An approach to software project feasibility study using stochastic risk model during proposal preparation

The Request-for-Proposal process plays an important role in software outsourcing field. Correct estimates of project cost and expected profit may provide more flexibility during contract negotiation and confidence in project success. In this paper we propose an original approach to project profit estimation and feasibility study at proposal preparation phase. In addition to estimating effort and cost, we use a stochastic approach to estimate project risks and profit for different types of contract: Fixed-Price, T&M and TRIM (Total Risk Identification and Mitigation). As a result, we are able to evaluate project success early, revise project schedule or plan, and present different pricing options to the customer. The approach was implemented and supported by the Auriga-CPPM tool and at the time of writing is being tested at Auriga Inc. We consider a sample project to demonstrate how the approach is applied.