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I've managed a few small projects at work, but I've never dealt with the budget. For instance, I've had a few tool projects, and two contracts, full time developers, and students. The project lasts about 8 months.

How would you estimate the size of the project(in dollars) accurately?

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    Hi kelf, do you want to edit and tell us more about what the project is about, so that you get answers more tailored to your specific situation, or are you looking for more general guidance on how to estimate a project? – jmort253 Sep 12 '12 at 5:38
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Taking a small project as an example you could break down your budget in these broad categories -

  1. People cost - how much would you spend on man power .e,g, hourly rate mutiplied by duration of the project

  2. Tool cost - test equipment,development equipment,support software

  3. Training cost - if any

  4. Entertainment cost - e.g. buy them a round of drinks :)

  5. Contingency cost - buffer for over run . trickier to estimate , use history or comparative projects

  6. Logistics - sales , marketing , advertising

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The PM should not be making estimates for anything other than the work associated with managing the project. Instead, the PM should collate estimates from the team members for the work that they will do.

In addition, think about why you have a budget. I would argue that the most important function it fulfills is to help give you a justifiable business case for proceeding with the project. In that sense you need a more holistic idea of costs beyond work done on the project, you also need an estimate of likely ongoing costs once the project products are delivered.

That being said, the budget for project work generally covers:

  • Subcontracts. This is relatively easy, use the cost quoted by the subcontractor chosen.
  • Labor. Get this from the team leaders delivering a work package. Use your company rules to convert full-time equivalents into $ terms.
  • Materials. Again, get this from team leaders delivering a work package.
  • Risk. You should allocate money to deal with risks should they occur, but this should be a separate "pot" and not used unless the risk the money is earmarked for occurs.

Post-project ongoing costs can be broken down into similar buckets, but should be kept separate from project work costs.

Regardless of the budget that you come up with at the start of the project, it is an estimate and will likely have to be revised as new information comes to light.

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First create your Work Breakdown Structure

Do this thorough: make sure the whole project scope is captured (both product scope and process scope).

Then calculate the cost for each Work package (like "the reluctant tester" summed up: people, materials, ...); make sure to include the cost of your risk management strategies.

Add everything up until you have your project cost. Finally, depending on your risk management culture, add management reserve.

the WBS is key.

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