The Project Management Tool Kit: 100 Tips and Techniques for Getting the Job Done Right

Calculate Costs and Adjust for Uncertainty

Convert effort estimates into monetary costs using appropriate labor rates.

For each project activity, determine other expenses, for outsourcing, equipment, software, travel, support, training, communication, and other direct activity costs. Sum the labor and other costs to determine a “most likely” activity cost estimate.

Once you have made a “most likely” cost estimate, probe for failure modes and potential problems. Determine the cost and resource consequences of worst cases.

PERT (Program Evaluation and Review Technique) defines a formula you may use to adjust cost estimates for uncertainty: c_e = (c_o + 4c_m + c_p)/6, where c_e is a weighted average “expected” cost, based on c_o: an optimistic cost, ...