| The true value of an estimate is not about what you thought the project would initially cost, but rather, the true value of an estimate is as a tool to estimate the final cost of the project once the project is underway. Trying not to get into too much detail here, but, when you devise your initial estimate you should have a list of deliverables and you should determine what you think those deliverables will cost to implement. Your initial estimate will then become your baseline, and is mainly used to keep track of what you initially agreed upon (scope) and as a way to measure your progress. Imagine that based upon your original estimate you have a deliverable that to implement will cost $50,000, but you have already spent $30,000 to implement it and are only 10% done. Well then your new estimate would now balloon out to $300,000 and it will take 10x as long. If you replicate this process out across all of your deliverables based on their progress you will have a new estimate, as the project continues your estimate will become more and more accurate. Beyond having a better understanding of what your project will actually cost, you will also have a tool to handle scope changes by management and/or the client. You will automatically have an idea of based upon your prior performance on this project the feature that they ask will cost them $X additional dollars and increase the duration of the project by Y Days, or, as a way to negotiate a reduction in scope in order to stay within your budget. There are certain mega engineering firms that make all their money solely off of defining the estimate and scope at a very detailed level up front and then renegotiating the (hell out of the) price as new scope is introduced. Here's a link for more information: http://en.wikipedia.org/wiki/Earned_value_management |