Cost is often seen as a fixed, calculable, knowable number. But it isn’t. Cost is one of the most flexible, variable numbers that exists in a project.
If you step back, it’s easy to see why. Cost is the thing that every executive wants to see, but the number of inputs and recursive values that make it up are nearly unmanageable. The best we can really do is provide an estimate of cost given some set of assumptions.
One of the key assumptions to cost estimates is time. Cost is driven largely by operations. Unless we can actually know how our business is going to change over the next 1 to 10 years there is no way to really understand a project cost with any certainty. Similarly, without understanding the factors NOT included in the cost assumptions there could be large cost components not even included in the budget and plan.
Ultimately, any cost estimate should be taken for what it is – an estimate.
So what should you be focused on? Do the project alternatives meet the non-financial requirements laid out. If yes, then the cost estimates become a guideline for deciding which alternative has the best possible outcome. But if no, the alternative shouldn’t be considered regardless of the cost.
Too often an alternative solution is selected because it meets the cost criteria even though it isn’t well aligned with overall project goals. Finance is not a key driver, it’s a decision driver.
Reblogged this on PAULDOLANBLOG.