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How to Effectively Implement Project Cost Estimation ?

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Project cost estimation is probably one of the most challenging and daunting tasks in projects. When project managers implement cost estimation, the results can be accurate or wrong. The possibilities are endless and the failure or success is uncertain.

Most of the time projects fail due to inaccuracies in cost estimation—which is inevitable due to the following factors:

  • There are not historical data collected by your organization’s PMO to help new project efficiently and effectively estimate cost.
  • There is vague data in the operation before it even begins.
  • To make accurate or approximate cost estimation possible, it needs to go under approval by the senior manager. Which also means that there will be a reduction involved in the cost. This, in turn, pressures the whole team to tread carefully with estimation.

 

Software Project Cost Estimation

Cost estimation involves crunching number and science, hence the creation of software that is responsible for estimating cost involved in the project. Such software consists of parametric estimating, three points estimating (PERT), and analogous estimation.

The line of codes (LOC)  estimation are examples of cost estimation software that fall victim to the factors mentioned about regarding inaccurate data. There is also the issue of the lines that are not equally distributed.

LOC-based cost estimation was later on manifested function point cost estimation. This particular estimation involves multiple calculations—counting the number of function points within a system and multiplying an assigned cost per point.

 

Merging Scrum and Cost Estimation

Scrum experts don’t necessarily evade the cost estimation since they have various approaches to evaluating cost that is aligned and compatible with Scrum methodologies within a project.

Almost all scrum projects  undergo processes that involved catering to stakeholder’s needs or expected results. From there, scrum cost estimation methodologies are implemented to fulfill the requirements. Such process also includes addressing the starting and final cost, as well as timeline and changes in requirements that are both uncertain and varied.

During the initiation, the client or stakeholder brings out the vision and the team in charge will come up with functions known as “stories”. They are often ranked based on their difficulty level.

Below are the steps the people involved in the scrum project should take:

  1. The stakeholder provides a definitive story for cost estimation purpose. There will be questions to be raised and verification to take into account on the stakeholder’s side.
  1. Each individual in the team presents a the scale of effort or contribution in the project via development cards.
  1. Once the estimates are gathered, the cards are shown.
  1. Team embers should give their justification on their estimation scale.
  1. After the official statement of the following range, repeat from the second step down to step four.

 

Project cost estimation may be complex and sometimes a scary step towards project outputs, but it has its own advantage that can greatly benefit any type of project, as well as generate a development among team members in terms of contribution or effort. There is numerous cost estimation software to choose from but you need to evaluate your project’s needs first. Don’t let your team suffer by choosing the wrong software that generates inaccurate estimation.

 

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