Project Estimating
Project Estimating and Control Techniques
CPMGT/303
July 12, 2014
Project Estimating
Cost management planning happens early on in the project planning phase and should be refined throughout the project’s life cycle as additional details become available. The project’s cost management plan sets the framework for all of the project’s cost management processes. The accuracy of estimating a project’s cost is essential to the successful or failure of the project. This makes choosing the right estimating techniques crucial for a project. Expert judgment provides an insight to past experiences, environments, and historical information from past similar projects. This information is compared and analyzed against
…show more content…
Bottom-up estimating can be used when individual work packages or activity segments of the project need to be estimated. Bottom-up estimating takes the detailed costs and then rolls those cost details up to a higher level activity segment or work package (Project Management Institute, 2008). An example of this would be estimating all the resources and facility costs and rolling the information up into the overall project estimate.
Three-point estimating takes a single-point activity and use probability distribution to approximate what can happen in the future. This technique takes uncertainties and risks into consideration and is considered a more accurate technique as the three points clarify and determine the risk level or range of uncertainty for the cost estimate (Project Management Institute, 2008).
Determining the most appropriate estimating technique for the project is important. Choosing the right technique depends on the amount of information you have from past similar projects, and the information you have regarding the current project, such as scope baseline, project schedule, human resource plan, risk register, enterprise environmental factors, and organizational process assets (Project Management Institute, 2008). It is also important to know how much time and money the
project data from work breakdown structures and schedules" and comparing it to "topdown project goals." After this, the teams are to estimate investment risks
Cost Management is used to outline the costs of planning a project. Estimating costs through data collection, design planning, and budgeting are used throughout facility planning to reduce costs
In this work related project analysis various information will be for gathering information. Some of the areas that will be covered are; methods of searching, interviewing techniques to gather the information, agreement for articulating requirements, and strategies to gather information for computerization. Requirements must
(TCO B) You are the project manager for three projects. You are about to estimate costs for these three projects. Given the below information on each project, recommend an appropriate estimation method and justify your answer for each.
592 Week 1 DQ 1 WBS Construction PROJ 592 Week 1 DQ 2 Project Cost Estimates and Assumptions PROJ 592 Week 2 DQ 1 Cost Components PROJ 592 Week 2 DQ 2 Estimating Processes PROJ 592 Week 3 DQ 1 Project Schedules PROJ 592 Week 3 DQ 2 Sensitivity Analysis PROJ 592 Week 4 DQ 1 Resource Allocation and Leveling PROJ 592 Week 4 DQ 2 Advanced Schedule Techniques PROJ 592 Week 5 DQ 1 Earned Value Calculation PROJ 592 Week 5 DQ 2 Project Monitoring and Control & EV PROJ 592 Week 6 DQ 1 Forecasting Project Completion Cost PROJ 592 Week 6 DQ 2 Project Control PROJ 592
1.2 The basis of an estimation is made up of three main categories. These are Labour, Materials and Plant and together, they define the approximated final price of the project. However, these do not include extras such as overheads, profits or preliminaries.
The earned value analysis has led to see the project will control the actual budget, which is $18,000. The actual cost at the period 4 totaled to be $7,050, and total of earned value at period 4 is $7,750. The estimate at completion for typical is $22,550. These variances show that this project will exceed the original budget of $18,000, so we are still exceeding the project’s original budgets. The SPI is less than a value of 1, which means that the project will also over schedule and activity plans. The requests immediate actions from the third-party company.
This falls into the comparative estimation method that the book calls parametric estimation. We would start by finding the most similar projects and to define the cost estimation based on what we historically has been our cost values. Most of our products are made out of about 10 different materials we use regularly so we are able to easily estimate our material costs as well as lead times for acquiring material. Since we use this parametric estimation we are able to also estimate our cost times for production, inspection and any assembly requirements by comparing to similar products. If we are comparing though to a product that has not been produced recently we will estimate costs based on inflation to ensure that we are accounting for changes in economic times.
Projects are used today as a way of achieving a variety of outcomes in local or international locations for new constructions, new product development, product improvement, process design, process improvement, utility installation, theory and technology development, and many more. Bringing a project to a successful conclusion requires the integration of numerous management functions like controlling, directing, team building, communication and others. It also requires cost and schedule management, technical and risk management, conflict and stakeholder 's management, and life cycle management.
budget. As the project evolves, additional information is discovered and further estimates are produced. This is an extremely important process and we cannot emphasize enough the need for this re‐estimation or re‐budgeting process at each phase of the project. In any case, for the purpose of this article, we will call the revised budget the "actual budget." Another standard activity is to provide management with an expected cash flow. From a financial perspective this is an important activity, but it also can be used as your cost expectation.
The Measurement Construct utilized in the Riordan Project is based on the adherence to estimate. Accurate project estimation is crucial in keeping project costs down and stakeholders happy. The Key Performance Indicator project managers want to minimize is expressed by the formula [(E-A)/E], where E = estimated Value to complete project and A = actual Value used to complete project. Project managers can substitute any value into the equation, such as hours or cost, to determine adherence to estimate. This will allow the project management team to spot trends early on during the project and then make the necessary adjustments.
The cost planning is one of important phases for project management. It will goes through whole project’s life cycle. It is foundation of project and it will tell the project are measured, reported and controlled in every process. Estimating is the process of forecasting or approximating the time and cost of completing project deliverables.
The project priorities are in regards what should be prioritised in the project. What is to be taking in regards in terms of cost is (budget), time (schedule), and performance (scope) of the project. What is important to emphasise on here is how these three correlate with one another. In a case where time is important it would be necessary to perform faster, which will prevent a quality outcome, hence lead to reduced costs. The importance of a project manager is to control the trade-offs between budgets and scope. The project managers functions as a link between upper management and project customers. The project manager needs to have keen understanding of project scope in order to fulfil the requirements for the customers and how prioritize the demands. The customer can also add requirements and then the manager needs to prioritize the requirements in regards to the project. An important method is to use the priority matrix to identify what is worth prioritizing more. The constrain is stick and have to be obliged to the first agreements made between the customer, this includes, the specifications and scope of the project or the budget. The enhance includes time and costs. The enhance is an essential factor seeing where to emphasize on either on reducing costs or
Project Cost Management – controlling the cost of the project, which includes estimating, budgeting, financing, funding, and managing costs of each task.
For instance, the concept of cost estimation which assists in estimating future expenditure as the expenditure depends on the cost of the respective activities can be applied in the setting of a budget which is simply an estimate and schedule of all costs required to be assigned to an activity. One can make an estimation of the resources required for an activity by applying the cost estimation techniques. Since there are limiting factors to each activity such as scarcity of resources for activities, the concept of constraints can be applied together with the concept of cost volume profit analysis to ensure that maximum benefits are driven from the scarce resources and the number of activities that are available. This facilitates the allocation of resources that most equitable and profitable. The theory of constraints is also applicable in the process of setting up budgets. In setting up budget one considers the amount of resources that are available and cannot therefore set a budget plan that exceeds the amount of resources that are available. This implies that the budget is constrained by the amount of