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7 - PROJECT COST MANAGEMENT

price-to-win is a price the customer is willing to pay, is lower than competitors are expected to bid, but not so
low that it will be rejected by the customer’s evaluators as unreasonable or as showing that the supplier does not
understand the project. Price-to-win should be balanced with cost-to-build to produce a realistic bid. Risk analysis
is performed on the price-to-win bid (as described further in Section 11 of this Software Extension) so that the risk
of having to perform the project at the bid price is acceptable to the supplier’s organization. (This discussion ignores
the competitive strategy of bidding a small project at a price with a low probability of being profitable, or even
below the most likely cost, with the intention of gaining experience, customer confidence, or intellectual property
for future, more profitably priced projects.)

7.2.3 Estimate Costs: Outputs

The outputs in Section 7.2.3 of the PMBOK Guide are applicable outputs from estimating software
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project costs.

7.2.3.1 Activity Cost Estimates

See Section 7.2.3.1 of the PMBOK Guide.
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7.2.3.2 Basis of Estimates

See Section 7.2.3.2 of the PMBOK Guide.
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7.2.3.3 Project Documents Updates

See Section 7.2.3.3 of the PMBOK Guide.
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7.3 Determine Budget

The inputs, tools and techniques, and outputs for determining budget in Section 7.3 of the PMBOK Guide are
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applicable for software projects.

7.3.1 Determine Budget: Inputs

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The inputs for determining budget in Section 7.3.1 of the PMBOK Guide are applicable inputs for determining
the budget for a software project.

7.3.1.1 Cost Management Plan

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See Section 7.3.1.1 of the PMBOK Guide.

132 ©2013 Project Management Institute. Software Extension to the PMBOK Guide Fifth Edition
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