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how to estimate costs of projects that have not been clearly needs. for example I got a project to create information systems for xxxxx, then the client requesting the cost of it, while I do not know clearly the needs of its system.

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In general, software cost estimation has been a non trivial task since it was first encountered. Many models exist to contain the risks of software development cost miscalculation, e.g. Constructive Cost Model, Function point analysis and others.

Now, what you are asking for seems to be: How to negotiate rates with clients on a freelance-basis?

If the requirements are as blurry as you describe them, I'd offer a hourly rate and just tell it how it is: That with the current amount of specification there is no way to realistically estimate the cost.

I would then try to split the project in as many independent units as possible and discuss these and the best (implementation) approach with the client. I would bet, that if the client gets an image of the development process, he'll have an easier time identifying the one or two things, he wants first. When you reach this point, estimation should be easier, since you have fewer requirements.

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You can't. The best you can do is a top down order of magnitude guesstimate. Don't take it any farther if they insist on a hard budget without defining the needs.

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You can always estimate cost of project, however on every particular project phase your accuracy or preciseness will be different. Read more about Cone of Uncertainty concept originally introduced by Barry Boehm.

Consider this perfectly valid estimate example:

"The project will cost $1.5mln, with accuracy of +300% and -150%"

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Price based on what you know. Don't get them a cost for the system, give them a receipt of work items they need to complete.

Example:

Vague system xxxxx

  • Meeting with you to discuss this: $500.00
  • Collection of data from sources Acme and BobCo through EDI - $10,000.00
  • Feature that sends email to jack only when this happens - $300.00
  • Interface that lets you do exactly this: Download a historical list of reports - $5,000.00
  • Search tool of unknown complexity - Between $1000.00 and $50,000.00
  • Additional programming hours for tasks not provided: $250/hour

Please let me know if you require any changes to this specification, as we will be working exactly to this specification.

They should figure out real quick that $250/hour is 10k/week because they couldn't spend the time to clearly define their requirements.

If they're still playing stupid, ask them how much does a car cost. You know, the type that travels on the road, makes turns, breaks, accelerates, that type of stuff. Cars obviously can range from $100 all the way to more than some houses.

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Give a rough estimate, letting them know it has +/- 50%.

Bill hourly rather than fixed price.

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  • You are describing the old cost-plus contract. Those are hard to find nowadays.
    – Dunk
    Commented Feb 20, 2011 at 22:47
  • @Dunk -I wasn't talking specifically about the contract structure but rather the range of accuracy you can expect without have detailed requirements.
    – Mark Phillips
    Commented Feb 21, 2011 at 16:06

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