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.

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  • aapo
    What are the estimating pitfalls that can impede the pricing function in project management?
    2 months ago

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