...Estimating Project Times and Costs Estimating ESTIMATING PROJECTS Estimating The process of forecasting or approximating the time and cost of completing project deliverables Types of Estimates Top-down (macro) estimates: analogy, group consensus, or mathematical relationships Bottom-up (micro) estimates: estimates of elements of the work breakdown structure WHY ESTIMATING TIME AND COST ARE IMPORTANT Estimates are needed to determine how long the project should take and its cost. Estimates are needed to schedule work. Estimates are needed to develop cash flow needs Estimates are needed to develop time-phased budgets and establish the project baseline. Estimates are needed to determine whether the project is worth doing. Estimates are needed to determine how well the project is progressing. Estimates are needed to support good decisions. FACTORS INFLUENCING THE QUALITY OF ESTIMATES Other Factors Other Factors Other ((e.g. e.g. .downtime) ..downtime) downtime) Organization Organization Culture Culture Padding Padding Estimates Estimates Planning Planning Planning Horizon Horizon Horizon Quality of Quality of Quality Estimates Estimates Estimates Project Project Duration Duration Task Task Task Definition Definition Definition People People People productivity productivity productivity Project Project Project Structure and Structure and Organization Organization Organization ESTIMATING...
Words: 1234 - Pages: 5
...projects is of strategic importance – an economic evaluation at this early stage is critical to the owners’ decision-making with limited information. The current study developed a comprehensive but practical system that can be used in such an early phase for economic evaluation of capital building construction projects. The system integrates four analytical steps: (i) Project planning, (ii) Construction costs estimation, (iii) Projection of incomes and expenditures and; (iv) Economic evaluation. Due to the integration, the system effectively manages the information flow from the planning to the evaluation, in which any changes from the initial plan are fully accounted for multiple alternates. In the system, users predict construction cost using a combined estimating method with historical project data and assembly costs. The system performs the tabulation of all incomes and expenditures based on the automated calculation as well as users’ inputs and then the economic evaluation based on project cash flow, which is generated using an automated scheduling method. System performance has been tested in terms of its accuracy and efficiency through case study. 1. INTRODUCTION Economic evaluation of facility investment is one of the most critical tasks in the conceptual phase since it involves a commitment of resources spending when a decision is made. The evaluation involves forecasting cash flow considering all capital requirements and revenues. An economic evaluation...
Words: 3364 - Pages: 14
...Project Estimating Project Estimating and Control Techniques CPMGT/303 July 12, 2014 Project Estimating Cost management planning happens early on in the project planning phase and should be refined throughout the project’s life cycle as additional details become available. The project’s cost management plan sets the framework for all of the project’s cost management processes. The accuracy of estimating a project’s cost is essential to the successful or failure of the project. This makes choosing the right estimating techniques crucial for a project. Expert judgment provides an insight to past experiences, environments, and historical information from past similar projects. This information is compared and analyzed against the new project and helps the project management team determine if they should combine similar methods of estimating or not, and, if so, how they will reconcile the gaps between them (Project Management Institute, 2008). Analogous cost estimating is similar to expert judgment in the way it uses information from similar past projects. However, instead of using a person’s memories and knowledge, it uses the actual costs from the past project by using the values of parameters such as scope, cost, budget, and measurable scales of things such as, size, weight, and complexity. Analogous cost estimating is mainly used when there is not enough detailed information about the project. For example, when a project is just beginning this is a less...
Words: 702 - Pages: 3
...Project Estimating Paper Introduction Projects are different form one project to another. The most challenging job a project manager will have is properly estimating time, and cost because of the uncertainty of variables of each project. Using the correct technique and tools to deal with the certainty, or uncertainty of a project is important to give an accurate estimate. Using the proper technique and tools, a project manager can deal with the challenges of estimating time, and cost to give an accurate estimate. Dealing with uncertain variables that challenge a project will give the project a successful outcome. When and How Techniques Are Used Expert Judgment is using a subject matter expert that provides estimates into the estimating based on expert experience in the subject. An expert judgment is most important when estimates are dependent on an unknown variable. This is where acquiring the expert to fill in the variables with knowledge from experience is necessary. Analogous estimating is used when costs from a previous project inputted can save time on estimating with the variations of know differences from past projects. This is important on known stable projects similar in use. Analogous analysis will make adjustments for variables known (PMI, 2008). Parametric Estimating can be used in small segments, or the complete project. This form of estimating relies on calculations using historical information and known variables...
Words: 1074 - Pages: 5
...Cost Estimating Introduction Profit Profit is basically how much wealth is making by a person. There are different types of profits such as net profit, gross profit and operating profit. Gross profit is usually set up calculating all sales less any cost connecting to the sales, in additional terms how much wealth which person make on the trade. Net profit is seen as gross income less all expenses and interest & operating profit which is the income for the company core company operations apart from income made from investments and the belongings of tax or interest. The remaining price of measured work is the last price captivating into concern all the essentials. In additional expressions the net value is the overall and last value, as well as labor, plant and materials exclusive of any returns or overhead payments which are priced in another put in the groundwork. Expenses require to be full into concern when plan to calculate approximately. Overheads (expenses) are expenditure that can control such as electricity or office rent. the majority intermediate construction business improve the expenditure of these each year increase over the earnings of the project, this can be charge as a proportion adding together but may change according to earnings of the project. When the plan is going started then in I initial stage the budgets are arranged, which I will follow by timely and can be change with the passage of time according to the desire needs. In this all the...
Words: 1037 - Pages: 5
...NIKE, INC. COST OF CAPITAL Context: Estimating Cost of Equity with different methods. Compute WACC Nike’s current price per share= $ 42.09 Question: Is it undervalued or overvalued to make buy /sell decision? Forecasts for Cash flows, Dividend growth, EPS estimates for NIKE are given. Interest rate #’s, Betas, Book values on debt and equity are given. Also historical performance #s are given. At 12% WACC Nike is overvalued and hence sell decision; At 11.17% correct valuation; WACC below 11.17% , undervaluation and hence buy decision. Exhibit 2 : The bottom table shows the sensitivity of share price to discount rate. The issue is which discount rate (WACC) to use to make the decision. Lower the discount rate, higher the estimate of stock price. How do you estimate WACC? Weights of Debt and Equity Cost of Debt and Cost of Equity Overall Assessment of the firm: Exhibit 1 Uneven growth rate in revenue, operating income and net income from negative to low positive. All profit margin #s are relatively stable. Market share has declined. Company’ plans: (1) New Products in shoes and Athletic Apparel; (2) Expense Control Revenue growth target= 8-10% Earnings growth target=15% Both are substantially higher than the recent performance. Methodologies for Valuing a Firm 1. Estimating Cash flows per share; Take a good look at Exhibit 2. Exhibit 2 has information for ten years. Question: Why is terminal value given at the end of year 10...
Words: 725 - Pages: 3
...Sa m pl e on ly NEIL PEARSON E W LARSON C F GRAY A Complete Course for BSB41513 and BSB51413 Sa m pl e on ly IN PRACTICE Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Additional owners of copyright are acknowledged on the acknowledgments page. Every e ort has been made to trace and acknowledge copyrighted material. infringement have occurred. e authors and publishers tender their apologies should any Reproduction and communication for other purposes Apart from any fair dealing for the purposes of study, research, criticism or review, as permitted under the Act, no part of this publication may be reproduced, distributed or transmitted in any form or by any means, or stored in a database or retrieval system, without the written permission of McGraw-Hill Education (Australia) Pty Ltd including, but not limited to, any network or other electronic storage. Enquiries should be made to the publisher via www.mcgraw-hill.com.au or marked for the attention of the permissions editor at the address below. National Library of Australia Cataloguing-in-Publication Data Author: Title: Published in Australia by McGraw-Hill Education (Australia) Pty Ltd Level 2, 82 Waterloo Road, North Ryde, NSW 2113 Publisher: Norma Angeloni-Tomaras Development editor: Alex Payne Senior production editor: Claire Linsdell Permissions editor: Haidi Bernhardt Copy editor: Julie Wicks Proofreader: Angela Damis Indexer: Mary Coe Design coordinator: Dominic Giustarini...
Words: 33240 - Pages: 133
...B, C, and E, Integrated Cost and Schedule Control in Project Management Chapters 1–5, and A Guide to the Project Management Book of Knowledge, fifth edition, Chapters 6 and 7. Covers Weeks 1, 2, and 3 • This quiz is worth 100 total points and includes five essay questions worth 20 points each. • You have 2 hours to finish the quiz. • Remember to save frequently, because when the time limit is reached you will be exited from the exam. • If you have any technical problems, please contact the Help Desk at 800-594-2402. Answer questions with short, direct responses. For questions which require calculations, please show your calculations. Note: Detailed solutions are required to support your response and receive credit. Partial credit may be given for student responses where work is shown. Solutions from previous sessions will not be correct. You will not be given part credit for pasting solutions from previous session quizzes. The questions and/or the numbers have changed. Topics covered: The five questions cover the following material. They will test your understanding not that you can paste a paragraph from the textbook. Explanations should be in your own words. The budgeting process. Week 2 lecture notes How do we create project budgets? Is there more than one primary process? Compare and evaluate the processes. The estimating process and methods, what are they and how to use them. • Be sure you discuss the estimating process not general project...
Words: 528 - Pages: 3
...project budgets. Estimates are typically formed using a combination of estimated costs for labor and materials, combined with allowances for indirect costs such as inventory costs and overhead. WBS: There are a few different types of WBS which are described in the textbook (Chapter 5), and these include deliverable based, function based, and phase or process based. The selection of the type is based on the project and project manager preference. The accumulation of historical data regarding costs is a primary determinant of estimating accuracy. to develop a meaningful database for use in historical cost estimating: Develop a System for Gathering Data Costs common across projects in the company should be identified, and requirements for comparative data established. Regardless of the method used to accumulate historical data, a prime concern is that all costs are captured in the database. There are a number of ways to relate historical costs to new project estimates: By Actual Cost; By Pro-rating; By Pooling Costs. Choosing the Method for Accumulating Historical Costs The majority of firms use a combination of methods to record historical costs for estimating purposes. • Direct costs are usually recorded at actual cost and can therefore be closely correlated to output. • Indirect costs are usually allocated as a percentage of direct costs based on total volume. Indirect costs are generally expressed using a...
Words: 274 - Pages: 2
...................................... 2 2 Measures Derived from FPA ............................................................................... 2 3 Different FPA Methods ....................................................................................... 2 4 The advantages of using FPA............................................................................. 3 5 The disadvantages of, or problems using, FPA .................................................. 3 6 Developed v Delivered FPs................................................................................. 4 7 The use of FPs in estimating effort and cost ...................................................... 5 8 Function Point counting procedure ..................................................................... 6 8.1 IFPUG Method ............................................................................................. 6 8.1.1 Complexity Matrices............................................................................... 7 8.1.2 Complexity/UFP Contribution................................................................. 7 8.1.3 Overall FP Count ................................................................................... 8 8.1.4 IFPUG FPA Process Summary.............................................................. 8 8.2 MK II Method ................................................................................................ 9 8.2.1 MK II FPA Process Summary ...................................
Words: 3966 - Pages: 16
...Airbus Defence and Space PARTNERING WITH PRICE® TO USE THE INNOVATIONS OF TRUEPLANNING® FOR MORE COMPETITIVE BIDDING ON ADVANCED TECHNOLOGY PROJECTS Challenge: Verify cost estimates to ensure bids are priced to win but are accurate and profitable for each stakeholder in a project’s supply chain. Solution: Create a Cost Estimation Framework (CEF) that uses TruePlanning® top-down, parametric estimating to set cost targets with TrueMapper® feature to cross-check estimators’ bottom-up estimates in Excel based on Work Breakdown Structure (WBS). Improve knowledge capture by creating an historical data repository of cost models to source information for future projects. CASE STUDY “PRICE provides us with more than your typical vendor/customer relationship; we work closely together in a real partnership. When we wanted to verify cost estimates for all bid processes that go into proposals, they listened, understood and collaborated with us on precisely what we wanted to achieve with an integrated Cost Estimation Framework.” Manuel Massini Head of Cost Engineering Airbus Defence and Space Results: A Cost Estimation Framework providing the tools and methods to enhance and integrate bid processes across estimating teams spread throughout the organization, improving the accuracy and credibility of estimates, data sharing, collaboration, and competitive yet profitable bid pricing for advanced projects. Bid managers gain better insights to evaluate risks, react to issues, and...
Words: 1172 - Pages: 5
...projects with sound initial estimates are doomed to overrun cost and schedule budgets if they are not guided by rules of thumb and rigorous estimates-to-complete. Therefore, project managers must be armed with simple metrics and rigorous estimating models to be successful. Simple or complex, there are five questions project managers should ask about every estimate as they define and manage their projects. This paper stresses the value of accurate estimating, the project management discipline developing estimating rules-of-thumb and the application of those metrics to aid successful decision-making. Project Managers must be Accurate Estimators The key to successful project completion is an accurate estimate and a realistic risk assessment. Capers Jones, in a study of two hundred and fifty complex, software-intensive projects identified only twenty-five as successful in achieving their initial cost, schedule and performance objectives. Jones defines a failed project as one that is six months over schedule and fifteen percent over its cost estimate (p.5). Cost estimating was revealed as one of the six best practices utilized by the successful projects. How to be an Accurate Estimator Successful project managers make daily use of three powerful tools to become accurate estimators: simple rules-of-thumb, rigorous predictive mathematical models, and the project management triangle. They create an accurate estimating discipline...
Words: 1955 - Pages: 8
...Even projects with sound initial estimates are doomed to overrun cost and schedule budgets if they are not guided by rules of thumb and rigorous estimates-to-complete. Therefore, project managers must be armed with simple metrics and rigorous estimating models to be successful. Simple or complex, there are five questions project managers should ask about every estimate as they define and manage their projects. This paper stresses the value of accurate estimating, the project management discipline developing estimating rules-of-thumb and the application of those metrics to aid successful decision-making. Project Managers must be Accurate Estimators The key to successful project completion is an accurate estimate and a realistic risk assessment. Capers Jones, in a study of two hundred and fifty complex, software-intensive projects identified only twenty-five as successful in achieving their initial cost, schedule and performance objectives. Jones defines a failed project as one that is six months over schedule and fifteen percent over its cost estimate (p.5). Cost estimating was revealed as one of the six best practices utilized by the successful projects. How to be an Accurate Estimator Successful project managers make daily use of three powerful tools to become accurate estimators: simple rules-of-thumb, rigorous predictive mathematical models, and the project management triangle. They create an accurate estimating discipline in their organizations...
Words: 1955 - Pages: 8
...Project management Approaches While estimating a project, the first step is to derive the size of the project so as to guide in estimation of other parameters, such as cost, schedule, and effort. With an accurate estimation of the size of your project done, you can carry out estimation of the required effort. This conversion from project size to total project effort is done after you have defined the project development lifecycle and development process that your team should follow to specify, design, develop and test the software. Estimation of the effort required in a project requires a project manager to identify and derive, and them put together all the activities that will build up the project as per the estimated size. There are various ways to derive effort from size: Use the organization’s historical data: An ideal path is to utilize your organization's documented information to decide the amount of exertion past projects of the same size has taken. This data obviously does not guarantee the performance of equal measure, but it sure provide a baseline of the possibilities. Review available records and determine the effort applied to achieve similar activities. You can interview the people who were there in case of lack of some records. This, of course, assumes a few things (a) your association has been archiving real records on recent activities and that you will follow a comparatively similar development lifecycle, utilize a comparable advancement strategy, utilize...
Words: 1620 - Pages: 7
...is executed and controlled. Scope, schedule, and Cost, Change, and Configuration Management plans are created in this process and are part of the PM plan- Scope Management plan is developed here as well.| Project Scope Management | -Interviews -Focus Groups -Facilitated Workshops -Group Creativity Technique -Group decision making techniques -Questionnaires and Surveys -Observation(Job Shadowing) -Prototypes| Facilitated Workshops examples: JAD and Quality Function Deployment Group Creativity Technique examples: -Brainstorming -Nominal Group Technique: enhances brainstorming with voting process -Delphi Technique-Idea and Mind Mapping -Affinity Diagram: large numbers of ideas to be sorted into groups Group Decision making technique -Unanimity: everyone agrees on single course of action -Majority: support from more than 50% of the members of the group -Plurality: the largest block in a group decides even if a majority is not achieved -Dictatorship: one individual makes the decision for the group| Project Time Management| -Bottom- up Estimating -Expert Judgment -Alternative Analysis -Published Est. Data -PM Software| Bottom-up estimating: Breaking down complex activities into pieces. -Published Est. Data: Published data as books and journals -Alte. Analysis: means considering several different options for how to assign resources| Project Cost Management | -Analogous Estimating -Bottom-up Estimating -Parametric Estimating -Cost of Quality -Vendor Bid Analysis -Reserve Analysis...
Words: 728 - Pages: 3
