Estimating Pitfalls

Several pitfalls can impede the pricing function. Probably the most serious pitfall, and the one that is usually beyond the control of the project manager, is the "buy-in" decision, which is based on the assumption that there will be "bail-out" changes or follow-on contracts later. These changes and/or contracts may be for spares, spare parts, maintenance, maintenance manuals, equipment surveillance, optional equipment, optional services, and scrap factors. Other types of estimating pitfalls include:

• Misinterpretation of the statement of work

• Omissions or improperly defined scope

• Poorly defined or overly optimistic schedule

• Inaccurate work breakdown structure

• Applying improper skill levels to tasks

• Failure to account for risks

• Failure to understand or account for cost escalation and inflation

• Failure to use the correct estimating technique

• Failure to use forward pricing rates for overhead, general and administrative, and indirect costs

Unfortunately, many of these pitfalls do not become evident until detected by the cost control system, well into the project.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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