DESIGN OF DISTRIBUTION OF FACILITIES & PROJECT

COST ESTIMATE

‘’COST ESTIMATION IS A CRITICAL STEP IN PROJECT

MANAGEMENT BECAUSE IT SERVES AS THE

FOUNDATION FOR CALCULATING AND CONTROLLING

THE PROJECT ‘’’BUDGET. COSTS ARE ESTIMATED FOR

THE FIRST TIME AT THE OUTSET OF A PROJECT, OR EVEN

BEFORE IT BEGINS. FOLLOWING THAT, THE PROJECT

COST IS ‘’(RE-)ESTIMATED ON A REGULAR BASIS TO

ACCOUNT FOR MORE DETAILED INFORMATION OR

CHANGES TO THE SCOPE OR TIMETABLE.

‘’IF THE EARNED VALUE MANAGEMENT METHODS USED

TO CONTROL PROJECT COST REVEAL CONSIDERABLE

DEVIATIONS FROM THE BUDGET, A RE-ESTIMATION OF

THE ‘COST AND SCHEDULE, AS WELL AS A REVIEW OF

THE TOTAL BUDGET, MAY BE REQUIRED.

WHAT IS A COST ESTIMATE?

A COST ESTIMATE IS A CALCULATED ESTIMATE OF THE

NUMBER OF RESOURCES ‘’NEEDED TO ACCOMPLISH A

PROJECT OR COMPONENTS OF A PROJECT.

THESE COST ESTIMATES ARE FREQUENTLY STATED IN

MONETARY UNITS. IF ‘DOLLAR VALUES ARE NOT

APPLICABLE OR IRRELEVANT, OTHER UNITS SUCH AS

MAN-DAYS CAN BE UTILIZED INSTEAD.

‘’COST ESTIMATES COME IN A VARIETY OF SHAPES AND

SIZES. THE ROUGH ORDER OF MAGNITUDE (ROM) AND

THE EXACT ESTIMATE ARE LISTED IN THE PROJECT

‘MANAGEMENT BODY OF KNOWLEDGE. BOTH

CATEGORIES DIFFER IN TERMS OF ‘’ACCURACY,

PROJECT PHASES IN WHICH THEY ARE APPLIED, AND

TOOLS AND PROCEDURES ACCESSIBLE. ADDITIONAL,

SOMETIMES INDUSTRY-SPECIFIC SORTS OF

‘’ESTIMATIONS ARE USED IN SOME PROJECTS.

WHAT ARE THE TYPES OF COST ESTIMATES?

‘AS FURTHER GRADATIONS OF ESTIMATE TYPES, SOME

SOURCES OFFER SO-CALLED PRELIMINARY ESTIMATES

AND BUDGET ESTIMATES. IN CONSTRUCTION PROJECTS,

‘’THERE ARE ADDITIONALLY INDUSTRY-SPECIFIC SORTS

OF ESTIMATES, SUCH AS DESIGN AND BID ESTIMATES

(SOURCE). THE PRESENT PMI PROJECT MANAGEMENT

‘FRAMEWORK, ON THE OTHER HAND, EXCLUSIVELY

REFERS TO THE TWO TYPES INDICATED ABOVE.

‘IF THE BUDGET NEEDS TO BE ADJUSTED IN THE MIDDLE

OF A PROJECT, A SO-‘’CALLED ESTIMATE TO FINISH IS

CALCULATED.

ROUGH ORDER OF MAGNITUDE VS. DEFINITIVE

ESTIMATE

THE MOST EVIDENT DISTINCTION BETWEEN THESE TWO

TYPES OF ESTIMATIONS ‘’IS THEIR ACCURACY: THE ROM

IS SOMEWHAT INCORRECT, WITH A WIDE RANGE OF

PROBABLE OUTCOMES. AS A RESULT, IT'S MOST

COMMONLY UTILIZED DURING THE ‘PROJECT

INITIATION PHASE, WHEN A BALLPARK FIGURE IS ALL

THAT'S NEEDED TO ‘’GET A PROJECT STARTED.

WHEN NEW INFORMATION AND RESOURCES FOR

RELIABLE ESTIMATES BECOME ‘AVAILABLE DURING

THE PROJECT, THE FINAL ESTIMATE IS DETERMINED.

‘’ESTIMATE TO COMPLETE (ETC) AND ESTIMATE AT

COMPLETION (EAC

IF IT IS DISCOVERED HALFWAY THROUGH A PROJECT

THAT THE BUDGET BASELINE ‘’(BASED ON EARLIER

ESTIMATES) CANNOT BE FULFILLED, THE PROJECT COST

MUST BE RE-ESTIMATED.

‘’THIS IS ACCOMPLISHED BY DETERMINING A

COMPLETION ESTIMATE, WHICH IS ‘THEN USED TO

PRODUCE A NEW COMPLETION ESTIMATE, WHICH

REPLACES THE ‘’INITIAL BUDGET AT COMPLETION AND

SO BECOMES THE PROJECT'S NEW COST BASELINE.

‘WHEN ARE COST ESTIMATED?

THROUGHOUT THE PROJECT, COSTS ARE ESTIMATED AT

VARIOUS POINTS. THE ‘’PROCESS IS CARRIED OUT

"PERIODICALLY THROUGHOUT THE PROJECT AS

NEEDED," ACCORDING TO THE PMBOK.

‘THE FIRST TIME YOU SHOULD ESTIMATE COSTS IS

DURING THE PLANNING PHASE, SUCH AS WHEN YOU

WRITE THE PROJECT BUSINESS CASE OR THE PROJECT

CHARTER. A ‘’PROJECT MANAGER MUST DETERMINE

THE QUANTITY OF RESOURCES REQUIRED TO FINISH THE

PROJECT FOR THESE PAPERS.

‘’DUE TO THE LACK OF SPECIFICITY IN THE

INFORMATION AVAILABLE AT THE TIME, THE PROJECT

MANAGER WILL MOST LIKELY PRODUCE AN

APPROXIMATE ORDER OF ‘’MAGNITUDE ESTIMATE

RATHER THAN A DEFINITIVE ESTIMATE. WHEN FURTHER

INFORMATION BECOMES AVAILABLE LATER IN THE

PROJECT, THIS ORDER OF ‘’MAGNITUDE ESTIMATE WILL

BE REPLACED WITH A DEFINITIVE ESTIMATE.

‘THE COST WILL BE RE-EVALUATED DURING THE

PLANNING PHASE ONCE THE PROJECT IS LAUNCHED,

FOLLOWING THE METHODOLOGY DESCRIBED IN THIS

ARTICLE.
‘’COSTS ARE OFTEN (REaESTIMATED IN SUCCEEDING

PHASES IF RELEVANT NEW INFORMATION AND DETAILS

BECOME AVAILABLE, OR IF THE PROJECT SCOPE OR

‘’TIMEFRAME CHANGES. ONE OF THE MOST TYPICAL

REASONS FOR RE-ESTIMATING COSTS IS WHEN PROJECT

CONTROL INDICATIONS INDICATE THAT THE INITIAL

‘’BUDGET BASELINE WILL NOT BE FULFILLED.

CONCLUSION

WE DISCUSSED COST ESTIMATE METHODOLOGIES AS

RECOMMENDED BY THE PMBOK IN ‘’THIS ARTICLE. IT'S

WORTH NOTING THAT THE ESTIMATES' LEVEL OF

INFORMATION AND COMPLEXITY FREQUENTLY RISES AS

THE PROJECT PROGRESSES.

‘’THE ROUGH ORDER OF MAGNITUDE (ROM) IS

FREQUENTLY THE ONLY SORT OF ESTIMATE AVAILABLE

DURING THE START PHASE. DEFINITIVE ESTIMATES WILL

ALMOST ALWAYS NECESSITATE METHODOLOGIES LIKE

ANALOGOUS, BOTTOM-UP, AND ‘’PARAMETRIC

ESTIMATING, WHICH MAY NOT BE AVAILABLE UNTIL

LATER IN THE PROJECT'S LIFE CYCLE.

‘’THE STRATEGIES THAT PRODUCE THE MOST

ACCURATE COST ESTIMATIONS ARE ‘’USUALLY

PARAMETRIC AND BOTTOM-UP ESTIMATES. THEY'RE

TYPICALLY UTILIZED WHEN A BUDGET NEEDS TO BE

REASSESSED AND A NEW ESTIMATE ADDED AT THE

END.EARNED VALUE ANALYSIS AND VARIANCE

ANALYSIS HELP PROJECT MANAGERS ‘CONTROL THE

COST AND VALUE GENERATED IN A PROJECT AFTER A

BUDGET HAS ‘’’BEEN CALCULATED AND APPROVED.

THIS ARTICLE HAS FURTHER INFORMATION ON THE

MEASURES AND PROCEDURES.