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  1. #1
    Join Date
    Sep 2009
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    Ontario
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    1,012

    software development costing

    I have to do a quote, or at least provide a "not more than" amount for a new application. I started reading this Software development effort estimation - Wikipedia, the free encyclopedia and now my instinct is to take my first estimate and multiply by 4.
    So, a couple of questions.
    What percentage of the total cost should the quote take? That is, if the job total is around 500 hours, how many hours should be/are likely to be spent creating a quote.
    What do you think the ratio of original estimate to actual completed cost is? Or. another way, what percentage of jobs come in at 80, 90, 100, 110, 120, 200 percent of the quote.
    Most of the time I work by the hour, and I don't generally create new applications.

  2. #2
    Join Date
    Feb 2004
    Location
    In front of the computer
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    14,943
    The percentage of the total project effort that is used to produce the quotation varies greatly depending on the experience of the person preparing the quote with the type of task.

    Typically I see people doing their first quotation coming in at around 15-20% of the actual hours, and about 60-70% of the "hard costs" for the final bill.

    As a general rule, experienced quote writers will get within 50% (from 50-150% of actual cost) for about 50% of their projects. Nearly all of the mis-estimates for experienced writers are due to "scope creep" so the actual project gets larger, not because the original estimate was bad.

    If you can get a signed SOW (Statement of Work) that says exactly what the project entails, you can bid with relative safety. If the customer can not commit to what they want before you write the proposal, then do not accept the job as anything other than time and materials. Trying to do a job without a formal definition of what is expected for a fixed cost will kill you and ruin your reputation with the customer.

    If you get the SOW, then work up your proposal. Allow for the fact that your first few estimates will be off by nearly an order of magnitude and possibly more, so push the ceiling up as far as you think that it will go... For your first few jobs, there is no such thing as "too much headroom" in your bid!

    Just FYI, a few years ago when I was an independant I tried to slack off my remaining jobs before joining the company I work through now. I found an alternative worker for each client that I felt would do a decent job, then raised my rates and estimates through the roof... This didn't work well, I actually had clients choose to work with me (even when I pleaded with them to reconsider) and had new clients come knocking before I bolted the door for good! When you develop a good reputation for being fair and thorough, it is practically impossible to price yourself out of a job!

    -PatP
    In theory, theory and practice are identical. In practice, theory and practice are unrelated.

  3. #3
    Join Date
    Sep 2009
    Location
    Ontario
    Posts
    1,012
    Since I have a week or so before I have to cough up a number, I took one part of the project, about 20 percent of the total maybe, and wrote down an estimate of the hours required (30).
    I am now timing myself to see how long it actually takes.

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