| Software cost estimation supports the planning and control of software projects, two important project management activities considered to be critical to the success of software projects. Cost estimation is also essential to the economic analysis techniques used in the decision making process for software projects.; A study by Jones (1994), showed that between one fourth and one third of U.S. software projects involve outside contractors. Such an environment introduces additional cost factors and risks attributed to the interaction between the contractor and the customer. The additional costs include the contracting organization personnel involved in planning, acquiring, and managing the project, and user involvement and participation.; If we look at the software cost estimation processes, methods and tools in use, they all estimate the cost of the technical, management and some support resources needed for a software project. However, none of them estimates the user involvement in the development process, which is considered a hidden cost, particularly when dealing with contractors. While various research studies have stated the importance of participation of the contracting organization personnel in the development process, current estimation methods and tools have ignored their costs.; This research addresses the need for improvements in existing software cost estimation processes by making the hidden costs of a contracting organization visible. Current cost estimation practices were assessed using an approach recommended by process improvement organizations and initiatives. The hidden costs for twenty six contracted software projects were identified and measured.; Descriptive, simple correlation and regression analysis methods were used to test the hypotheses. The percentage of the incurred hidden costs relative to the total project cost was calculated, distributions of the hidden cost by lifecycle phase and by labor categories are provided.; The study also investigated the relationship between the hidden costs and the size of the project and found a strong relationship that can be expressed in a linear equation.; The results of this research are significant to contracting organizations as they show that the hidden costs are incurred, are significant, but not managed. Failure to plan and schedule critical resources such as the users, might result in introducing risks to the project as these resources might not be available when needed. Also, incorporating the hidden costs into software economics analysis could improve the decisions making process. |
