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Thanks a lot my dear Mr. Salauddin Mohammad for your invitaion.
As our collegues said we should consider all direct and indirect costs but the estimations should be realistic.
1- Direct cost: including, any costs of resources can be changed by changing the amount of work.
2- Indirect cost, not related to changing of the work.
3- Contingency reserves
4- Management reserves
Agreed with both answers given by Mr.:Rafaat & Mr.:Abdul_hameed too as well
There are various factors that needs to be taken care :
Nature of the project, duration, manpower involved, criticalities, technicalities etc.
Local conditions, economic affairs, Rules and regulations on broaders aspects.
Expertise, experience, involvements, outsourcesing, JV's etc
1. determine the costs of establishing the project include:
• the cost of the land and buildings of the project.
• the costs of extraction licenses and registration of the project.
• the costs of equipment, machinery and appliances.
• the costs of conducting economic feasibility studies.
• the costs of legal advice in the establishment phase of the project.
• the cost of advertising.
• training costs.
• Other costs in the establishment phase of the project.
2. build the project include:
Engineering design of the project and includes the final shape of the project and the preparation of specifications and bidding and the timetable for implementation of the project starting from the preparation of the project until the beginning of the operation and expansion of the project plan
3 Determine the cost of the required labor and management personnel:
Determine the necessary number of workers to run the project, both labor unusual or clever or management personnel and observers and maintenance workers and transport workers and escort services and hygiene and to determine wages and the cost of using each type of employment and training programs of employment for upgradation to the level required in the operating schedule
4. determine the cost of factors of production quantities are required:
Include a needs assessment project of raw materials, raw materials and energy dynamics.
5. determine the cost of machinery and technical equipment:
6. Determine the cost of packaging:
7 identify and transportation:
Within the project and between the project and the areas with which it deals.
8. Determine losses in production:
Both during the production process, transport or storage or marketing. And choose a method which works to reduce this wastage.
This answer is Inline with what PMI Says
Nowadays, we rarely hear about projects that finish below a given budget. On the contrary, we hear about projects that need more people, more material resources and more time, which ultimately translates into additional costs that strain the project budget.
Although it is clear that project costs can be influenced by external factors beyond the project manager's control, there are at least as many factors that can be controlled from within the project, through appropriate project cost planning.
Here are six simple reasons that projects incur cost overruns
Underfinancing
Unrealistic costs estimates
Underestimated complexity
Extended project schedule
Improper buffer planning
Improper resource planning
Solutions:
01 Mitigation: Clarify with the project sponsor from the very beginning how cost overruns, which are very likely to occur, will be handled -- for example, through scope reduction or additional funding.
02 Mitigation: Break down the work into smaller and more assessable packages. Get help from subject matter experts and experienced personnel when estimating costs. Make the cost estimations comprehensible, by applying different estimation techniques (e.g., three-point estimates, parametric estimating or bottom-up).
03Mitigation: Split the project in smaller work packages or phases. Avoid planning everything extensively from the very beginning (the planning alone of the Berlin airport project took15 years). Plan iteratively -- per work package or phase -- and throughout the project.
04Mitigation: Manage the project time and schedule well. Focus especially on the tasks on the critical path, which can have the most impact on both project schedule and costs. If you get asked to extend the project time, explain to your stakeholders that this probably will cost more. Remember the scope-time-budget project triangle. Time is money!
05Mitigation: A budget comprises estimated cost and some contingency. Plan the contingency for unexpected scope changes, unusual weather changes or possible problems with suppliers. Consider a buffer for the costs that cannot be accurately or predictably estimated. Some of the cost estimates will be more accurate than others -- for example, commodity prices will be more predictable than labor costs for a specific service.
06 Mitigation: First plan the scope, then the required work to be done, and then the related assumptions, dependencies and risks. This will facilitate a better understanding of the work needed to be done and hence will help better assess the right equipment, amount of resources and required skill sets.
There are several good answers already and I like the answers from Mr. Raafat Sallam and Mr. Abdul-Hameed D. Al-Sawadi ...
Wikipedia has some good guidlines to follow....
1. Direct costs including:
- Salaries
- Material
- Travel
- Subcontracts
2. Indirect costs, including:
- Overhead (employees benefits, holidays, sick, insurance, rent, equipment,...)
- Management and administrative
Mainly Cost escalations and time-trame--A clear Budget required and the estimations should be realistic and deviations are allowed to the minimum--A narrative requirements from two or more experts in the field prove effective, so that omissions are cared to. For the reset of the thing: Dear Mr. Salauddin Mohammad : You are an expert
The following are essentially required for estimating project costs :
- Scope Statement (Detailed Statement of Work)
- WBS
- Schedule Statement (Network Diagram with Resources)
- Risk Assessment and Contingencies.
- Estimation Tools & techniques including historical records and other rational basis for estimating.
