Many organizations need to set aside funding to conduct their own projects. How much funding, though? Poor project estimating leads to poor business forecasting and that can have a big impact on your organization's success. Learn the 4 methods typically used to estimate projects and the error (and risks) associated with each.
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Don't Add Risk And Double Investment Requirements By Estimating Project Budgets Incorrectly
1. Don’t Add Risk And Double
Investment Requirements By
Estimating Project Budgets
Incorrectly
Ed Kozak
contractor that we’re subbing to uses this
After 13 years of budgeting and same formula and if it’s good enough for
them it’s good enough for us.” The
managing projects I went to work for an
IT firm during the heyday of the Internet formula itself assigned what appeared to
Bubble. My new firm was hired as a be an arbitrary cost to each of the
recommended third-party by the different types of statuses of people one
contractor to consolidate and reduce the might find in a pension database. For
errors in pension databases before being example, one who still works for the
loaded onto the contractor’s site for call company is an ACTIVE and each person
center management. I was astounded to in this category was assigned a specific
see that there was no cost accounting cost per head, for the sake of argument,
system in place with which I would be let’s say 40 cents. Employees who no
able to track costs. “We’re the only one longer worked for the company were
in our niche” said the company President labeled TERM for terminated and were
“Trust me, we make more than enough further broken down into Vested Terms
money.” (VT) and Non-Vested Terms (NVT).
VTs were assigned a second cost per
I was further astounded when it came head, say 35 cents, while those labeled
time to work on my first proposal for as NVT were assigned a third cost per
them. Instead of estimating how much head, say 20 cents. Two other categories
the work would cost by figuring out the that were sought out were Retirees, RET,
required number of labor hours needed and those listed in the system who were
to perform the job and multiplying that now deceased, DEC. Employees labeled
number times labor rates and overhead RET were assigned a fourth cost
multiples, I was given a parametric category, 30 cents per head, while those
formula to use—something that based who fell into the category DEC fell into
the cost of the project not on our labor the fifth category and were assigned a
hours but on some variables found in the cost of 15 cents per head. Prior to
database that we were to cleanse. When submitting a proposal to a client we
I questioned whether this was the needed to receive the most recent
optimal estimating technique to use the electronic copy of table of their pension
Senior VP replied to me “It’s obvious database that contained all of the
you don’t know our industry. The employees and their respective statuses