PROJECT COST ESTIMATION

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Course Code: CAP-330 Course Title: Software Project Management
Course Instructor: Miss Namrata Vij
Academic Task No.: 2 Academic Task Title: Term Paper
Date of Allotment: 9/8/2016 Date of submission: 7/11/2016
Student’s Roll no: A30 Student’s Reg.no: 11616866
Evaluation Parameters:
Learning Outcomes: (Student to write briefly about learning’s obtained from the academic
tasks)
Through this term paper I learned about how Project Cost Estimation is done through different
techniques and paprameters.
Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other student’s
work or from any other source except where due acknowledgement is made explicitly in the text, nor
has any part been written for me by any other person.
Student’s Signature:
Evaluator’s comments (For Instructor’s use only)
Evaluator’s Signature and Date:
Marks Obtained: _______________ Max. Marks: ______________
General Observations Suggestions for Improvement Best part of assignment

2. 1
Term Paper:
Project Cost Estimaton
SUBJECT- Software Project Management
Mittal School Of Business
MBA –IT (1ST YEAR)
SUBMITTED TO: SUBMITTED BY:
Miss Namrata Vij UDAY SHARMA
11616866
Q1652(A30)

3. 2
INDEX:
Sr. No. Topic Page No.
1 Introduction 3
2 Cost Estimation 4
3 Related WORK 6
4 SOFTWARECOST ESTIMATION
METRICS
7
5 Types of Software Project Cost Estimation
Models
10
6 DISCUSSION AND CONCLUSION 14
7 REFERENCES 15

4. 3
INTRODUCTION:
Software cost estimation gives the essential connection between the general ideas and
systems of financial investigation and the specific universe of programming building. Project
Cost Estimation is the errand of foreseeing the cost, exertion or efficiency required to finish
the task. Ali (Arifoglu, 1993) depicted it as an exact procedure furthermore included
improvement time as one of the prerequisites to finish the venture. A standout amongst the
most essential issues going up against any product task is the way to precisely foresee the
expense of building up the product. Programming cost estimation is imperative for settling on
great administration choices. There is no great approach to play out a product money saving
advantage examination (Clements, 2011), earn back the original investment investigation, or
make-or-purchase investigation without some sensibly precise strategy for assessing
programming costs, and their affectability to different item, extend, and natural components
(Somerville, 2010). Fetched administration is maybe a standout amongst the most
troublesome parts of undertaking administration. Venture directors are all around rehearsed at
getting assets, doling out work, following advancement and finishing ventures (Vaughan,
2011). Be that as it may, since there's an expense connected with almost everything their
occupation turns out to be a great deal more unpredictable and troublesome. They should
make certain the expense of the venture is assessed precisely toward the starting, spending
plans are appointed for different parts of the task there are the apparatuses to control costs all
through the lifecycle of the undertaking (Simms, 2011). The product cost estimation
considers the extent of the venture which was generally dictated by conveyed source lines of
code.

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COST ESTIMATING
Project underestimation of assets and expenses is a standout amongst the most widely
recognized donors to project disappointment. All things considered, project directors ought to
be educated of and consider the different business strategies and instruments in the definition
and execution of undertaking cost estimation. As characterized by the cost estimation is the
iterative procedure of building up a guess of the money related assets expected to finish
venture exercises. Project groups ought to gauge costs for all assets that will be charged to the
task. This incorporates yet is not restricted to:
• Labour
• Materials
• Equipment
• Services
• Software
• Hardware
• Facilities
• Contingency Costs
The accompanying rundown incorporates normal apparatuses and systems utilized as a part
of venture cost estimation:
• Expert Judgment – utilization of information picked up from past venture administration
experience. Master judgment, in conjunction with target estimation strategies, gives
important data about the authoritative environment and data from earlier tantamount tasks.
• Analogous Estimating – utilization of the measurements from a past, comparable project
as the premise of estimation for the present undertaking. Closely resembling evaluating takes
the real cost of past, comparative ventures as a standard and after that alters for referred to
contrasts, (for example, size, many-sided quality, scope, length, and so forth.).
• Parametric Estimating – utilization of a factual relationship between chronicled
information and different variables (for instance, lines of code in programming advancement)
to compute an evaluation for action parameters, for example, scope, cost, spending plan, and
span. Utilized accurately, this strategy can deliver abnormal amounts of precision.
• Bottom-Up Estimating – assessing all individual work bundles/exercises with the best
level of point of interest, outlining more elevated amount gauges with the blend of the
individual evaluations. The precision of base up evaluating is advanced when individual work
bundles/exercises are characterized in point of interest.

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• Three-Point Estimates – utilization of three assessments to decide a reach for a
movement's cost: the best-case appraise, the in all probability gauge, and the most pessimistic
scenario gauge.
• Reserve Analysis – assurance of possibility stores to represent cost instability.
• Project Management Estimating Software – utilization of undertaking administration
cost assessing programming applications, automated spread sheets, re-enactment, and factual
apparatuses. Such instruments can take into account fast thought of various cost gauge
choices.
• Vendor Bid Analysis – assurance of what the project ought to cost taking into account an
audit of seller offers/recommendations. This method might be utilized as a part of
conjunction with other cost estimation strategies to guarantee that cost assessments are far
reaching.
Though the execution of fitting cost estimation strategies surely adds to the precision of cost
appraisals, other task administration information regions likewise assume an imperative part
in cost estimation exactness. For instance:
• Quality Management – If colleagues don't concur unmistakably upon deliverable quality
criteria ahead of schedule in the undertaking, they may take more time to meet desires,
pointlessly bringing about a timetable postpone and relating cost overwhelms.
• Communications Management – If colleagues don't obviously comprehend their parts and
obligations on the project, project work may take more time to finish, along these lines
postponing the timetable and expanding costs.
• Scope Management – If necessities are vague, colleagues may convey items that don't
meet desires, bringing about superfluous revamp, plan postpones, and comparing cost
overwhelms.
• Human Resource Management – If group faculty don't have the required abilities or
experience to perform project work, it might take them longer to finish the work, creating
plan postpones and cost overwhelms.
• Risk Management – If colleagues don't proactively lead hazard administration, cost-
affecting issues that could have been forestalled may rise.
• Procurement Management – If acquisitions do exclude terms and conditions that
proactively relieve State danger, (for example, settled cost contracts and deliverable
acknowledgment criteria), the task may encounter expanded costs later in the project because
of changing undertaking and economic situations.
• Time Management – If colleagues don't precisely appraise an ideal opportunity to perform
exercises, the task may encounter plan postpones and cost invades.

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RELATED WORK:
There is a quick development of models in the 1970s through 1990s (Product and Process
Innovation Inc, 2009). Couple of new models have been created in spite of the expanding
significance of controlling and evaluating programming improvement. Models of 1970s and
1980s are of no enthusiasm to the present expert because of the developing changes in
programming improvement (Heemstra, 1992). Amid the previous 40 years, diverse studies
looking at programming cost estimation have been distributed (Boehm, 1981; Albrecht and
Gaffney, 1983; Putnam, 1978). These early studies utilized information sets of different size
and environment. The general results then were poor execution of the procedures when
connected to other environment uncalibrated. An average case is the work of (Kemerer,
1987), which thought about four models: Software Lifecycle Management (SLIM),
Constructive Cost Model (COCOMO), ESTIMACs and FP utilizing 15 ventures. He reported
an estimation blunder as far as mean extent of relative mistake between 85% for FP and
ESTIMACs, 601% for COCOMO and 772% for SLIM (Wu, 1997). Kemerer presumed that
FP-based cost estimation strategy is a superior approach particularly at the early period of
programming advancement. Utilizing a mix of Kemerer information set and COCOMO,
Briand et al (Briand, Emam, Surmann, Wieczorek, and Maxwell, 1999)compared
organization particular information to multi-hierarchical information. Their outcome
demonstrated that exhibitions of the cost estimation methods considered were not
fundamentally distinctive aside from relationship based procedure which gave off an
impression of being less exact. Mittas and Angelis (Mittas and Angelis, 2008) incorporated
into the correlation factual tests to join parametric data and non-parametric by presenting
what they called semi-parametric strategy. Their outcome demonstrated that semi-parametric
strategy gave more precise assessment than parametric or non-parametric method. This study
makes the commitment of assessing and looking at a hefty portion of the basic programming
cost estimation strategies that has been utilized as a part of programming designing.

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SOFTWARE COST ESTIMATION METRICS
SOURCE LINES OF CODE (SLOC):
SLOC is an old cost estimation metric which picked up prominence at the early time of PC
innovation, giving it advantage over other cost estimation measurements. Its application may
take after either unit-per-cost or particular similarity approaches (Briand, Emam, Surmann,
Wieczorek, and Maxwell, 1999). It is a product metric used to gauge the measure of code in a
product venture. It is utilized to appraise the exertion required to build up a project and
profitability once the product is created. A few cost, timetable, and exertion estimation
models use SLOC as an information parameter, including the broadly utilized Constructive
Cost Model (COCOMO) arrangement of models (Boehm, 1981), Putnam model (Putnam,
1978), and so on. SLOC is dialect subordinate not at all like FP which is autonomous of
programming dialect and other execution variables (Touesnard, 2004). SLOC discards clear
and remark lines in its definition yet a few creators use non-critique source explanations
(NCSS) to take out clear and remark lines. SLOC is a base up method where estimation
begins from the essential unit (module, subroutine, capacity, strategy, and subprogram) of the
framework a work in progress, then whole them up and do exploratory measures (Arifoglu,
1993, for example, cost-per-SLOC, number of SLOC every day per software engineer. Most
programming estimation methods (COCOMO, PUTNAM, and so on) are SLOC-based.
Programming engineers trust that aggregate task expense can be effortlessly gotten from the
subsequent number of individual months; henceforth the estimation of exertion is the thing
that most analysts discuss (Keil, Paulish, and Sangwan, 2006). With the approach of GUI-
based dialects/apparatuses, for example, Visual Basic, a lot of advancement work is finished
by drag-and-drops and a couple mouse clicks, where the software engineer for all intents and
purposes composes no bit of code, more often than not. It is unrealistic to represent the code
that is consequently created for this situation (Hoh, Baik, Kim, Yang, and Boehm, 2006).
This distinction welcomes gigantic varieties in efficiency and different measurements
regarding diverse dialects, making the Lines of Code increasingly unimportant with regards
to GUI-based dialects/devices, which are noticeable in the present programming
improvement field.

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FUNCTION POINTS:
Capacity Points is one technique that has been created by Albrecht and Gaffney (Albrecht
and Gaffney, 1983) in 1979 from exact proof to counter SLOC. Numerous undertakings were
analyzed as for their diverse qualities and the span of the last items was inspected, lastly a
model delivered to fit the information. (Wu, 1997) characterizes capacity focuses as a
strategy for measuring the size and intricacy of a product framework as far as capacities that
the product conveys to the clients. Erik (Stensrud, 1998) grouped programming things into
exchanges and information elements utilizing FP number. FP expect there is a connection
between's the specialized framework improvement exertion and application advancement
exertion since balanced FP includes a rate for specialized multifaceted nature as opposed to
assessing this exertion independently from the measure of usefulness. It considers the direct
mix of five fundamental programming parts and conforming for ecological preparing
unpredictability, called specialized multifaceted nature alteration. These five programming
parts are further weighted as basic, normal and complex (Kusumoto, Imagawa, Inoue,
Morimoto, Matsusita, and Tsuda, 2002) which gives it the unadjusted capacity point
(UFP).the specialized many-sided quality conformity is performed by ascertaining the
specialized multifaceted nature components, (TCF). Capacity purpose of a framework can be
ascertained utilizing this recipe: FP = UFP * (0.65 + 0.01 * TCF). From a client view point,
Function Points can be utilized to indicate to a merchant, the key deliverables (Vaughan,
2011), to guarantee proper levels of usefulness will be conveyed, and to create target
measures of cost-adequacy and quality (Stensrud, 1998). They are most successfully utilized
with settled value contracts as a method for indicating precisely what will be conveyed. From
a seller point of view, effective administration of settled value contracts depends completely
on precise representations of exertion According to (Touesnard, 2004), FP depends on
tallying capacities which may contrast from individual to individual contingent upon the
individual's capacity. Numbering FP is manual and tedious. Associations can beat these
issues by honing capacity focuses examination reliably over a timeframe.
OBJECT POINTS:
Object Points (OP) additionally alluded to as application point in (Somerville, 2010) to
abstain from misconception with articles in item arranged frameworks depends on numbers
of windows, reports, 3GL modules and tenets. Investor et al (Banker, Kauffman, and Kumar,
1992) proposed OP size metric as a substitution for capacity focuses (FP) to fuse visual
gadgets of the fourth era dialects (Stensrud, 1998) and the coordinated Computer-Aided
Software Engineering apparatuses, and to conquer the lacks of the customary lines of code
and capacity point measurements (Issa, Odeh, and Coward, 2007). Latest programming
advancement dialects are article situated in nature, managing items and classes. At the point
when a class has different associations with different classes, the intricacy of that class
increments. Numerous scientists attempted to take care of this issue by mapping OP to FP,
however proposing new and upgraded approach for formative size estimation in view of item
model would be more well-suited. There is a deficiency of verifiable task information on
which to base the experimental approval of the new protest focuses based programming cost

10. 9
estimation model. This altogether decreases the unwavering quality of their application in
association. Capacity focuses estimation metric is generally acknowledged in programming
industry as a veto standard for formative size estimation (Chamundeswari and Babu, 2004),
thusly new models will require some serious energy to breakeven in the business.
USE CASE POINT:
(RoyClem, 2005)explains Use Case Points as a venture estimation strategy that utilizes an
undertaking's utilization cases to create an exact assessment of a task's size and exertion. It
gives the capacity to evaluate an application's size and exertion from its utilization cases. In
view of work by Gustav Karner in 1993 when he utilized use case demonstrating to catch the
business procedures and prerequisites of a product application by breaking down the
utilization case on-screen characters, situations and different specialized and ecological
figures and digests them a condition (Koirala, 2004). The condition is made out of four
variables:
Technical Complexity Factor (TCF).
Environment Complexity Factor (ECF).
Unadjusted Use Case Points (UUCP).
Productivity Factor (PF).
Every variable is characterized and processed independently, utilizing saw values and
different constants. The complete condition is:
UCP = TCP * ECF * UUCP * PF (Ashman, 2004)
For the performing artist to be arranged, we have to know some specialized subtle elements
like which convention the on-screen character will utilize. So estimation must be finished by
specialized specialists. FP is not specialized ward.

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Types of Software Project Cost Estimation Models
In this segment, programming cost estimation procedures will be talked about and their
standards depicted making a refinement between them.
EXPERT JUDGEMENT:
Expert judgment includes meeting with programming cost estimation specialists to utilize
their experience of the proposed venture to gauge its cost (Ramesh and Karunanidhi, 2013).
Liming (Wu, 1997) depicted master judgment as cost estimation community oriented
gathering where unknown members utilized their experience and comprehension of the task
to evaluate the expense. The specialists get their experience from past activities to the
proposed venture. The gathering utilizes Delphi procedures amid their cooperation with a
facilitator giving unknown outline of the specialists' assessments at any cycle (Heemstra,
1992; Ramesh and Karunanidhi, 2013; Somerville, 2010). It doesn't require information,
elaborate numerical conditions (Briand, Emam, Surmann, Wieczorek, and Maxwell, 1999) or
ability yet depends exclusively on judgment, hunch, and instinct (Arifoglu, 1993). The
assessments are subjective and not objective rather subjective (Trivailo, Sippel, and
Sekercioglu, 2012). Likewise, it is troublesome for somebody to replicate and utilize the
learning and experience of a specialist. In the event that master judgment is connected
wrongly, erroneous estimation may happen coming about to cost invade or underrun.
PRICING TO WIN(PtW):
The product venture expense is assessed to be whatever the client has accessible to spend on
the task. Client's desires are met with respect to cost yet it is dangerous for the undertaking
chief since task might be thought little of. The estimator's principle interest is to win the
agreement without considering the amount it will cost to convey. This is the procedure
utilized by new programming creating organizations who are intrigued to break into the
business, accordingly, as their capacity and execution increment, cost estimation increments.
(Pernia, 2012) supported for PtW when sufficient lead time to accumulate and survey data on
contenders and clients are accessible. (Heemstra, 1992)hardly calls it programming cost
estimation system, since business thought processes assume a vital part in this methodology.
The contractual worker gets the agreement because of underestimation however the
likelihood of the framework meeting every one of the necessities is insignificant.
PARKINSON’S LAW:
Parkinson's Law expresses that work extends to fill the time accessible (Somerville, 2010).
The expense is controlled by accessible assets instead of by target evaluation. In the event
that the product must be conveyed in 12 months and 5 individuals are accessible, the
endeavors required are assessed to be 60 man months. In circumstance of overestimation, the
arranged exertion will be utilized totally. In The (Economist, 2014), the author guaranteed
that this law is based upon an investigation of the variables by which that development is
controlled. This development is controlled in programming ventures by accessible assets

12. 11
(labor, cash, and time) and what develops are the conveyed source directions, capacity
focuses, or question focuses relying upon the programming dialect utilized and the case
apparatuses utilized. Luckily, there is no cost overwhelm here however the framework is
generally unfinished which is bad for the task.
ESTIMATION BY ANALOGY(EbA):
This procedure depends on extrapolation taking into account correlation of past ventures
which are undifferentiated from or comparable in nature with the new venture (Trivailo,
Sippel, and Sekercioglu, 2012). The undertaking whose expense is to be evaluated is
described by an arrangement of qualities which is put away in the database on the past
activities. (Mittas and Angelis, 2008). Master examiners are required to hunt down these
properties of the past activities that compare to this task, for example, size, group experience,
innovation being used, application area, or what Barry Boehm called Cost drivers in
COCOMO II (Constructive Cost Model II) (Somerville, 2010) to illuminate their supposition
(Wu, 1997). Mittas and Angelis (Mittas and Angelis, 2008)expressed EbA as a non-
parametric model, however it is an observational system. Trivailo et al (Trivailo, Sippel, and
Sekercioglu, 2012) considered this strategy for estimation to be subjective however they
additionally discovered its confinement of distinguishing a reasonable simple or satisfactory
specialized information (Briand, Emam, Surmann, Wieczorek, and Maxwell, 1999).
Utilization of this model is just conceivable where records of comparable finished
undertaking are accessible, however incomprehensible if no similar venture has been handled
(Somerville, 2010). The likenesses between the past activities and the proposed venture are
recognized and impacts assessed. The issues in this strategy are the means by which best to
portray a venture, what number of tasks to be utilized when looking at, and database
stockpiling. The estimation might be wrong prompting cost overwhelm or underrun if
unpracticed experts are utilized (Ramesh and Karunanidhi, 2013).
ALGORITHMIC COST MODEL:
Algorithmic cost model as indicated by analysts (Somerville, 2010; Ramesh and
Karunanidhi, 2013) is produced utilizing chronicled cost data that relates some product
metric (more often than not its size) to the task cost. Venture Costs in view of verifiable
information, for example, source lines of code (SLOC), usefulness of the framework, and
other cost drivers e.g. plan approach are broke down utilizing scientific conditions connecting
expense or contributions with measurements to deliver an expected yield. As the extent of the
product expands, additional expenses are acquired because of correspondence overhead of
huge group, more intricate setup administration, Difficult framework joining, and so on;
consequently, the bigger the framework, the bigger the estimation of this type (Heemstra,
1992). It can create repeatable appraisals, change input information, refine and tweak
equations, and bolster affectability examination (Wu, 1997). Every algorithmic model
experience the ill effects of the same crucial challenges (Somerville, 2010) that it is regularly
hard to gauge size at an early stage in a venture when details are accessible; capacity focuses
and protest focuses are less demanding to deliver than evaluations of SLOC. Algorithmic
models veer off from the established perspective of cost estimation prepare yet just give a

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metric to gauge the measure of the completed framework (Kemerer, 1987). Poor measuring
inputs and off base cost driver rating will bring about cost overwhelm or underrun (Wu,
1997).
MACRO ESTIMATION METHOD :
Otherwise called top-down estimation, a general estimation of the product venture expense is
part into pieces and allocated to every part of the low-level segments of the task (Heemstra,
1992; Wu, 1997; Ramesh and Karunanidhi, 2013). Sommerville (Somerville, 2010) saw the
full scale estimation procedure as beginning at the framework level to evaluate the general
usefulness of the item and how this usefulness is given by cooperating sub-capacities. It
considers costs framework level exercises, for example, reconciliation, design administration
and documentation, which other estimation techniques may disregard. This strategy can
belittle the expense of taking care of troublesome low-level specialized issues connected with
particular segments, for example, interface to nonstandard equipment. It requires negligible
task detail yet gives no itemized premise to advocating choices or evaluations.
BOTTOM-UP ESTIMATION:
This strategy requires the undertaking group to disintegrate the work into little segments (Wu,
1997; Ramesh and Karunanidhi, 2013). As per (Heemstra, 1992), the expense of individual
programming segment is assessed by the individual who will build up that segment. Singular
appraisals are then summed up to get the general venture cost. The littler the task exercises,
the less demanding it is to assess. This evaluation is normally more precise in light of the fact
that the work is little and better caught on. On the other hand, it is tedious and might be
difficult to disintegrate exercises that are difficult to characterize (Product and Process
Innovation Inc, 2009). (Kemerer, 1987) appraised the exactness of utilizing this technique at
±20%, demonstrating that utilizing this strategy, the undertaking may invade or underrun by
20%.
PARAMETRIC ESTIMATION TECHNIQUE:
An assessing system that uses a measurable relationship between authentic information and
different variables (e.g., lines of code in programming improvement) to figure an evaluation
for movement parameters, for example, scope, cost, spending plan, and span (Briand, Emam,
Surmann, Wieczorek, and Maxwell, 1999). This system can deliver larger amounts of
precision relying on the advancement and the fundamental information incorporated with the
model (Heemstra, 1992). This technique depends on the way that the amount of work to be
performed is specifically corresponding to some fundamental measure of the deliverable.
Parametric displaying requires chronicled information taking into account comparable
(Mittas and Angelis, 2008) ventures and sensible estimations of the amounts or components
of work to be performed (AACE, 2008). It is appropriate for applied or framework plan stage
gauges, when a portion of the last degree and the undertaking approach have been
characterized. Its precision is amongst +75% and - 25% (Kemerer, 1987). The parametric
assessment utilizes evaluating principles to surmised the imaginable last gauge of either the

14. 13
whole venture or a few noteworthy segments of a bigger task; henceforth the multifaceted
nature of building up the model requires measurable aptitudes and authentic information with
a scope of dangers and results (AACE, 2008; Trivailo, Sippel, and Sekercioglu, 2012). The
parametric evaluating technique is generously more precise when utilizing a database of
numerous finished undertakings.

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DISCUSSION AND CONCLUSION:
Each of the established programming cost estimation procedures has points of interest and
impediments. The best approach is to consolidate two or more systems to gauge venture cost,
we suggest cross breed estimation method. The absence of exact and solid estimation systems
joined with budgetary, specialized, authoritative, and social dangers of programming
undertakings, require a continuous estimation amid the advancement of an application and
the utilization of more than one estimation method. This model can be completed in three
phases. To begin with, the assessment of the measure of the item to be created is acquired
utilizing object focuses in light of the fact that most programming dialects of today are article
situated in nature. The second stage changes over this size appraisals to cost gauge utilizing
no less than two of the current systems and the most precise evaluation will be picked at
every stage. This should be demonstrated in consequent examination. The precise estimation
of programming advancement expenses is a basic issue to settle on great administration
choices and precisely decide how much exertion and time a venture requires both for
undertaking directors, framework expert and engineers. There are numerous product cost
estimation strategies accessible however none is essentially preferred or more terrible over
others, therefore their qualities and shortcomings supplement each other. In this paper we
considered the qualities and shortcomings related to various sorts of cost estimation systems.
Our outcome presumed that utilizing more than one estimation system will give precise
assessment to maintain a strategic distance from cost overwhelm or underrun. Taken a toll
estimator ought to consolidate strategies in light of the qualities and shortcomings of the
strategy and its fittingness to the undertaking. In the event that a task is obscure, i.e. totally
new, it is prudent to utilize algorithmic technique or capacity point-based strategy with
master judgment particularly in the early period of the product lifecycle in light of its
awesome vulnerability estimations of size. On the off chance that the dialect is of the item
situated family, question point based strategies will be more proper. We at long last prescribe
cost estimators to utilize distinctive expense assessing systems, look at the outcomes and
decide the explanations behind any extensive varieties. It is likewise prudent to report all
suppositions made amid cost estimation and keep up authentic database.

16. 15
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