7.2 Estimate costs Flashcards
What is estimate cost process?
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
What additional information is usually added along with cost estimates?
- 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
what is one basic assumption regarding cost estimates for projects?
Basic assumption is whether the estimates will be limited to direct project costs only or whether the estimates will also include indirect project costs
Inputs to Estimate Costs
Cost management plan:
what are the resource considerations for cost estimates?
labor material equipment services facilities special categories - inflation allowance, cost of financing, contingency costs
At what level normally cost estimates are provided?
It may be presented at activity level or in summary form
What are the inputs to Estimate Costs?
Cost Management Plan Human Resource Management Plan Scope Baseline Project Schedule Risk Register Enterprise Environmental Factors Organisation process assets
How is cost management plan used for Estimate Costs?
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
How does human resource management plan help in Estimate Costs process?
It contains below info required for estimation:
project staffing attributes
personnel rates
rewards and recognition
How does Project scope statement help in estimations?
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
How does WBS help?
provides relationship among all the components of the project and the project deliverables
how risk register helps with estimation?
because risk responses often results in cost. Risks which can be threats or opportunities have an impact on activity and overall project costs
What are the enterprise env factors that have an impact on cost estimates?
market conditions
published commercial information
Whaht are the tools and techniques for estimates cost?
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
what is analogues cost estimating?
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.
what is a parametric estimation
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
What is three-point estimating?
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
What are the 2 formulae used in 3 point estimation
triangular distribution = (co+ cm + cp)/3
beta distribution = (cO+ 4cM + cP)/6
What is reserve analysis ?
This is mainly about having two kinds of cost reserves - contingency reserves and management reserves
What is the difference between contingency reserve and management reserve?
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.
How is cost of quality helping with the estimates?
Assumptions about costs of quality maybe used to prepare the activity cost estimate
What are the project management software used for estimating ?
Posit management software applications, computerised spreadsheets, simulation, and statistical tools are used to assist with cost estimating
Ho PM tools help with estimating?
Such tools can simplify the use of some cost estimating techniques and thereby facilitate rapid consideration of cost estimate alternatives
What is vendor bid analysis?
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.
what is group decision-making techniques?
It is an assessment process having multiple alternatives with an expected outcome in the form of future actions.
How is group decision-making techniques useful in estimating ?
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
What are activity cost estimates?
These are quantitative assessments of the costs required to complete project work.
What are the typical resources for which costs are estimated as part of activity cost estimates ?
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
What are the typical supporting details provided as part of activity cost estimates?
/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
