Bottom-Up Cost Estimating
Bottom-up cost estimating involves estimating the cost of individual work packages or activities and then aggregating those estimates to arrive at a total project cost.
Explanation
Bottom-up estimating is a method where the cost of individual work packages or activities is estimated at the most detailed level and then summarized or rolled up to determine the total project cost. The cost and accuracy of bottom-up estimating are typically driven by the size and complexity of the individual work packages or activities.
This technique generally requires the project scope to be well defined and decomposed to a granular level through the work breakdown structure (WBS). Because it estimates each piece of work individually, it tends to produce the most accurate results but is also the most time-consuming and expensive estimating technique.
Bottom-up estimating is often used when a detailed and accurate estimate is needed, such as during detailed planning or when a fixed-price contract requires precise cost figures.
Key Points
- •Most accurate estimating technique
- •Most time-consuming and expensive to perform
- •Requires a detailed WBS decomposition
- •Estimates are aggregated from the lowest level upward
Exam Tip
Bottom-up estimating is the most accurate but most costly and time-consuming method. If the exam asks which technique is most accurate, bottom-up is the answer.
Frequently Asked Questions
Related Topics
Analogous Cost Estimating
Analogous cost estimating uses the cost of a previous, similar project or activity as the basis for estimating the cost of the current project or activity.
Parametric Cost Estimating
Parametric cost estimating uses a statistical relationship between historical data and other variables to calculate a cost estimate for project work.
Estimate Costs
Estimate Costs is the process of developing an approximate monetary assessment of the resources needed to complete project activities.
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Part of
Cost Management
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