Palmer offers a 12-Step Process for Cost Estimation.These twelve steps are as outlined.Firstly we define estimate’s purpose that is determine the purpose of the estimate, the level of detail which is required, who receives the estimate and the overall scope of the estimate.

Develop estimating plan assemble our cost-estimating team, and outline our approach.  Develop a timeline and determine who will do the independent cost estimate. Finally, create the team’s schedule. We then dfine characteristics create a baseline description of the purpose, system and performance characteristics. This includes any technology implications, system configurations, schedules, strategies and relations to existing systems. Don’t forget support, security, risk items, testing and production, deployment and maintenance, and any similar legacy systems.

Determine estimating approach: Define a work breakdown structure (WBS), and choose an estimating method that is best suited for each element in the WBS. Cross-check for cost and schedule drivers; then create a checklist.Identify rule and assumptions clearly define what is included and excluded from the estimate, and identify specific assumptions.Obtain data create a data collection plan, and analyze data to find cost drivers.Develop point estimate develop a cost model by estimating each WBS element.Conduct sensitivity analysis test sensitivity of costs to changes in estimating input values and key assumptions, and determine key cost drivers.

Conduct risk and uncertainty analysis: Determine the cost, schedule and technical risks inherent with each item on the WBS and how to manage them.Document the estimate have documentation for each step in the process to keep everyone on the same page with the cost estimate.Present estimate to management brief decision-makers on cost estimates to get approval.Update estimate any changes must be updated and reported on. Also, perform a postmortem where you can document lessons learned.

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