Project Cost Estimation
This article is about Project Cost Estimation. As we told you several days before that Project Cost Estimation is really important for the project for the future. It is like a planning. If you fail in planning, it means that you plan for failing. So, this matter of Project Cost Estimation is super important. Everything in this Project Cost Estimation process, you cannot take it lightly.
Project Cost Estimation
Project Cost Estimation, based on Wikipedia, is the approximation of the cost of project. The project cost estimate is the product of the project cost estimating process. The project cost estimate has a single total value and may have identifiable component values. A problem with a cost overrun can be avoided with a credible, reliable, and accurate cost estimate. An estimator is the professional who prepares cost estimates. There are different types of estimators, whose title may be preceded by a modifier, such as building estimator, or electrical estimator, or chief estimator. Other professional titles may also prepare estimates or contribute to estimates, such as quantity surveyors, cost engineers, etc. In the US, there were 185,400 cost estimators in 2010. There are around 75,000 professional quantity surveyors working in the UK.
The U.S. Government Accountability Office (GAO) defines a cost estimate as, “the summation of individual cost elements, using established methods and valid data, to estimate the future costs of a program, based on what is known today.” The GAO reports that “realistic cost estimating was imperative when making wise decisions in acquiring new systems.”
Project cost estimation is often needed to support evaluations of project feasibility or funding requirements in support of planning. A cost estimate is often used to establish a budget as the cost constraint for a project or operation.
In project management, project cost management is a major functional division. Project Cost Estimation is one of three activities performed in project cost management.
In cost engineering, Project Cost Estimation is a basic activity. A cost engineering reference book has chapters on capital investment cost estimation and operating cost estimation. The fixed capital investment provides the physical facilities. The working capital investment is a revolving fund to keep the facilities operating.
In system, product, or facility acquisition planning, Project Cost Estimation is used to evaluate the required funding and to compare with bids or tenders.
In construction contracting, Project Cost Estimation is usually prepared to submit a bid or tender to compete for a contract award.
In facility maintenance and operation, Cost Estimations are used to establish funding or budgets.
In an attempt to manage liability risk, some firms avoid the use of the word estimate and instead refer to the estimate as an “Opinion of Probable Cost.”
Common project cost estimation classifications historically used are
- Order of magnitude
- Detailed estimate
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