COST ESTIMATION IN PROJECT MANAGEMENT: OUR TECHNIQUES AND TIPS

Cost Estimation in project management is how the costs of a particular project are estimated, allocated, and controlled, allowing companies to identify and forecast future expenditures to ensure that they do not exceed the company’s budget. The expected costs are calculated during the planning phase of the project and must be approved before the start of work on the project. The expenditures are documented and tracked during the implementation of the project so that all operations go within the cost management plan. Once a Cost Estimation in project management is completed, projected costs are compared to actual costs, providing specific benchmarks for future cost management plans and budgets for upcoming projects. PROJECT COST ESTIMATING METHOD cost estimation in project management. Cost Estimation in project management specialists uses a range of pricing or cost estimation techniques that allow the preparation of cost estimation methods with different levels of accuracy. The cost estimation techniques always aim to prepare the most accurate cost estimation possible. They may have to start with less accurate cost estimate sometimes and review them once the project scope and final size are clarified, and here We will explain the most important and widely used cost estimation techniques: Analogous cost estimation techniques A similar cost estimation method is based on past experience gained from older projects undertaken by companies, also called a back-down or historical cost estimate, and is based on data from previous projects to prepare cost estimates for new projects that are similar. The corresponding estimate is prepared based on a ready-made archive for this purpose that includes the data of old projects, and often relying on previous projects of the same company. When the company implements project cost estimation methods repeatedly or similar to old projects. It uses the data for these projects and approves it in drawing up the cost plan for the project. BOTTOM-UP ESTIMATING Also called analytical estimation, it is the most accurate estimating method using the Work Breakdown Structure (WBS) method in which the project outputs are divided into a series of packages. Each package consists of a series of tasks, and the project team estimates the cost of each of these tasks. All the way to creating cost estimate techniques for the entire project by grouping the costs of these parts or tasks together. Hence the name of this method – incremental estimation. PARAMETRIC ESTIMATING This type of cost estimate is used in projects that include similar and repetitive tasks, and it is used to create a cost estimate for a single task or unit. Then multiply the number of tasks or units by the cost of that task or unit, thus obtaining the total cost of the project. It is an estimate of the cost of one meter of a pipeline, for example, or the cost of painting a specific area such as a ceiling or wall to know the total cost of the entire project. It must always ensure the accuracy of the assessment of the task or single unit. COST ESTIMATION TECHNIQUES It is an empirical cost estimation method based on the opinions or consensus of experts in the field of estimates where the project coordinator sends cost estimation questionnaires to a group of experts in two or more rounds. After each round, the coordinator sends a summary containing a summary of the expert cost estimates from the previous round explaining. The reasons why Their judgments are built on that basis, and thus experts are encouraged to revise their previous questionnaires based on feedback from other experts. As this process is repeated, the range of answers will shrink and the estimates converge to the exact estimate or correct answer. HOW DO EXPERT JUDGMENT? This cost estimation technique is the most used technique especially in estimating average projects. Expert cost estimation techniques are done by professionals who know how much similar projects have been done in the past cost. As such, experts rely primarily on similarities between past and future projects to create and adjust estimates. Since no two projects are likely to be exactly the same, expert estimates are presented as a range of values. While a broad range usually means that these estimates will not be widely adopted, Project management professionals point out that these broad scope estimates are only intended to indicate the project’s feasibility and provide an approximate figure for project managers. WHAT IS RESOURCE COSTING? Resource costing is a simple mathematical method for calculating the costs of employing certain resources for a project. It is easily done by multiplying the hourly cost of hiring a supplier by the number of expected hours of work. WHAT IS THREE-POINT ESTIMATING TECHNIQUES? Appreciation of the three points based on a statistical method called program analysis and technical audit (Program Analysis and Review Technique PERT). Which are used to analyze the activity or project costs or the length of time by setting the optimistic and pessimistic estimates and more likely for each activity. The three-point estimation uses a variety of equation methods to calculate costs, expected duration of costs, optimistic duration, costs, pessimistic duration, and weighted costs and duration. WHY WE USE OF ESTIMATING SOFTWARE? Project management software can simplify, speed up and improve the cost estimating process. You can use a variety of construction estimation project management software to generate cost estimates or to determine uncertainty levels in cost estimates through the use of probabilistic modeling. WHAT IS INITIAL COST ESTIMATE FOR THE PROJECT? Companies rely on the initial cost report in the process of approving the establishment of new projects. And this report plays an important role in the process of determining the scope of the project is approved and approved. If the cost estimates are too high, the company may decide to scale back the project to fit its budget (it is necessary to secure funding to get the project started). And once the project is started the cost estimate is used to manage all of its costs in order to keep the project within budget.