Project Management

PMBOK® Guide for the Trenches, Part 3: Cost

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Categories: Project Failure


What would be your reaction if I told you there's a widely practiced profession out there that pays well, with (usually) nice working conditions, and it involves continuously providing its customers with the wrong answers?

Welcome to the wonderful world of cost estimating.

Take for instance, the original estimate for the National Ignition Facility project--it was just over US$1 billion. The final budget was US$4.2 billion. The Central Artery/Tunnel Project, also known as the "Big Dig," was originally estimated at US$2.8 billion. Through 2006, US$14.6 billion had been spent (though to be fair, this is only US$8 billion in inflation-adjusted dollars).

The original estimate for the Sydney Opera House was US$7 million. The final cost was US$102 million, more than 14 times the original estimate.

Why is estimating so tough? It's not as if estimators are dumb or poorly trained in their profession. I've earned my estimating certification, and that was one hard test--it melted my brain. I took the examination on a Friday and couldn't participate in light conversation for the following weekend.

The reason that initial cost estimates seem to so rarely align with a project's final costs has nothing to do with the work quality of the estimators. It has to do with the work quality of everybody else on the project team. You see, comparing the final costs of a project to their original estimates is a way of making the cost baseline team somehow responsible for everything that went wrong in a project.

In the case of the Sydney Opera House, bad weather, incomplete plans and drawings, and a lack of information about the material and the structure of its now-famous roof all added dramatically to the cost. The estimators didn't make those errors--other members of the project team did.

I have to laugh every time I hear a project manager lament all that's really needed is a good cost estimate--as if a sufficiently prescient estimate would work as a talisman to ward off rate variances, contingency events, poor performance and scope creep.

For those estimators who are reading this and can't believe your eyes, I figured I've spent enough ink lambasting you for hanging around projects and continually re-estimating the remaining costs as a way of providing project control capability. You deserve a break.

I'm especially interested in hearing from those estimators and project controllers who somehow find themselves the scapegoat when their original cost baseline gets blown to smithereens. 
Posted by Michael Hatfield on: March 03, 2010 01:21 PM | Permalink

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