Tuesday, May 6, 2008

Historical Information Sources for Cost Estimating

Have you ever made an important project decision based on a similar situation in the past? Historical information and estimating publications are important inputs to cost estimating because they serve as benchmarks.

In project management, historical information is information about previous projects that can be used to help with a current project. Four sources of historical information a project management team can use for cost-estimating purposes are discussed below.

1. Project files
In all likelihood, your current projects are not that different from projects your company has done in the past. Each of these finalized projects should have a file, whether it is a "hard copy" file in a cabinet somewhere, or an electronic file.

You should consider both similarities and differences between past and current projects when consulting closed-out project files. One way to do this is to carefully compare the project scope statements.

An essential part of project management is keeping complete files of all planning inputs, work results, performance reports, and correspondence. If external organizations also worked on a project, you could obtain copies of their records for the project as well.

The documents most relevant to cost estimating are previous cost estimates, budgets, reports on cost performance that include actual costs, and documents that show the rationale behind revised cost estimates and budget changes.

Knowing how useful project files are to future projects should motivate you to keep every output your project management process generates. For example, you could implement a system for document retention within your project team, make sure that all stakeholders know that you want to keep all documentation in a central project file, set up a shared directory on your company's computer network where documents can be stored and backed up, and keep records of the reasons for cost variances, even when it causes embarrassment for the cost estimators.

2. Project team knowledge
The knowledge of your project team members is another form of historical information. Employees with experience and maturity are a great asset when it comes to cost estimating. They can draw on their experiences when cost estimating, since they likely will recall cost information about the various projects on which they have worked.

3. Commercial cost-estimating databases
Commercial databases are another source of historical information from which you can obtain cost information about previous projects. Publicly-owned corporations are required to make such information available. Other companies charge fees for access to databases that compile this information.

If you find a number of projects similar to yours in a database, compare them to your project and make adjustments for differences. You should be able to arrive at fairly accurate cost estimates for your project. Remember that certain factors, such as inflation, need to be considered when basing current cost estimates on former projects.

4. Estimating publications
Estimating publications are similar to commercial databases, as they contain commercially available analyses of raw data that can be used to prepare estimates. These publications help team members who are preparing cost estimates customize general information to their specific project. This streamlines the cost estimating process and increases efficiency.

Estimating publications can include such resources as computer software programs, industry-specific case studies, and periodical articles. These resources can provide you with useful project data in a reasonably short amount of time.

Of the four sources discussed above, project files contain the most reliable cost information. Project team recollections are useful, but they are generally far less reliable than documented results. Historical information and estimating publications are a great starting point for cost estimating. Remember to use the cost estimates that were proven accurate so you can avoid making the same errors again.

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