Cost
Three Point Estimates
By: Ray Myers, Jr., PMP The accuracy of an estimate can be improved by considering uncertainty and risk. PERT uses 3 estimates to define a range for an activity’s cost. This formula can be used for cost estimating and for scheduling. Most Likely – based on a realistic assessment Optimistic – estimated cost based on the best... »
4 Cost Estimating Techniques
By: Ray Myers, Jr., PMP There are 4 cost estimating techniques discussed in the PMBOK: Expert Judgment Influenced by variables such as labor rates, material costs, inflation, risk factors, etc. Guided by historical information and insights from prior similar projects May be used to determine whether to combine other estimating methods or reconcile differences between them Analogous or Top-Down Uses the... »
Cost Estimate Accuracy
By: Ray Myers, Jr., PMP The accuracy of project cost estimates varies depending on position in the project life cycle. Rough Order of Magnitude (ROM) Very early in the project ROM estimates are used for selection decisions Accuracy is usually plus/minus 50%, but could range from -25% to +75% Budgetary Early in the project Budgetary estimates are used for initial budget planning Accuracy... »
Project Pricing – T&M
By Ray Myers, Jr., PMP T&M, short for Time and Materials, is a common pricing methodology that is used when the project scope is not clearly defined or when the scope frequently changes. T&M contracts are ideal for small projects or tasks because the client pays for only the actual hours worked and the materials... »
Project Pricing – Margin
By Ray Myers, Jr., PMP According to the businessdictionary.com, margin is defined to be: the difference between the cost price and the selling price of a product. In other words, margin is the profit earned on a business transaction. Margin is usually measured as a percentage of the selling price. Thus the project manager might say,... »
Project Pricing – Markup vs. Margin
By: Ray Myers, Jr., PMP Is there a difference? You bet, and understanding the difference between these confusing terms may impact the profit you make on your project. Let’s define the terms and do a quick calculation to see the difference between the two pricing concepts. Markup Markup is the difference between the cost of your project... »
