ESTIMATE

COST ESTIMATE
 DEFINE ESTIMATE
 Accurate assessment of amount of work
required to complete the project scope in
time, quality and customer’s delight

 Estimate begins as quantification of resource

units required which is then translated in to a
financial budget using rate tables or actual
costs.
DIFFERENT TYPES OF
ESTIMATES
 LABOUR ESTIMATE
 Cost of people employed for the project
directly or indirectly

MATERIALS ESTIMATE

 Cost of material bought, constructed or

consumed during the project.
 PLANT & EQUIMENT ESTIMATE
 Equipment hired / purchased which are
deployed in executing the project and
are reusable on subsequent projects.
- e.g. Crane, Lifting Equipment etc.

SUBCONTRACT ESTIMATE
 Material and labour provided by the
contractor , where the control is not within
the scope of the present organization.
OVERHEADS ESTIMATE

 Includes cost of Managers, PMIS, Support

office and Temporary services.

FEES AND TAXATION

 Insurance, Financing cost, Legal, BG,
License, Agreements and Taxation
 CONTINGENCY
 Estimate to cover risks and
unforeseen in the projects.
ESTIMATE METHODS
ANALOGOUS ESTIMATION
 Estimates generated based on previous
projects that are similar.
TOPDOWN ESTIMATES
 Project estimate is broken to WBS levels
which is then further broken down to work
packages and then to activities.

BOTTOM UP ESTIMATION
 Estimate individual work items, then
rolling up the individual estimates to
WBS level and then total project
estimate.
PARAMETRIC ESTIMATE
 Involves using project characteristics (parameter)
in a mathematical model to predict project costs.
 The characteristics fed in to process are primarily
based on performance indicators such as speed,
accuracy, tolerance, reliability, friendliness, error
rate and complexity of the environment of
deliverables.
 The output of parametric models includes cost of
major phases, total project cost and resource
requirement.
 EXPERT JUDGEMENT

 Consulting one or more experts to

validate the estimate of the proposal
against the experience and
understanding of the experts for
tempering / concurring with it.
LEARNING CURVE CONCEPT
 ESTIMATES DEPLOYED AT
DIFFERENT STAGES OF PROJECT
CYCLE
PRE-FEASIBILITY ESTIMATE

 Always based on historical figures with

additions for escalation / inflation and
local factors, based on statistics and
guess work.

 Probability of estimate’s accuracy is

between +25 and 40%
 PRELIMINARY CONTROL
ESTIMATE

 This is prepared generally after the completion

of the design process and listing of major
equipment

 Probability of estimate’s accuracy is between

+15 and 25%

 Forms part of techno-feasibility / detailed project

report
 DEFINITIVE ESTIMATE

 This is prepared as soon as the basic

engineering is complete and bulk materials take
off sheets are made.

 Probability of estimate’s accuracy is between

+10 and 15%.

 This can be used for budgeting and to initiate

procurement action.
 DETAILED ESTIMATE
 This is prepared when - Design engineering and
preparation of production drawings, final material
lists have been completed and prices of all
materials are ascertained.

 Probability of estimate’s accuracy is between +5

and 10%.

 This leads to revision of provisional budgets.

 The exercise of estimating is stopped at this stage

by shifting attention to controls instead of
estimation.
 PROJECT COST PERCENTAGE
FACTORS
The following are the percentages of the project cost
factors

 Project Development and DPR – 2 %

 Engineering & Design – 13%

 Bought out Materials and equipment – 55%

 Fabrication and construction – 30%