Analysing Estimate Costs For Project Management
Estimate cost for project management is the process of developing an approximation of the cost of resources needed to complete project work. The key benefit of this process is that it determines the monetary resources required for the project. This process is performed periodically throughout the projects as needed.
A cost estimate is a quantitative assessment of the likely cost for resources to complete the activity. It is a prediction that is based on the information known at a given point in time. Cost estimate includes the identification and consideration for cost alternative to initiate and complete the project. Cost trade-offs and risks should be considered such as make versus buy, buy versus lease and the sharing of resources in order to achieve optimal cost for the project.
Cost estimates are generally expressed in units of some currency i.e dollars, euros, yen e.t.c. Although in some instances other units of measure, such as staff hours or staff days, are used to facilitate comparisons by eliminating the effects of currency fluctuations.
Cost estimates should be reviewed and refined during the course of the project to reflect additional details as it becomes available and assumptions are tested. The accuracy of a project estimate will increase as the project progresses through the project life cycle.
For example, a project in the start-up phase may have a rough order of magnitude (ROM) estimate in the range of -25% to +75%. Later in the project, as more information is known, the definitive estimate could narrow the range of the to -5% to +10percent. In some organisations, there are guidelines for when such refinements can be made and the degree of confidence or accuracy that is expected.
Costs are estimated for all resources that will be charged by the project. This includes but is not limited to labour, materials, equipment, services and facilities, as well as special categories such as an inflation allowance, cost of financing, or contingencies costs. Cost estimates may be presented at the activity level or in summary form.
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