Despite all of the excellent steps listed above, which surely are right, I am still wondering why you would take all the time to price things out, draw up a contract, etc., when your co-worker may take one look at the total and bail. That's a lot of your time invested in a project you don't want to complete at any cost.
If you want her to give the idea up, herself, why not just say you've priced things out and the minimum would be (fill in high number here.) She'll likely make some polite excuse and walk away, without your investing a lot of effort.
hugs,
charlotte