22:38Four Tools to Estimate Costs in the Project Management
One of the first tasks when managing a project is the cost estimate. A cost estimate
must be accurate, transparent and reliable. These factors are particularly important for a small business because its resources are limited. Using standard techniques give accurate results, and their reliability is high as long as the inputs used for the calculations are exact. When you calculate project costs using effective cost-estimating techniques, you will be able to assign corresponding resources and develop schedules to manage the project the project successfully. (1)
Four tools are used to estimate the costs of the project in project management:
Analogous estimating differentiates from others because of being the least accurate
method, and bottom-up because of being the most accurate method.
projects and applies them to the current project. The accuracy of this process is better
than the analogous estimation because it employs more than one data set. 3. This technique is used to reduce the biases and uncertainties in estimating
assumptions. Instead of finding one estimate, three estimates are determined and then their average is taken to reduce the uncertainties, risks, and biases. PERT is the most commonly used method in three-point estimation technique. (2) Three PERT estimates are as follows:
Most Likely Cost (Cm): Considers a normal case and everything goes as usual. Pessimistic Cost (Cp): Considers the worst case and assumes that almost everything goes wrong.
4. The Bottom-up Estimating technique is also known as the “definitive technique”. (2) This estimation technique is the most accurate, time-consuming, and costly technique for estimating the cost. In this technique, the cost of each single activity is determined with the greatest level of detail at the bottom level and then rolls up to calculate the total project cost. Here, the total project work is broken down into the smallest work components.
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