5.1: Scenario Building

Chapter Title: Estimating Cost and Building the Budget
Milestone Focus: Translating execution plans into a structured and defensible budget
Client: University College of Medical Sciences (UCMS)
Consulting Firm: C-Bay Inc. – Software Project Management Services (SPMS)

📨 Internal Memo

To: Project Planning Team – UCMS Engagement
From: Dr. Wendy Sheen, Director, Project Management Office, C-Bay Inc.
Date: Start of Week 6
Subject: Development of Cost Estimate and Budget Model for UCMS Clinical System Initiative

Team,

With the project charter approved and the detailed execution plan nearly complete, we are now entering the final stage of the planning phase for the UCMS Unified Clinical Management System project.

Your team has already completed:

• The Work Breakdown Structure (WBS)

• Effort and duration estimates for every major task

• Logical sequencing of activities and milestone schedule

The next deliverable is the Cost and Budget Planning Package—a complete financial view of what it will take to deliver this project successfully. This document will be reviewed by UCMS’s leadership, finance office, and external procurement reviewers to determine if the project moves forward into funding and launch.

🎯 Project Deliverables for This Milestone

You are responsible for producing a cost planning package that includes:

1. Cost Categories and Inputs

   • Identify all cost-driving elements (labor, tools, licensing, services, equipment, training, overhead, etc.)

   • Categorize them as fixed/variable, one-time/recurring, and direct/indirect where appropriate

2. Labor Cost Estimation

   • Apply task-level effort estimates to hourly rates per role

   • Use standard billable rates or defend market-based approximations

   • Document assumptions about team mix, utilization, and availability

3. Non-Labor Cost Estimation

   • Estimate quantities and unit costs for subscriptions, tools, licenses, external services, etc.

   • Identify vendor costs and sourcing assumptions (e.g., per-user pricing, seat-based licenses, flat contracts)

4. Total Budget and Allocation Model

   • Present an organized budget by phase, category, or deliverable

   • Include subtotal breakdowns and a grand total

   • Ensure traceability back to the WBS and execution plan

5. Contingency and Funding Narrative

   • Add a contingency line item justified by project risks (not arbitrary %)

   • Write a 1-paragraph sponsor-facing explanation of what the budget covers, what risks are buffered, and what value the funding enables

🧭 Key Constraints

• UCMS has not pre-defined a budget. Your planning will inform their request for institutional or grant-based funding

• The budget must account for the full project duration and scope defined in Milestone 3

• Labor costs must reflect effort and role—not team size alone

• Non-labor costs must be sourced or benchmarked, even if placeholders are used

• Contingency must be proportional to project risk, not a blanket add-on

🧠 Audience and Tone

This deliverable will be reviewed by:

• UCMS clinical operations leadership

• UCMS finance officers

• Cross-departmental stakeholder groups

• A potential IT procurement advisory board

Therefore, it must be:

• Clear, itemized, and scannable

• Aligned with the approved execution structure

• Reasoned and defensible—not padded or speculative

• Ready for presentation in a live review session in Week 8

🔍 Strategic Value

A sound budget signals more than fiscal readiness—it builds trust in your entire plan.
This is your opportunity to prove that your team can:

• Think ahead

• Estimate with responsibility

• Structure a financial plan that supports success

• Communicate value—not just numbers