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Estimating
“How much is this going to cost?”
It’s the most hazardous question in the communications
business. The ability to provide an accurate answer
requires a basic grasp of the two primary approaches
to cost estimating: “top-down” and “bottom-up”.
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Top-down estimating compares the proposed project
to similar, completed projects whose costs are known.
An existing safety training manual, for example, could
be used as a basis for developing a top-down estimate
for a maintenance manual. To refine, consider how
obvious differences between the two – total pages,
number of photos/illustrations, type of binder, etc.–should
be added to or subtracted from the known cost to generate
a new estimate specific to the project.
Bottom-up estimating is based on the Work Breakdown
Structure of a project. The costs for labor, materials
and third-party resources are calculated for each
project deliverable; the sum of the parts is the completed
Bottom-up estimate. |
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Which to apply? Top-down estimating is somewhat
“quick-and-dirty” by comparison to the bottom-up approach.
The more experience a team has with similar types
of projects, the more accurate its top-down estimates.
If a project involves “unknowns” such as new technology
or complex information, it probably warrants the extra
time and effort of a bottom-up estimate.
In either case, be sure to include contingency; i.e.,
padding to cover unforeseen complications, problems
or delays. To help manage client expectations and
ensure a reasonable budget, submit as an “estimated
cost range” (e.g., $7250-$8250) or include a “plus-or-minus
x%” notation when the estimate is provided as a lump
sum (e.g., $7500, +/- 10%). |
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Click on a link below to learn more about these other
Best Practices:
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