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That pot is not calling that kettle black: project budgets and estimates

We were sitting at the table in the conference room, discussing how we’ll implement the new cost tracking features in AceProject. And I realized the difference between budget and estimate was not clear at all to everyone sitting at that table.

What’s the difference, anyway?

Budget is defined as:

  • A sum of money allocated for a particular purpose

An estimate is defined as:

  • An approximate calculation of quantity or degree or worth; “an estimate of what it would cost.”

A budget is often something that is decided before estimating how much something will cost. The organization decides how much they can invest in the project, then they decide on the scope of the project, and finally the project team estimates how much it will really cost to do the project. When the estimate is higher than the budget, the fun begins.

Here’s an example:

  • I want to buy a new car. I know I can afford to pay 15 000$ for the car. That’s my budget.
  • I go to the car dealer and I pick the car I want, with all the options I […]
By |2009-07-08T18:29:00-04:002009-07-08|

Project metrics: earned value management with a 6-function calculator, part 2

Last time, we focused on how to get the basic project metrics without so much as a basic calculator. On the second part of this post, we’ll focus on estimates.

Estimates seem even trickier than variances and indexes. Because a lot of the original estimating process is fuzzy, it’s easy to assume figures like Estimate to Complete and Estimate at Completion would be hard to understand and hard to believe that – Gasp! – they can be computed with a pen and paper.

Just like last time, we’ll work with a  6-month fictional project with a 50 000$ budget. In order to compute Estimate to Complete and Estimate at Completion, we need the following figures:

  • Budget at Completion is your project’s total budget. This is (usually) decided when the project is approved
    • With our project example, the Budget at Completion is 50 000$.
  • Earned Value is how much you’ve really accomplished in the project.
    • Working with our 6-month project. Let’s pretend that you’re
      only 40% done with the project. That portion of your project budget is
      the Earned Value.
  • Actual Cost […]
By |2009-05-04T13:39:00-04:002009-05-04|
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