Wednesday, July 26, 2006

Some thoughts on estimating costs

I recently completed the design and installation of a large hydraulic system. At no point in this project was I asked for input on costs. As the project neared completion it overran its cost estimate. What happened?

I will not go into all the details because some of what occurred is business confidential. I will discuss one item that is specific to my portion in the project.

The original project estimate included the cost of the hydraulic power unit, the sensors, and the servo-valves for controlling the hydraulics. It however did not include the cost of the hydraulic fittings, hoses, tubing, and the installation of these items.

What’s the problem? All the major items were included, weren’t they? What’s the cost of plumbing when you have the fabrication of the major items, the system design cost, and software development. I spent over $50,000 on fittings not including their installation costs. The minor cost of plumbing up the system was not so minor.

When estimating try to include all the items required in a system. Give some thought to items that may initially appear to be inconsequential.