2.1.2 Cost Estimate Classifications

Question 1

1

primary parameter for the classification of estimates

Answer 1

1

maturity level of project definition upon which the estimate is based

purpose of the estimate

methodology used in development of the estimate

acuracy of the estimate

relative effort required to produce the estimate

Question 2

1

ACCURACY RANGE

Answer 2

1

An expression of an estimate’s predicted closeness to final actual costs or time. Typicallyexpressed as high/low percentages by which actual results will be over and under the estimate along with the confidence interval these percentages represent

Question 3

1

Allowance

Answer 3

1

For estimating, resources included in estimates to cover the cost of known but undefined requirements for an individual activity, work item, account or sub-account.

Question 4

1

Contingency

Answer 4

1

An amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, or effect is uncertain and that experience shows will likely result, in aggregate, in additional costs

Question 5

1

KNOWN-UNKNOWN

Answer 5

1

An identifiable quantity or value having variability or an identifiable condition lacking certainty

Question 6

1

UNKNOWN-UNKNOWN

Answer 6

1

A quantity, value or condition that cannot be identified or foreseen, otherwise referred to as unknowable

Question 7

1
The term “unit hours” refers to

Answer 7

1

Work hours per unit of production.

Question 8

1

LEARNING CURVE

Answer 8

1

A graphic representation of the progress in production effectiveness as time passes

Question 9

1

PROFITABILITY

Answer 9

1

A measure of the excess income over expenditure during a given period of time

Question 10

1

PROFITABILITY ANALYSIS

Answer 10

1

The evaluation of the economics of a project, manufactured product, or service within a specific time frame.

Question 11

1

VARIANCE

Answer 11

1

The difference between what was originally expected and what actually happened

Question 12

1

The key areas are to be practice by the Cost Estimator

Answer 12

1

The key areas are: Ethics; Leadership; Information Management; Quality Management; Value Management; Health and Safety. If all of these are practiced by the Cost Estimator, there will be continuous improvement in the estimating process and the final project or process that is being produced.

Question 13

1

What allows an ethical behavior, well develop database

Answer 13

1

Ethical behavior leads to a more harmonious society.
A well‐developed database leads to a quality estimate.
The input of cost estimating is important to value engineering to provide a more effective project.
The continuous use of the Deming Cycle (Plan‐Do‐Check‐Act) leads to better estimates.

Question 14

1

CONCEPT PHASE

Answer 14

1

First phase of a project in which need is examined, alternatives are assessed, the goals and objectives of the project are established and a sponsor is identified

Question 15

1

PARAMETRIC ESTIMATE

Answer 15

1

In estimating practice, describes estimating algorithms or cost estimating relationships that are highly probabilistic in nature

Question 16

1

Location Factor

Answer 16

1

An instantaneous (current – has no escalation or currency exchange projection) overall total project factor for translating the summation of all project cost elements of a defined construction project scope of work, from one geographical location to another. Location factors include given costs, freights, duties, taxes, field indirects, project administration, and engineering and design. Location factors do not include the cost of land,scope/design differences for local codes and conditions, and the cost for various operating philosophies.

Question 17

1

Uncertainty

Answer 17

1

The total range of events that may happen and produce risks (including both threats and opportunities) affecting a project (Uncertainty = threats + opportunities.)

2

All events, both positive and negative whose probabilities of occurrence are neither 0% nor 100%. Uncertainty is a distinct characteristic of the project environment.

Question 18

1

Strategic Risk

Answer 18

1

A risk for which the potential impact threatens a project objective, even if the probability of occurrence is low or risk matrix severity rating is within screening thresholds. In projects, these risks are generally funded through management reserves.

Question 19

1

TACTICAL RISK

Answer 19

1

Risk for which the potential impact does not significantly threaten an overall project objective or have a significant potential impact on enterprise, portfolio or other higher objectives or plans beyond the project level.

Question 20

1

Risk Management goal

Answer 20

1

Risk Management is designed to reduce the risk caused by uncertainty.

Question 21

1

Range estimating

Answer 21

1

A formalized risk analysis technology that synergistically combines Pareto’s law to identify the relatively few critical elements, heuristics governing the assignment of probabilistic ranges to such elements, and Monte Carlo Simulation to provide decision making information quickly and at reasonable effort.

Question 22

1

CONTRACT, COST PLUS CONTRACTS

Answer 22

1

In cost plus contracts the contractor agrees to furnish to the client services and material at actual cost, plus an agreed upon fee for these services. This type of contract is employed most often when the scope of services to be provided is not well defined.

Question 23

1

methods of estimating algorithms:

Answer 23

1

There are five major methods of estimating algorithms:
Factored
End‐Product Unit
Capacity Factor
Physical Dimension
Parametric

Question 24

1

Factored Estimates

Answer 24

Ratio or factored estimating methods are used in situations where the total cost of an item or facility can be reliably estimated from the cost of a primary component. Two of the most popular types of this method are the Lang and Hand Factors. Both the Lang and Hand Factors are based on the cost of equipment in a process plant. The Lang Factor is a ratio of the equipment cost to the total installed plant cost. The Hand Factor is a ratio of the individual equipment item cost to the direct field cost of the installed item, excluding instrumentation.

The Hand Factor does not account for project indirect costs.

Question 25

1

End‐Product Unit Estimate

Answer 25

1

This method is used when the estimator has enough historical data available from similar projects torelate the end‐product units (capacity units) of a project to its construction costs.

Question 26

1

Capacity Factor Method

Answer 26

1

A capacity‐factored estimate is one in which the cost of a new facility is derived from the cost of a similar facility of a known (but usually different) capacity.

Question 27

1

Parametric Method

Answer 27

1

A parametric estimate comprises cost estimating relationships (CERs) and other parametric estimating functions that provide logical and repeatable relationships between independent variables, such as design parameters or physical characteristics and the dependent variable, cost. A very simple example of this would be a highway where the concrete, reinforcing, and finishing are of constant cross section and the only input needed to calculate the quantities is length.

Question 28

1

attributes that make a good code of accounts

Answer 28

1

There are four attributes that make a good code of accounts

Usage: The code of accounts must be designed in a way that serves the stakeholders needs.

Content: The amount of content that can be included in a code is limitless, but it must be restricted to a level that does not become burdensome to the users.

Structure and Format: Structure and format increases usability and providing definitions of all elements in a reference dictionary or similar document improves clarity.

Standardization: A consistent coding structure on all projects assists users and provides a better historical record.

Question 29

1

BENCHMARKING

Answer 29

1

A measurement and analysis process that compares practices, processes, and relevant measures to those of a selected basis of comparison (i.e., the benchmark) with the goal of improving performance.