Estimate Costs
Estimate Costs is the process of developing an approximate monetary assessment of the resources needed to complete project activities.
Explanation
Estimate Costs involves developing a quantitative assessment of the probable costs of resources required to complete project work. Cost estimates are typically expressed in units of currency, though in some cases other units of measure such as staff hours or staff days may be used.
Costs are estimated for all resources charged to the project, including labor, materials, equipment, services, facilities, information technology, and special categories such as an inflation allowance, cost of financing, or contingency costs. The accuracy of a project estimate increases as the project progresses through its life cycle.
Key tools and techniques include analogous estimating, parametric estimating, bottom-up estimating, three-point estimating, data analysis (alternatives analysis and reserve analysis), the project management information system, and decision making. The primary outputs are activity cost estimates and the basis of estimates documentation.
Key Points
- •Estimates are refined as more information becomes available
- •Includes both direct and indirect costs
- •Activity cost estimates and basis of estimates are the key outputs
- •Uses multiple estimating techniques depending on available data
Exam Tip
Estimate Costs produces activity cost estimates, not the project budget. The budget is created in the Determine Budget process by aggregating cost estimates.
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.
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.
Three-Point Cost Estimating
Three-point cost estimating improves the accuracy of single-point estimates by considering estimation uncertainty and risk through optimistic, most likely, and pessimistic cost values.
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Cost Performance Index (CPI)
Cost Performance Index (CPI) is an EVM efficiency metric that measures cost performance as the ratio of earned value to actual cost: CPI = EV / AC.
Schedule Performance Index (SPI)
Schedule Performance Index (SPI) is an EVM efficiency metric that measures schedule performance as the ratio of earned value to planned value: SPI = EV / PV.
Earned Value Management (EVM)
Earned Value Management (EVM) is a methodology that integrates scope, schedule, and cost data to assess project performance and progress objectively.
Burndown Chart
A Burndown Chart is a graphical representation of work remaining versus time in a Sprint or release, showing whether the team is on track to complete the planned work.
Resource Leveling
Resource leveling is a resource optimization technique in which adjustments are made to the project schedule to keep resource usage at or below a defined limit, often resulting in a longer project duration.
Risk Register
The risk register is a project document that records the details of individual project risks, including their identification, analysis results, response plans, and current status.
Stakeholder Mapping
Stakeholder mapping is the visual representation of stakeholder relationships, influence, interest, or other attributes using grids, matrices, or diagrams to support analysis and engagement planning.
Relative Estimation
Relative Estimation is an agile technique where work items are sized in comparison to each other rather than in absolute units like hours or days, providing faster and more accurate estimates.
Power/Influence Grid
The power/influence grid is a stakeholder classification model that groups stakeholders based on their level of authority (power) and their active involvement or ability to affect the project (influence).
Part of
Cost Management
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