project and change management

Hi,

Estimate Cost can defined as the process of developing an approximation of the monetary resources needed to complete the project activities. The project can include such costs as resources which can be people, contractor or equipment. General administrative fees, license fees, supplies. After the estimate is approved by the stakeholders, the estimate will become the budget for the particular project. There are some estimation techniques that can help make accurate estimates for the projects.

Estimating by guessing. This is a technique that estimate by guessing or picking number. Mostly the estimation relies on experts, iteration of guesses is done until consensus is reached, compare and make average guesses.

There is also Top Down Approach in which top management determines overall resource, effort and time. Another approach is Bottom Up Approach. In this approach time, resource and effort are constructed from wbs. In other words, ideas will start from individuals who will be carrying out the actual job.

Also project managers use the technique of Analogues Estimate which historical data as the basis for estimating. In addition to that, some managers use Parametric Approach. This approach uses mathematical parameters to make accurate estimates.

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Thanks and Regards

Turaboy Holmirzaev 

Cost Estimate Tools and Techniques

One of the first task when managing a project is the cost estimate. A cost estimate must be accurate and reliable.  These factors are so important for a small business because its resources are limited. Also, the more accurate your estimate of the project cost is the better you will be able to manage your project's budget.

Tools and Techniques

There are four tools to estimate costs in project management.

1. Analogous Estimating: This estimating method generally used at the start of the project when not much is known. It compares the current project with past similar projects. It is an easy method of estimating but it is not so accurate. The analogous estimating also known as the Top-Down Estimating.

2. Parametric Estimating: Parametric estimating used for estimates that are quantitatively based such as dollars per square foot. It uses historical data to calculate cost estimates. It takes variables from similar projects and applies them to the current project. The accuracy of this estimating method is better than the analogous estimation because it uses more than one data set.

3. Three-Point Estimating:  This technique is used to reduce the uncertainties in estimating assumptions.  It accounts for uncertainty associated with estimating by determining an optimistic, most likely, and pessimistic scenario. PERT (Program Evaluation and Review Technique) is the most commonly used method in three-point estimation technique. 

PERT estimate formula is

(O + 4M + P) / 6

4. Bottom-up Estimating:  Used when there is significant detail about the activity. It is also known as the "Definitive Technique".  This estimation technique is the most accurate, time-consuming, and costly technique for estimating the cost. In this technique, the cost of each single activity is determined with the greatest level of detail at the bottom level and then rolls up to calculate the total project cost. 

When during the project life cycle the tools should be used and why?

As we discussed before, project management life cycle contains five steps: Initiation, Planning, Execution, Monitoring/Control, and Closure. The cost estimates tools and techniques are used during the planning phase. 

References:

daniyal, Usmani, F., Khanzada, A. A., Dash, S., O, J., Thomas, L., … ali, saif. (2012, June 30). Home. Retrieved January 30, 2017, from https://pmstudycircle.com/2012/06/4-tools-to-estimate-costs-in-the-project-management/

Stackpole, C. S. PMP certification: 4 estimating techniques for project managers. Retrieved January 30, 2017, from PMP Certification, http://www.dummies.com/careers/project-management/pmp-certification/pmp-certification-4-estimating-techniques-for-project-managers/

Markgraf, B. (2017). Project management cost estimating techniques. Small Business Chron. Retrieved from http://smallbusiness.chron.com/project-management-cost-estimating-techniques-40508.html

Regards

Abdullah Karatas 

Cost Estimate Tools and Techniques