Estimate Costs
Estimate Costs is the process of developing an approximate monetary assessment of the resources needed to complete project activities.
Explanation
Estimate Costs involves developing a quantitative assessment of the probable costs of resources required to complete project work. Cost estimates are typically expressed in units of currency, though in some cases other units of measure such as staff hours or staff days may be used.
Costs are estimated for all resources charged to the project, including labor, materials, equipment, services, facilities, information technology, and special categories such as an inflation allowance, cost of financing, or contingency costs. The accuracy of a project estimate increases as the project progresses through its life cycle.
Key tools and techniques include analogous estimating, parametric estimating, bottom-up estimating, three-point estimating, data analysis (alternatives analysis and reserve analysis), the project management information system, and decision making. The primary outputs are activity cost estimates and the basis of estimates documentation.
Key Points
- •Estimates are refined as more information becomes available
- •Includes both direct and indirect costs
- •Activity cost estimates and basis of estimates are the key outputs
- •Uses multiple estimating techniques depending on available data
Exam Tip
Estimate Costs produces activity cost estimates, not the project budget. The budget is created in the Determine Budget process by aggregating cost estimates.
Frequently Asked Questions
Related Topics
Analogous Cost Estimating
Analogous cost estimating uses the cost of a previous, similar project or activity as the basis for estimating the cost of the current project or activity.
Parametric Cost Estimating
Parametric cost estimating uses a statistical relationship between historical data and other variables to calculate a cost estimate for project work.
Bottom-Up Cost Estimating
Bottom-up cost estimating involves estimating the cost of individual work packages or activities and then aggregating those estimates to arrive at a total project cost.
Three-Point Cost Estimating
Three-point cost estimating improves the accuracy of single-point estimates by considering estimation uncertainty and risk through optimistic, most likely, and pessimistic cost values.
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