I just want to share with you what my "rule of thumb" process when estimating technology project costs and I hope it helps you now and in the future. I found that the numbers I get from this process are within 10-18% of where the science will take me - enough to drive a decision on whether to proceed with the project or not.

My Definitions:

- Base Estimate - Ideal Estimate assuming all things go right
- Base Budget - the internal budget we use to actually move the project forward
- Planning Budget - the budget we use for planning and budget requests

1. Base Estimate = summation of all the resource costs you need for the project (eg Labor, Hardware, Software Licenses, Conference and Travel, Support and Sustain costs, Implementation and Training Costs)

2.Base Budget = Base Estimate + Impact of Known Risks (see below how to estimate)

3.Planning Budget = Base Budget * Unknown Risks/Contingency Factor (see below for rule of thumb)

How to estimate the

__Known Risks__

1.Analyze the risks you identified and determine which are related or dependent to each other (if one risk happens - the other will happen too) and classify them into risk groups

2. For each risk group identified - estimate the dollars it would take to recover the proejct or the business if the risk happens * probability of it happening (there is a more accurate way that includes impact - talk to me if interested) . Note - if the probability is > 50% - then it is an issue, not a risk.

Sum the resulting dollars

__Unknown Risk Factors/Contingency Factor__- this is more a gut feeling based on experience or parametric analysis of historical projects

If your gut or experience is telling you that

1.There is a low probability of unknowns - add 5-10%

2.There is a medium probability of unknown - add 10-15%

3. There is a major probability of unknown - add 15-20%

Sum your numbers.

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