There is one question that training managers ask consultants and vendors more than any other. Consultants hear it in phone calls, at the end of their capability demonstrations, and at industry conventions. This question causes vendors to cringe every time it is uttered. The seemingly simple question is: "What does it cost?" Variations include, "I need a sales training CD-ROM, what will it cost?" or "I want Web-based training to teach people how to use their word processor. What's a ballpark budget?"

Consultants squirm when asked how much a training project costs. It is a lot like calling up a construction company and saying, "I want to build a house. What's it going to cost me?" The obvious answer is always, "It depends." The price of a house is likely to depend on many factors, including site preparation; total square footage; number of rooms; style and quality of construction; finishing details such as flooring, counters, and cabinets; landscaping; and even the construction schedule (is it a rush job that will require overtime labor?). So, too, the cost of a training project depends on many factors.

Factors That Influence Price

When estimating the budget for custom e-learning programs, you need to be able to answer at least these questions:

• How will the training be delivered - CD-ROM or Web?
• If Web-based, is it high-bandwidth or low-bandwidth?
• What is the content or subject matter?
• How long would it take the average student to complete the course, or how many screens will it contain? While not an exact measurement, these questions get at the basic issues of size and scope.
• Will the program use audio, video, animations, complicated illustrations?
• Where will the source content come from? Are there existing training modules? Is there a subject matter expert readily available?
• Will the program have student-tracking capabilities? Will it be complex?
• When will the project begin? When does it need to be delivered?
• What specific services will your organization provide, for example, script development, audio/video clips, quality control, or packaging and duplication?

With this information, an experienced vendor should be able to give you a rough estimate of the cost of program development. With some more details you can expect a firm price.

Pricing Rules of Thumb

While the answer to "how much will it cost" is not simple, there are rules of thumb that are commonly used. These "rules" often are upheld wrongly as hard-and-fast, cast-in-concrete rules, rather than the general guidelines they are intended to be.

The most common price reference is that it takes approximately 600 person hours to complete one hour of high-quality multimedia training, which is usually delivered on CD-ROM. This includes all services - instructional design, audio and video, programming, quality control, and project management. For simpler web-based or computer-based training without audio or video, the rule of thumb is that it takes 300 person hours, or half as much work, to complete one student hour of training.

Most training vendors charge $100 to $125 per hour for their services, which puts the cost for multimedia CD-ROM training at $60,000 to $75,000 per finished hour. An hour of WBT or CBT without audio or video might cost $30,000 to $40,000 to develop.

Many informal industry surveys support these rules of thumb. The American Society for Training and Development reports on a recent survey that one-hour of multimedia could cost upward of $65,000 (Phillips, 1998).

Problems with Pricing by the Hour

Although pricing by the hour is a very common practice, it is deeply flawed. The fundamental problem is the notion of the mythic student hour. What is it really? Because the student controls the program's pace, it might take a slow learner two hours to complete a "one hour" program of computer-based training. A fast learner might get through the same material in only 30 minutes. In fact, a well-designed program will purposely vary in length based upon the experience of the student. Pre-tests enable some students to "test-out of" certain lesson segments, thus reducing the total amount of learning time.

The complexities of the material to be taught and the instructional strategies deployed are other important factors in estimating the time it takes to create a training program. A one-hour simulation of open-heart surgery will certainly require more time and money to develop than a one-hour linear tutorial on how to use Microsoft Windows.

Significant programming tasks are required for the "first hour" of training that do not need to be replicated for subsequent hours of instruction. These programming tasks include developing the title screen, student log-in screens, student tracking, book marking, and the basic design of the graphical interface the user sees. It is inaccurate, therefore, to extrapolate that if a one-hour program costs $60,000, then a four-hour program would cost four times as much or $240,000. Initial production requirements are involved in the project setup. Just as in producing a book, magazine, or newspaper, the first copy off the press may cost thousands of dollars for the writing, art, typesetting, and design. Each additional copy costs less and less.

An alternative approach to per-hour pricing is pricing by the number of screens. Many multimedia training suppliers will quote $60,000 for 120 to 150 screens or "frames" of instruction. But problems arise similar to those in the "learning time" approach. What really constitutes a screen? If one screen plays a 30-second audio clip and another screen plays a five-minute video clip, shouldn't these costs vary? Are menus, glossaries, student tracking, and help screens included in the screen count? What about interactive questions that present a question, accept student input, and provide feedback? Is this interactivity counted as one, two, or three screens?

Simplistic per-hour or per-screen rates mask many factors that accurately describe and define the task at hand. Such flat-rate estimates do not adequately describe the quality of instruction, the number of features, or amount of media in the program. Frequently, technology-based training projects that are initiated after the acceptance of a sparse three-page proposal conclude with the client being disappointed with the final program and the vendor disconcerted over the profit margin. The client may have imagined a program with much more interactivity. The vendor, who was continually asked to add complexity, may feel that the project was not fairly represented and should have been priced differently.

How should a project be priced?

Developing technology-based training programs requires the time of many specialists including programmers, writers, artists, audio/video specialists, and project managers. The most accurate way to price a project is to specify all of its design details and estimate the total amount of time each team member will contribute. Applying the respective hourly rates to each of these services will yield an accurate total project price.

Vendors typically make assumptions about the project that may or may not be expressed to you, the client. For example, an animated 3D title screen sequence with dramatic music can cost ten times more than a simple text screen, but you are not likely to be asked about this level of detail. If the production house typically creates Hollywood-style effects, and if they think your organization has a substantial budget for the project, they will likely assume you want the deluxe opening and price it accordingly.

These vendor assumptions should be presented to you as line items upon request. If you are surprised by how high or low a project estimate is, you should ask your vendors questions. Among the questions to ask to bring out assumptions:

• How many interactive exercises are planned? What type of exercises are they?
• What are the plans for the post-test? Will it print a diploma upon reaching a mastery level?
• How many graphics and animations will be included? Are they all original or will some be clip art?
• How much total video and audio are to be used?

These questions will force vendors to show their cards, and force them to examine their own plans if they are merely providing a generic per-hour price.