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www.methoda.com
MethodCostMethodCost
Cost Estimation
2Methoda Computers Ltd
MethodCost
Cost Estimation is a complex task with no unanimous approach
MethodCost bases cost estimation on an examination of the types of components in the project, their quantities and their complexity
MethodCost is based on Function Point Analysis (FPA) - estimating by type,
size, and quantity of entities The MethodA matrix model for detailing the system’s
components
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MethodCost
MethodCost includes tools and templates for cost estimation at every phase of the project/system life cycle:
For the initiation phase - Quick cost estimation For the analysis phase - Detailed cost estimation For the maintenance phase - Cost estimation for
changes and improvements For the operation phase - Investigation and
estimation of costs for systems that perform everyday production
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MethodA matrix model for cost estimation
Life Cycle
MaintenanceDesign TestingAnalysisInitiation
SystemComponentTree
1. Goals
2. Application
3. Technology
4. Implementation
5. Cost
Est.by
LifeCycle
Phases
Est. by components of the sys tree
Itemest.
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Cost Matrix
Costs can be estimated by: Columns – Life cycle phases Rows – Components of the system tree More detailed figures at the cell level
The appropriate matrix cells contain notes on topics and components to be priced as part of the project cost
Projects differ greatly, so from the all-inclusive matrix, not every topic will apply to every project
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Cost Estimation Process
Phase 1 – Prepare a Quantities List Estimated quantities of resources required
Phase 2 – Define a Price List For each cost item:
What is to be used
How is it measured
What is the unit cost?
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Cost Estimation Process
Phase 3 – Make a Comprehensive Estimate Multiply listed quantities by listed prices Apply certainty factors
Phase 4 – Calculate Costs (See Cost Calculation Kit)
Common denominator for estimate’s results Mapping of costs along time axis
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Phase 1 – Detailed Quantities List
Quick cost estimation during the initiation phase
Relatively exact quantities list at end of analysis phase
LifeCyclePhase
Sectionin SysTree
CostSub-
clause
Qty perSub-
clause
Job(for
staffing)
Notes Link toline in
Price List
Design & Build
2.4 Screens Complex screen
7 Pgmr Veteran pgmr
1
Testing 2.4 Screens Complex screen
7 Tester Ordinarytester
2
Design & Build
3.1 Central Hardware
R&D
Server
3 100
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Phase 2 – Defining a Price List
Price list for HR
PriceCode
CostClause
Sub-clause Job Investment in
Sub-clause
Units UnitPricein NIS
Price ofSub-clause
To Be Used
4 HR Analysis –Interviews
Inter-viewer
4 Workhrs
200 800 In-houselabor
5 HR Design & Build – Modelling
Pgmr 9 Workdays
1,200 (day)
10,800 In-houselabor
6 HR Installing & Run-In:Installing for Users
Tech-nician
4 Workhrs
180(hr)
720 In-houselabor
7 HR Installing & Run-In:Training the Users
Installer 1 Workdays
700 700 Out-sidelabor
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Phase 2 – Defining a Price List
PriceCode
Cost Clause Sub-clause To Be Used Units Price ofSub-clause
104 Technology & Infrastructure
R&D/TestEnvironment
Investment budget $K 120
105 Technology & Infrastructure
Mfg/DRPEnvironment
Investment budget $K 225
106 Technology & Infrastructure
External contractor – Implementinginfrastructuremodule
Procurement $K 200
As per the quantities
listAn auxiliary table could be
included for the many components of a manufacturing environment
According to theorganization’sbudget clauses
Price List Without HR
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Life Cycle Phase
Sys Tree Component
No. Name
Cost Sub-clause Quantity for sub-clause
Analysis 4.1 Stake-holders
User interviews 17
Analysis 2.3 SubsystemsBuilding the module or subsystem
23
Install & run 2.2 SubsystemsInstalling for users 2
Install & run 4.7 Integrationin workflow
Training the users 10
Quantities List for HR
Units Unit Price in NIS
Work hours 200
Work days 1200
Work hours 180
Work days 700
Price List for HR
PriceCode
4
5
6
7
Matched upby price codes
Life Cycle Phase
Sys Tree Comp
No. Name
Price Sub-clause Quantity for sub-clause
Design & build 3 Tech & infra R&D and test env 2
Install & run 3 Tech & infra Mfg and DRP env 2
Design & build 4.1 Stakeholders Vendors/Contractors
1
Quantities List w/o HR
PriceCode
104
105
106
Units Price of sub-clause
$K 120
$K 225
$K 200
Price List w/o HR
Quantities list & price list
meet at price code
Phase 3 – Comprehensive Estimate
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Certainty factor calculated as per template
Use of the certainty factor
=Estimated cost of tech
Certainty factor for tech
Adjusted cost of tech
=Estimated cost of HR
Certainty factor for HR
Adjusted cost of HR
Phase 3 – Comprehensive Estimate
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Phase 3 – Comprehensive Estimate
Price Code Cost in NIS Certainty Adjusted Cost
HR 38,360 0.9 42,622
Technology 3,105,000 0.893 3,477,044
Other 900,000 0.8 1,125,000
Total 4,043,360 4,644,666
Applying the certainty factors raised the costs by 15%
Subjective estimation
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Check on R&D Costs
Life Cycle Phase % of TotalR&D Costs
Initiation & Analysis 25 - 15
Design & Build (incl. unit test) 60 - 45
System Testing 15 - 12
Installation & Running In 15 - 10
Total 115 – 82
Total should approximate 100% with allowance according to type of system
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Activity Annual investment as % of complete R&D cost
Annual maintenance w/o changes & upgrades
8 - 6
Changes & upgrades 8 - 5
Total, approximate 15 - 10
Check on Maintenance Costs
Total for 5 years – 50-75% of complete R&D costTotal for 5 years – 50-75% of complete R&D cost
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