6. Introduction to the Estimation Process

Question 1

What is the objective of cost estimating?

Answer 1

The objective of cost estimating (or cost planning) is to define as accurately as possible the minimum realistic cost of executing an activity. The estimating task may be carried out by any project party but is usually done by, or on behalf of, the contractor or promoter to determine their costs.

Question 2

What is the purpose of a cost estimate?

Answer 2

> comparing alternative technical solutions;
identifying financial commitment;
as a basis for tendering;
as a yardstick against which performance can be measured.

Question 3

What is the difference between a cost plan and a tender?

Answer 3

A cost plan, in this context, is developed from the point of view of the promoter and can be used to first budget for the project and also to evaluate many tenders. It usually becomes the baseline for cost comparisons and monitoring during construction. A tender is the result of a contractor’s estimating activities and provides a bid for the work to be done for the promoter.