Project Cost Estimation is an integral part of every project and it cannot be avoided or neglected. Even though there are advanced estimating tools in the market, still project cost estimation is scary as hell for many people.

Cost Estimation

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The reason for this is that project cost estimation always involves some degree of uncertainty. Here we will be discussing some factors which are famous for contributing to the uncertainty in project cost estimation.

  • Planning Horizon

The planning horizon is one of the top factors which contribute to the uncertainty in project cost estimation. The longer the planning horizon, the greater will be the uncertainty.

The planning horizon we are thinking to consider may be the whole project or it may just a specific phase. Either way, we will be able to better estimate costs for the time periods which are closer to the present.

These days, there is cost management software which helps in reducing this uncertainty factor to a great extent.

Project Cost Estimating

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  • Experience with same or similar projects

Experience with similar projects also contributes to the uncertainty of project cost estimation. The more experience we have with similar projects, the less will be the uncertainty.

This is because, if we have managed similar projects, we will be better at estimating the costs of the project. Contrary, the less experience we have with similar projects, the greater will be the uncertainty.

  • Duration Of The Project

Project Tenure or duration also becomes an important contributing factor to the uncertainty in project cost estimation. Obviously, the longer the project, the greater will be the uncertainty.

Estimation Of CostImage Source: Google

This is similar to planning horizon to some extent, that if a project is of a shorter duration, there are chances that we account for most of the costs.

  • The Number of People Involved In The Project

The number of people involved in the project and their skills will be a great factor in estimating their costs. In the initial stage of the project, we may not even be able to know the exact number of people that will be on the project. That will further increase the uncertainty of our project cost estimates.