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You are here: Home / Definitions / S / Should-Cost Estimate

Should-Cost Estimate

To assist in project management when procuring items, it is recommended that an organization first complete a should-cost estimate. The organization can either prepare a should-cost estimate, or have a should-cost estimate prepared by an outside source. This will assist in project management by ensuring that the prices of items have been thoroughly checked prior to beginning a project.

Checking the Accuracy of a Should-cost Estimate

To further assist in project management, a comparison should be made between the should-cost estimate and the actual-cost estimate. If the actual cost of items varies greatly from the should-cost estimate, the organization can then assess the reasons for the discrepancies. There are several possibilities for the organization to consider when faced with this situation.

One possibility is that the should-cost estimate was prepared inaccurately. This can be due either to mistakes the preparer made or to inadequate sources of information.

Another possibility to consider is the marketplace itself. The prices of the proposed items may have changed since the original estimate was prepared.

Also to be considered is the prospective sellers role in the project. It is possible that the prospective seller has either misunderstood or failed to fully respond to the contract in place.

This term is defined in the 3rd edition of the PMBOK but not in the 4th.

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