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The process of estimating the amount, cost, and price of resources required by a project's scope is known as project cost estimation. “Cost estimating involves a degree of uncertainty because it is about predicting expenses rather than calculating actual expenditures.
The goal of cost estimation is to anticipate the quantity, cost, and price of resources needed to finish a job within the project scope. Cost estimates are used to bid on new business from potential clients and to help you plan your project and budget.
Project cost estimations forecast the resources and financial investment needed to execute a project successfully. The objective of estimation is to find all the costs related to the project in order to produce a precise budget and timeline.
Cost estimating enables you to do what you claim you will within the financial limits imposed by executives and stakeholders. When it comes to setting up a project's parameters, precise project cost estimating must take the front seat as one of the defining elements of successful progress.
There are three key components to every cost estimate. The first step is to create standard units of measurement. The determination of the number of units for every element, which is an actual measuring process: how many linear metres of wire, how many boxes, and so on, is the second element of an estimate.
Analogous estimating, also known as top-down estimating, use prior project data to produce estimates for new projects, similar to an expert opinion.
Analogous estimating is based on a custom-built archive of prior project data, which is often unique to a company.
When a company undertakes similar projects on a regular basis, it becomes simpler to draw parallels between the deliverables and associated expenses and to adapt those according to the project's magnitude and complexity.
If a comprehensive work breakdown structure is open, this technique, also known as analytical estimating, is the most precise estimating method. The project deliverables are divided into work packages using a work breakdown framework (each work suite is comprised of a series of tasks).
The project team calculates the cost of finishing each task, and then totals the expenses of all the project's principal tasks and work suites to arrive at a cost estimate for the overall project — thus it is named bottom-up estimating. Bottom-up estimates can benefit from the knowledge of experienced project team members, who are thoroughly trained and professionally qualified to estimate the project costs.
The parametric estimating method is used to develop extremely precise estimates using the unit price cost of the items that are involved in similar projects with a high level of consistency.
To use parametric estimating, first, break down the project into work units. “Then calculate the cost per unit and then multiply it with the number of units.
Finally, multiply the total cost by the cost per unit to get an estimate of the overall cost. These units could be the length of conduit to be put in meters or feet; the area of wall or ceiling to be painted in meter square or square yards. Estimators can make very exact and accurate estimations as long as the cost per unit is correct.
People frequently use the terms budgeting and project cost estimates interchangeably, as they have the same mental image in mind when considering one or the other. The two, however, are essentially just two sides of the same coin. Although they are extremely similar, there are some minor distinctions between the project cost estimate and the project budget.
Cost estimating is the method of calculating how much each resource will cost to execute a project. Everything that needs to be compensated for, in terms of the project is referred to as resources.
This includes labour, materials, land, and associated items. You will receive a single cash figure at the end of the process that signifies the total of everything you've quantified for.
That estimate is used in budgeting. Before you begin budgeting, you must have a rough notion of how much anything will cost. Budgeting is the method of determining the sources of cash to be used to cover the cost estimate rather than the amounts.
A cost baseline is the project's approved budget, split down into a list of wages, raw materials, equipment, and other expenses. It's the total of the project's cost estimates for all of the tasks.
Management reserves are the variation between the cost baseline and the project budget.
You'll compare performance to the baseline, but you'll also require the management reserve, which is included in the project budget, to deal with unforeseen risks. The cost baseline is made up of the work in the WBS plus contingency reserves.
Concrete work (measured in cubic metres), reinforcing work (measured in kilogrammes), and formwork is the RC components (measured in square meter). The quantity take-off (QTO) analysis was supported by a spreadsheet application. As indicated in the equation, the quantity of concrete work (QC) was calculated as the sum of all RC beams or columns based on the concrete section area (AC) and the length of RC beams or columns (L) (1). The total area closest to the required area should be used to determine the number and diameter of reinforcement bars (AR)”. The number and length of rebars (LR) were used to determine the quantity of reinforcing work (QR), which was then converted into weight units (metre to a kilogramme)
Exclusions: The project scope includes a list of tasks, items, and actions that are specifically excluded. Assumptions are a list of tasks, items, actions, and conditions that are assumed to be true but haven't been properly defined or necessitate further examination.
End users will be available to test during the agreed-upon timeframe.
Delivery: The project servers are delivered in good working order.
Budget — the project's expected cost.
Finances - the amount of money needed to finish the project.
Scope - the breadth of what you'll be delivering.
I hope the above blog provides you with an in-depth knowledge of Project Cost Estimate.
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