Cost Estimating
Cost estimating involves developing an approximation of the monetary resources required to complete project activities. It is essential to determining the required budget to accomplish project tasks. Estimating methods can include bottom-up, analogous, and parametric techniques. Bottom-up estimating evaluates each activity, while analogous estimating compares the project to similar ones in the past. Parametric estimating relies on statistical relationships between project variables such as cost indices. Accurate cost estimates can lead to optimal resource allocation, informed decision-making, and better project management.
Guide to Project Cost Estimating - PMBOK Guide Seventh Edition
Importance of Cost Estimating:
Cost estimating is a critical process in project management because it directly impacts the budget and schedule of a project. Accurate cost estimates help in effectively allocating resources, making financial decisions, and measuring project performance.
What is Cost Estimating:
Cost estimating is the process of forecasting the cost needed to complete project tasks within scope and schedule constraints. It considers various factors such as labor, materials, equipment, services, software, and contingency costs.
How Cost Estimating works:
Cost estimating in project management typically involves these steps: defining the scope, developing cost estimating criteria, preparing the estimate, and reviewing and validating the estimate.
Exam Tips - Answering Questions on Cost Estimating:
1. Understand the PMBOK Guide's approach to cost estimating, including key concepts and principles.
2. Practice cost estimating techniques, like parametric estimating, bottom-up estimating, and three-point estimating.
3. Familiarize yourself with common cost estimating issues and how to solve them.
4. Learn how to interpret and analyse cost estimates.
5. Be able to apply your knowledge of cost estimating to scenario-based questions.
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