Project Management: Cost Estimating Formats

Project Management: Cost Estimating Formats

by

John Reynolds

Completion of a task list has established the basis for project cost estimating. When the estimates have been collected they will contain a large amount of data. These data should be presented in a format that will allow easy reference, detailed analysis and extension into total amounts whether for departmental costs or for packages at any level of the project work breakdown structure.

A certain amount of procedural discipline has to be imposed on the estimating function throughout the organization, and from one project to another. Estimates should be tabulated according to a standard company procedure, itemized, where possible, by cost codes within the work breakdown structure. This will help to ensure that comparisons can readily be made between the estimates and the cost accountant s records of the actual costs eventually incurred, on a strict item-for-item basis. This is essential as part of the cost control function. As experience builds up over a few years and more data are collected, it will also contribute to the accuracy of comparative estimates for new projects.

Some contracts, especially those for defense and other national government projects, may become liable to investigation by technical cost officers or other auditors at one or more stages. These investigations can be exhaustive and taken into considerable detail. Starting off on the right foot by paying careful attention to logic and detail in presenting the cost estimates can help to establish the good relations necessary for reaching a fair agreement.

Observance of a company policy on cost rates and costing methods, as well as the need to determine working budgets, imposes an obligation on the project manager to ensure that the estimates are set down in a standard and logical manner. Calculations performed in odd corners of notebooks, on scraps of paper, and on the backs (or fronts) of envelopes are prone to error and premature loss. They will be unlikely to fulfill any of the conditions already mentioned. In other words, standardized estimating formats are needed (either as hard copy or as forms on a computer).

There is a fair amount of freedom in designing project estimating forms. However, some rules of thumb should be followed. One page can be allocated to each main project work package or group of tasks, while every row on each page would be occupied by one task or activity.

Attempts to design estimating forms will fail if they are too ambitious. These is no need to provide a column for every contingency. Instead, one or more columns can be left as spares, with their headings blank, so that these can be filled in as required for any special purposes.

For any project of significant size, the use of a computer for collating and aggregating estimates is assumed. Estimating forms will have to be designed with the computer input format in mind. If the company s procedures have been developed with care and forethought, the estimating data can be fed into a comprehensive management information systems that will, as work progresses, be used to compare expenditure and progress against these original estimates. Some project management software can also perform these comparisons.

John Reynolds has been a practicing project manager for nearly 20 years and is the editor of an informational website

rating project management software products

. For more information on project management and project management software, visit

Project Management Software Web

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