PMP Certification: Estimate Costs (based on PMBOK® Guide, 6th Edition)


  • WHAT Estimate Costs Is. Estimate Costs implies developing an approximation of costs associated with each of the resources – human and material – required for all schedule activities of the project.
  • WHY Estimate Costs Is Important. A project manager estimates how much everything will cost on the project using the Estimate Costs process and these estimates will be combined into a spending plan in the following Determine Budget process.
  • WHEN Estimate Costs Is Executed. The Estimate Costs process is a highly iterative process that is repeated throughout the life of the project. At every repetition, the activity cost is refined.
pmp 2018 pmp certification estimate costs pmbok guide 6th edition tipsographic main

Estimate Costs 101

What Does Estimate Costs Involve and When Do You Perform It in a Project Life Cycle?


  • WHAT Estimate Costs Is. Estimate Costs implies developing an approximation of costs associated with each of the resources – human and material – required for all schedule activities of the project.
  • WHY Estimate Costs Is Important. A project manager estimates how much everything will cost on the project using the Estimate Costs process and these estimates will be combined into a spending plan in the following Determine Budget process.
  • WHEN Estimate Costs Is Executed. The Estimate Costs process is a highly iterative process that is repeated throughout the life of the project. At every repetition, the activity cost is refined.
  • HOW Estimate Costs Operates.
InputsTools and techniquesOutputs
  1. Project management plan
    • Cost management plan
    • Quality management plan
    • Scope baseline
  2. Project documents
    • Lessons learned register
    • Project schedule
    • Resources requirements
    • Risk register
  3. Enterprise environmental factors
  4. Organizational process assets
  1. Expert judgment
  2. Analogous estimating
  3. Parametric estimating
  4. Bottom-up estimating
  5. Three-point estimating
  6. Data analysis
    • Alternatives analysis
    • Reserve analysis
    • Cost of quality
  7. Project management information system
  8. Decision making
    • Voting
  1. Cost estimates
  2. Basis of estimates
  3. Project documents updates
    • Assumption log
    • Lessons learned register
    • Risk register

Source: PMBOK® Guide, 6th ed., Chapter 7, section 7.2, p. 240.

Estimate Costs Key Terms

What Are the Key Terms to Fully Understand the Process of Estimating Cost?


  • Activity Cost Estimates. The cost estimates for all activities in the activity list of the project.
  • Basis of Estimates. The backup information to support how the estimates were developed.
  • Cost of Quality. The cost of ensuring quality, broken down into cost of conformance (prevention costs plus appraisal costs) and cost of non-conformance (internal failure costs plus external failure costs).
  • Rough Order of Magnitude Estimation. Estimating with very little accuracy at the beginning of the project and then refining the estimate over time. It ranges between –25% and +75%.
  • Vendor Bid Analysis. The technique that gathers information on bids from vendors to help a project manager determine cost estimates.

Estimate Costs Tips

What Are the Best Tips to Answer Correctly the PMP Certification Exam Questions on Estimate Costs Process?


  • project management professional certification 2018 study guide free online course tipsographicAccuracy of Estimates. Keeping in mind that the more the project progresses, the more precise an activity’s estimate, the range of uncertainty inherent in any estimate typically varies as follow:
    • Order of Magnitude Estimate. -50% to +100%
    • Rough Order of Magnitude Estimate. -25% to +75%
    • Conceptual Estimate. -30% to +50%
    • Preliminary Estimate. -20% to +30%
    • Definitive Estimate. -15% to +20%
    • Control Estimate. -10% to +15%
  • Type of Costs. A project manager may estimate the following type of costs for each activity and work packages defined for the project:
    • Fixed costs. Costs that do not change based on volume (e.g., office rent, independent from employees).
    • Variable costs. Costs that adjust based on volume (e.g., office chairs, dependent on employees).
    • Direct costs. Costs directly attributable to project (e.g., labor).
    • Indirect costs. Costs not directly attributable to project (e.g., legal department).
    • Sunk costs. Costs already incurred on the project that cannot be recovered if the project was to stop.

Click here for a detailed analysis of each project management process group and knowledge area.

SOURCES: Project Management Institute (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). 6th ed. Newtown Square: Project Management Institute.

pmbok 6th edition, best project management certification, pmp preparation, pmp training, pmp certification process, pmp certification, how to get pmp certification, pmp certification cost, pmi pmp certification, pmp certification exam cost, pmp certification prerequisites, pmp certification requirements, pmp program, project management exam, project management professional pmp, pmp 2018.

Recommended for You

  •  
    4
    Shares
  • 4
  •  
  •  
  •  
  •  

Project Management Glossary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

“PMP”, “PMBOK”, “PMI-ACP” and “PMI” are registered trademarks of the Project Management Institute, Inc. All rights reserved.