Quality Cost Estimates

by Humphreys & Associates | January 1, 2021 5:00 am

Quality Cost Estimates

The Foundation for a Realistic Performance Measurement Baseline (PMB)

If you have been involved in an Integrated Baseline Review (IBR), you can appreciate why a clear understanding of the project’s contractual scope of work and technical requirements is so important.  Without that understanding, it is impossible to create an executable Performance Measurement Baseline (PMB).  The intent of the IBR is to demonstrate to your customer you have created a realistic schedule and cost baseline plan that reflects a shared understanding of the work scope requirements as well as identified technical, schedule, cost, or resource risks that may impact the ability to execute the work as planned.

So, how do you demonstrate to your customer that your schedule and cost baseline plan is realistic for the agreed upon scope of work?  That’s where the quality of the cost estimate and related basis of estimate (BOE) information come into play.  The quality of the PMB is a direct reflection of how the project control team arrived at their cost estimate for the work scope along with documented BOE details that clearly communicates their rationale and assumptions.  The project control team needs this foundation to define the project’s sequence of activities, durations, and resources to do the work that reflects the known requirements and identified risks.

What are the characteristics of a quality cost estimate?

A quality cost estimate:

How do quality cost estimates help improve the PMB?

The project control team, project manager, and the customer need quality cost estimates and useful documented rationale so they can verify:

These cost estimates and documented rationale are also invaluable for:

Cost estimate quality improves with each project. 

A realistic PMB reduces the likelihood of schedule and cost growth “surprises” that negatively impact a company’s bottom line or the customer’s program budget.  As work is completed, the performance and actual cost data become useful historical source data for the next proposal or project.  Each cycle improves the quality of the source data proposal or project control teams can use to substantiate their cost estimates and produce useful BOE documentation for the next project’s PMB.

Need help with preparing for an IBR or standardizing your process for producing cost estimates and BOE rationale? Contact us today.

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