A cost estimate is an approximate prediction of how much money is needed to complete a project. It’s important to accurately estimate the costs as it will help you assess whether the project is feasible, i.e. if you have enough funds to back it. In short, accurate cost estimating helps you manage your project budget better. The project manager must include cost estimates for all resources, including materials, equipment, services, software, facilities, human resources etc.
Costs can be divided in direct and indirect costs. Direct costs are those that you can allocate directly, such as salaries for project team members, materials, supplies, equipment, travel costs, subcontracts etc. Conversely, indirect costs cannot be allocated directly, but without them you won’t be able to perform the project. Indirect costs can include office space rent, or general and administrative costs.
Common project cost estimation techniques: