Cost Estimating is a critical process in project management that involves developing an approximation of the monetary resources needed to complete project activities. This process requires analyzing all possible costs associated with successfully completing the project within the approved scope and time constraints. Cost estimates consider various inputs including activity resource requirements, resource rates, risk register, and project schedule. The process typically begins early in project planning and is refined throughout the project lifecycle as more details become available. Several techniques are used in cost estimating: 1. Analogous Estimating: Using historical data from similar projects to estimate current project costs. It's fast but less accurate. 2. Parametric Estimating: Using statistical relationships between historical data and variables to calculate estimates. This provides more accuracy when parameters are scalable. 3. Bottom-up Estimating: Estimating individual work components then aggregating them for total costs. This provides high accuracy but is time-consuming. 4. Three-point Estimating: Using optimistic, most likely, and pessimistic scenarios to determine expected costs and account for uncertainty. 5. Reserve Analysis: Adding contingency reserves for identified risks and management reserves for unplanned changes. The output of cost estimating includes activity cost estimates, basis of estimates (documentation supporting how estimates were derived), and updates to project documents. Effective cost estimating is essential for establishing the cost baseline, securing adequate funding, and providing the foundation for project cost control. It helps stakeholders make informed decisions about project investments and enables project managers to deliver within budget constraints. The accuracy of estimates typically improves as the project progresses and more information becomes available.

Cost Estimating is a critical process in project management that involves developing an approximation of the monetary resources needed to complete project activities. This process requires analyzing …

Concepts covered: Parametric Estimating, Bottom-Up Estimating, Reserve Analysis, Life-Cycle Cost Analysis, Expert Judgment, Fixed-Price Contract, Historical Information Review, Analogous Estimating, Three-Point Estimating, Cost Aggregation, Value Engineering, Cost Escalation, Vendor Bid Analysis, Cost of Quality