10 How to estimate costs

At this initial stage of developing your project proposal you do not need to break the project down into individual components and cost each one, then add them all together to determine the overall cost. That sort of detail comes later when you’re planning the project. For now, conceptually break your proposed project down into phases. Each phase should include an identifiable milestone at the end. You are to estimate the cost for the entire phase.

A reasonably simple technique for estimating is the three-point method (PERT). I hope you’re not afraid of all the math language, because if you look through the narrative the process can be simpler than what it seems.

Start by developing 3 broad estimates for each of your phases. One estimate is to be for the most likely outcome, the second estimate is to be for a worst-case scenario, the third estimate is to be for a best-case scenario. An example of estimates is below:

Then you are to use the following process for estimating (see clip that follows) to create a cost estimate that has a range that is 70% accurate (3% tolerance).