same.

Project management cost:

Many of the project managers do this mistake by not including their own cost and their supporting team’s cost while estimating. You have to include the project management cost, project management team’s cost, documentation costs and other related items costs while estimating. These are very important items which you need to include in estimating.

Risk register:

You know planning is iterative in nature and it is progressively elaborated. As you proceed in the projects more risks can be encountered or might be you have some risk control planning in hand to counterattack this risk, but it will cost you. Hence you have to include this risk control cost in terms of money while estimating. Remember that risk planning in advance always saves money and time for your project.

Organizational process assets:

What templates you will use and where … historical records from the past projects you need for estimating. You must need to know the right policies also.

Enterprise environmental factors:

As a project manager you must need to know the marketplace conditions … from where you are going to execute this project, from where you will procure the item… consider the currency conversion if you need to procure something outside from your country, your estimation will be highly affected due to the currency conversion.

 Above-mentioned all points are very important and not a single option can be ignored while cost estimating. As an ideal project manager, you should know this correctly.

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