7.2 Estimate costs

Question 1

What is estimate cost process?

Answer 1

Process of developing an approximation of the monetary resources needed to complete project activities

This is a prediction based on the information known at a given point in time

Question 2

What additional information is usually added along with cost estimates?

Answer 2

• identification and consideration of costing alternatives to initiate and complete the project
• Cost trade offs and risks should be considered such as make vs buy, buy vs lease and sharing of resources to achieve optimal costs for the project

Question 3

what is one basic assumption regarding cost estimates for projects?

Answer 3

Basic assumption is whether the estimates will be limited to direct project costs only or whether the estimates will also include indirect project costs

Question 4

Inputs to Estimate Costs

Answer 4

Cost management plan:

Question 5

what are the resource considerations for cost estimates?

Answer 5

labor
material
equipment
services
facilities
special categories - inflation allowance, cost of financing, contingency costs

Question 6

At what level normally cost estimates are provided?

Answer 6

It may be presented at activity level or in summary form

Question 7

What are the inputs to Estimate Costs?

Answer 7

Cost Management Plan
Human Resource Management Plan
Scope Baseline
Project Schedule
Risk Register
Enterprise Environmental Factors
Organisation process assets

Question 8

How is cost management plan used for Estimate Costs?

Answer 8

It defines how project costs will be managed and controlled. It includes the method used and the level of accuracy required to estimate activity costs

Question 9

How does human resource management plan help in Estimate Costs process?

Answer 9

It contains below info required for estimation:
project staffing attributes
personnel rates
rewards and recognition

Question 10

How does Project scope statement help in estimations?

Answer 10

it contains the assumptions and boundaries and constraints about the project. one key assumption is whether the estimates will be limited to direct project costs or whether indirect project costs will also be considered during estimations. one of the most common constraints is limited project budget

Question 11

How does WBS help?

Answer 11

provides relationship among all the components of the project and the project deliverables

Question 12

how risk register helps with estimation?

Answer 12

because risk responses often results in cost. Risks which can be threats or opportunities have an impact on activity and overall project costs

Question 13

What are the enterprise env factors that have an impact on cost estimates?

Answer 13

market conditions

published commercial information

Question 14

Whaht are the tools and techniques for estimates cost?

Answer 14

expert judgement
analogous estimating
parametric estimating
bottom-up estimating
three-point estimating
reserve analysis
cost of quality
proj mgmt software
vendor bid analysis
group decision making techniques

Question 15

what is analogues cost estimating?

Answer 15

It uses the values such as scope, cost, budget and duration or measures of scale such as size, weight and complexity from a previous similar project as the basis for estimating the same parameter for a current project. it relies on the actual cost of previous similar projects.

It is used when there is a limited amount of details infor about the project, e.g. in the early phases of the project.

Question 16

what is a parametric estimation

Answer 16

it uses a statistical relationship between relevant historical data and other variables to calculate a cost estimate for project work.

it can produce higher levels of accuracy depending upon the sophistication and underlying data build into the model

Question 17

What is three-point estimating?

Answer 17

This is a method to improve the accuracy of estimates by considering estimation uncertainty and risk and using 3 estimates to define an approximate range for an activity’s cost. It estimates:

Most likely - based on realistic effort assessment and any predicted expenses

Optimistic - cost based on best case scenario for the activity

Pessimistic - based on worst case scenario

Question 18

What are the 2 formulae used in 3 point estimation

Answer 18

triangular distribution = (co+ cm + cp)/3

beta distribution = (cO+ 4cM + cP)/6

Question 19

What is reserve analysis ?

Answer 19

This is mainly about having two kinds of cost reserves - contingency reserves and management reserves

Question 20

What is the difference between contingency reserve and management reserve?

Answer 20

Contingency reserve - part of the cost baseline. Used to account for known-unknowns. It is used, reduced, or eliminated as more precise information about the project becomes available. This is part of the overall funding requirements of the project and should be part of the cost documents.

Management reserve - this is the project budget withheld for management control purposes and are withheld for unforeseen work that are within the scope of the project. Not part of the cost baseline but part of overall project funding requirements.

Question 21

How is cost of quality helping with the estimates?

Answer 21

Assumptions about costs of quality maybe used to prepare the activity cost estimate

Question 22

What are the project management software used for estimating ?

Answer 22

Posit management software applications, computerised spreadsheets, simulation, and statistical tools are used to assist with cost estimating

Question 23

Ho PM tools help with estimating?

Answer 23

Such tools can simplify the use of some cost estimating techniques and thereby facilitate rapid consideration of cost estimate alternatives

Question 24

What is vendor bid analysis?

Answer 24

Cost estimating methods may include analysis of what the project should cost, based on the responsive bids from qualified vendors. When projects are awarded to a vendor under competitive processes, additional cost estimating work may be required of the project team to examine the price of individual deliverables and to derive a cost that supports the final total project cost.

Question 25

what is group decision-making techniques?

Answer 25

It is an assessment process having multiple alternatives with an expected outcome in the form of future actions.

Question 26

How is group decision-making techniques useful in estimating ?

Answer 26

These techniques are useful for engaging team members to improve estimate accuracy and commitment to the emerging estimates.

By involving a structured group of people who are close to the technical execution of work, additional information is gained and more accurate estimates are obtained

Question 27

What are activity cost estimates?

Answer 27

These are quantitative assessments of the costs required to complete project work.

Question 28

What are the typical resources for which costs are estimated as part of activity cost estimates ?

Answer 28

Direct labour,materials ,equipments,Services,facilities, information technology

It also includes special categories such as cost of financing including interest charges , inflation allowances, exchange rate, or a cost contingency reserve.

Indirect costs could be included at activity level or at higher levels

Question 29

What are the typical supporting details provided as part of activity cost estimates?

Answer 29

/documentation of the basis of the cost estimates(how was it developed)
/assumptions made
/any known constraints
/indications of the range of possible estimates +/-10%
/indication of the confidence level