Analogous estimating is a cost estimation technique in which the cost of a project, activity, or work package is determined by applying historical cost information from analogous (similar) projects. This technique is commonly used when there is limited data available for the current project. It relies on the expert judgment of the project team, usually based on their experience with similar projects. The core rationale is that the scope, complexity, and risks associated with the current project tend to be comparable to those of the prior projects, allowing extrapolation of realistic cost estimates. Analogous estimating is generally less accurate than parametric estimating and other methods but can provide a quick and simple way to estimate costs when resources, time, or expertise constraints are present.

Parametric estimating is a cost estimation technique that utilizes an algorithm or a mathematical equation to determine the cost of a project, activity, or work package based on historical data and key project characteristics. It uses well-established relationships between input variables, such as scope, scale, and complexity, along with relevant cost factors, either industry-specific or derived from comparable projects. This technique involves identifying units of measurement for each input variable, determining relevant cost drivers, and creating a reliable model to produce cost estimates. By running the model with various scenarios and assumptions, it is possible to assess the potential impact of different parameters and constraints on the estimated costs. Parametric estimating is generally more accurate than analogous estimating, but its effectiveness depends on the availability of accurate, relevant, and up-to-date historical data, as well as a robust and validated model set up reflecting the represented variables.

Three-point estimating is a cost estimation technique that acknowledges uncertainties in cost estimates by considering three outcome possibilities for each project component: the most likely (M), the optimistic (O), and the pessimistic (P) estimate. These three points can be derived from historical data, expert judgment, or a combination of the two. The technique then calculates a weighted average of these three estimates, typically using the PERT (Program Evaluation and Review Technique) formula, which assigns higher weight to the most likely estimate. The result is a more realistic and risk-adjusted cost estimate that accounts for possible variations in key cost drivers, recognizing that project costs may deviate from initial estimates due to unforeseen events or changing project conditions. Three-point estimating can lead to more accurate and reliable cost forecasts, enhancing project management decision-making and facilitating risk assessments and contingency planning.

Bottom-up estimating is a cost estimation technique that involves breaking down the project scope into its smallest work packages or tasks, and then aggregating the costs for each of these elements to derive the total project cost. This approach requires a detailed understanding of the work required at each stage of the project, along with the resources needed to perform the work, such as labor, materials, equipment, and other inputs. Bottom-up estimating allows for a more granular and accurate assessment of project costs, as it accounts for the specific circumstances and requirements of individual work packages, rather than relying on high-level, abstract assumptions or past experience alone. However, this technique can be time-consuming and resource-intensive, as it requires comprehensive planning, as well as in-depth knowledge of the project's scope and cost drivers.

Reserve analysis is a technique used to account for the uncertainties and risks associated with cost estimation by incorporating additional budgetary allowances, known as contingency reserves and management reserves, into the project's overall cost baseline. Contingency reserves are funds set aside for unforeseen events or changes to planned activities that may impact the project cost, such as scope modifications, changes in resource availability, or external factors like market fluctuations. Management reserves, on the other hand, cover risks outside the project scope, such as strategic or organizational changes requiring additional financing. Reserve analysis entails identifying potential risks or uncertainties, quantifying their impact in terms of cost, and establishing appropriate reserve amounts that can be allocated to the budget. Including reserves in the project budget, based on a thorough analysis of potential cost implications, can lead to more realistic cost estimates, improved risk management, and enhanced flexibility to cope with unexpected events or circumstances during project execution.

Cost aggregation is the process of adding up the estimated costs of individual work packages or activities within a project to determine the total project budget. This process typically occurs during the planning phase of project management and requires breaking down the project into work packages or activities to estimate and allocate resources. Cost aggregation helps in identifying the cost baseline, which is vital for measuring project performance and controlling the overall project spending. Moreover, cost aggregation offers a higher level of accuracy for project cost estimation compared to simpler methods and ensures that every activity, material, and resource required for the project completion is captured within the total project budget.

Life-cycle cost analysis is a comprehensive approach to evaluating the total costs associated with a project or product throughout its entire life cycle, from inception to disposal. This includes costs for planning, design, construction, operation, maintenance, and disposal. By considering the full spectrum of costs associated with a project, life-cycle cost analysis aids in selecting the most cost-effective alternatives during the decision-making process. It helps to identify areas where resources can be better utilized and optimize the project's financial performance through various stages. Moreover, life-cycle cost analysis supports sustainable project management by promoting consideration of environmental, social, and economic factors in project decisions.

Value engineering is a systematic approach to optimizing the cost, functionality, and performance of a project by analyzing its components and identifying opportunities to achieve better value for the same or reduced costs. This process is typically conducted during project planning or design, but it can also be applied throughout the project life cycle. Value engineering identifies areas of waste, inefficiency, and duplication while ensuring the project's objectives, quality standards, and functions are maintained or improved. Moreover, value engineering fosters innovation, collaboration, and improved decision-making among project stakeholders, ultimately leading to better cost management and overall project success.

Cost escalation is the increase in the cost of a project over time due to various factors, such as inflation, market trends, changes in labor rates, material costs, or currency fluctuations. In project management, it is essential to recognize these factors and their potential impact on the project's overall cost to develop a more accurate and realistic cost estimate. Cost escalation is often addressed by including contingencies, allowances, and escalation clauses in the project budget planning. By understanding and considering cost escalation factors, project managers can develop more effective mitigation strategies, minimize the impact of these factors on the project's final costs, and ensure the project remains on budget and financially viable throughout its entire life cycle.

Expert Judgment is the process of obtaining input and guidance from seasoned professionals and domain experts who have vast knowledge and experience in project management, particularly in the area of cost estimation. These experts understand the nuances of the project and can provide valuable insights into the estimation process. Utilizing their expertise can lead to more accurate cost estimates and ultimately, a more successful project. Expert judgment can come from stakeholders, subject matter experts, and even experienced team members. By leveraging their knowledge, the project manager can make informed decisions, which can lead to better allocation of resources and reduced overall risk.

Vendor Bid Analysis is an estimation technique that involves reviewing and comparing the cost estimates provided by various vendors or suppliers for goods and services required by the project. This process helps the project manager and the team in assessing which vendor or supplier can provide the best value for the project, considering factors such as cost, quality, and delivery schedule. The analysis supports better decision-making when it comes to selecting vendors and suppliers, as well as negotiating contract terms and conditions. Vendor bid analysis provides a comprehensive understanding of market conditions, which can be used to establish realistic cost estimates and more accurate budgeting.

A Fixed-Price Contract is a type of procurement contract in which the vendor agrees to deliver the agreed-upon goods or services for a fixed price. The cost estimation process depends on the project manager's ability to accurately determine the work required to achieve the project objectives, as well as the ability to secure a suitable vendor that can deliver the desired results within budget constraints. Fixed-price contracts are commonly used when the scope of work is well defined and the risk of cost overruns or schedule changes is low. They allow for predictable and controlled costs, minimizing the risk of cost escalation for the project. It is essential for the project manager to clearly communicate the project requirements and any changes to the vendor to mitigate potential conflicts and misunderstandings.

Cost of Quality (CoQ) is a concept that considers the costs associated with ensuring the quality of a project's deliverables, as well as the costs resulting from poor quality. The Cost of Quality approach can help project managers estimate and control project costs more effectively by focusing on both the prevention of defects and the identification and correction of existing problems. The CoQ can be divided into two main categories: the cost of conformance (prevention and appraisal costs) and the cost of non-conformance (failure costs). By addressing quality requirements upfront and mitigating any potential risks of poor quality, the project manager can improve overall project cost estimates and prevent cost overruns related to rework, scrap, and customer dissatisfaction.

Historical Information Review is the process of examining and analyzing data from previous projects that are similar in nature, scope, or complexity to the current project. This data can provide valuable insights into the cost estimation process, helping project managers establish more accurate and reliable cost estimates for their projects. By reviewing historical data and understanding how past projects were executed, project managers can identify trends, patterns, and lessons learned that can be applied to the current project. This can help reduce the likelihood of cost overruns and improve project success. Historical information should be carefully reviewed and compared to the unique requirements of the current project to ensure that the cost estimates derived from past experiences are applicable and reliable for the present situation.