Term
|
Definition
| Method for estimating cost for each work packet in WBS. Costs rolled up for progressively higher levels within WBS, plus add overhead costs, for total cost. |
|
|
Term
| Bottom-Up Estimating Advantages and Disadvantages |
|
Definition
| Most accurate & gives lower-level managers more responsibility, but requires the most detail, challenging, time, and costly. |
|
|
Term
| When use Bottom-Up Cost Estimating |
|
Definition
| Later on in project life cycle, when have more detail, need more accuracy required, and have time to invest in estimates. Use with work packages with highest level of uncertainty. Weigh need for accuracy of estimate with cost of doing the estimate. |
|
|
Term
|
Definition
| Use project's characteristics in mathematical model. Statistical analysis of historical information using scope, duration, cost, & budget as parameters. Accuracy is as good as the data used in it. |
|
|
Term
| Analogous estimating advantages & disadvantages |
|
Definition
| Can ensure no work is inadvertently omitted from work estimates. Can sometimes be difficult for lower-level managers to apportion cost estimates. |
|
|
Term
| Parametric advantages & disadvantages |
|
Definition
| Is not time consuming. May be inaccurate, depending on the integrity of the historical information used. |
|
|
Term
| Accurately estimating costs important because... |
|
Definition
| ...avoid overruns and unforeseen expenditures. Help create a strong cost baseline, which will be used to measure cost performance. |
|
|
Term
| Why developing Cost Estimates & Budgets important? |
|
Definition
| Deliver projects on time and on budget. Monitor progress against expectations. Meet expectations and deliver desired results. |
|
|
Term
|
Definition
| Projecting total expenditures necessary for the completion of the project. Provide a basis for making sound decisions about a project, and establish base lines against which success of project can be measured. Involves ID different cost alternatives, and may need different methods for different phases of project. |
|
|
Term
| Choosing a cost estimating method based on: |
|
Definition
-S/W availability
-Team member experience
-Project life cycle phase
-Time constraints
-Project definition
-Personal preference |
|
|
Term
|
Definition
Scope baseline
Project schedule
Human resource plan
Risk register
Enterprise environmental factors
Organizational process assets |
|
|
Term
| Estimate Costs input: Scope baseline |
|
Definition
| Includes approved detailed project scope statement along with assoc WBS & WBS dictionary. |
|
|
Term
|
Definition
| contains relevant information, such as project requirements, constraints, assumptions, and deliverables. |
|
|
Term
|
Definition
| Provides the relationship b/n individual project components and deliverables |
|
|
Term
|
Definition
| WBS dict, along with statement of work, provide specific details of work activities and deliverables |
|
|
Term
| Estimate cost input: Project schedule |
|
Definition
| Includes start and finish dates for each activity, and details of resources along with the time needed for them to complete project work that will incur project cost. |
|
|
Term
| Estimate cost input: Human resource plan |
|
Definition
| includes components necessary for developing cost estimates such as the project staffing attributes, personnel rates, and its related rewards and recognitions. |
|
|
Term
| Estimate costs input: Risk register |
|
Definition
| Risks that have an impact on cost |
|
|
Term
| Estimate costs input: Enterprise environmental factors |
|
Definition
| External factors, such as market trends, unavoidable budget restructuring, or commercial financial analysis may affect cost estimation. |
|
|
Term
| Estimate costs input: Organizational process assets |
|
Definition
| Intra-organizational cost estimating policies or templates, team experience, or data from old projects. |
|
|
Term
| Tools & Techniques to Estimate Costs |
|
Definition
Expert judgment
Analogous estimating
Parametric estimating
Bottom-up estimating
Three-point estimate
Reserve analysis
Cost of Quality (COQ)
Project management estimating software
Vendor bid analysis |
|
|
Term
| Estimate cost tech: Expert judgment |
|
Definition
| Variable such as labor costs, material costs, inflation, and risk factors can influence cost estimates. Expert judgment along with historical information will provide an insight on the information related to prior similar projects. |
|
|
Term
| Estimate costs technique: Analogous estimating |
|
Definition
| Uses the cost of a previous project with similar scope or activities to predict the cost of future activities. |
|
|
Term
| Estimate cost technique: Three-point estimate |
|
Definition
| Incorporates three types of estimates into a singular cost estimate scenario: most likely, optimistic, & pessimistic. |
|
|
Term
| Estimate cost technique: Reserve analysis |
|
Definition
| Contingency funds that are built into a cost estimate for as-yet unknown costs. Reserve analyses run the risk of inflating a cost estimate. |
|
|
Term
| Estimate cost technique: COQ |
|
Definition
| Cost of Quality: A technique that focuses on the cost of ensured quality. Peripheral costs include quality planning, control, and assurance. |
|
|
Term
| Tool: Project management estimating software |
|
Definition
| simplifies the cost estimation process, can accelerate estimation time, and is applicable to most projects, regardless of scale or scope. |
|
|
Term
| Tech: Vendor bid analysis |
|
Definition
| cost estimation based on the responsive bids obtained from vendors. results must often be revisited once contract approval has been gained. |
|
|
Term
|
Definition
Activity cost estimates
Basis of estimates
Project document updates |
|
|
Term
| Output: Activity cost estimates |
|
Definition
| Provide estimates on probably costs necessary to finish project work. This includes costs on direct labor, materials, equipment, facilities, services, information technnology, contingency reserves, or indirect costs, if any. |
|
|
Term
| Output: Basis of estimates |
|
Definition
| Supporting or additional information needed to justify the cost estimates. Details can include project scope, justification for the estimate, range of estimates, the assumptions, constrains, confidence level on the estimate, and expected range of estimates. |
|
|
Term
| Output: Project document updates |
|
Definition
| may include: the risk register, HR plan, activity list, project schedule, and training plans. |
|
|
Term
| Type or Level of Accuracy |
|
Definition
Rough Order of Magnitude (ROM)
Budgetary
Range of estimate
Approximate estimate
Definitive estimate (or "control" or "detailed")
Phased estimate (or "rolling wave" or "moving window") |
|
|
Term
|
Definition
| Rough Order of Magnitude: Generally made early in the project. Developed without basis of detailed data and often based on v high level historical data, expert judgment, or a costing model. Accuracy: -50% to +100%. |
|
|
Term
| Type of Accuracy: Budgetary |
|
Definition
| Often used for appropriation purposes. Accuracy: -10 to +25% |
|
|
Term
| Type of Accuracy: Range of estimate |
|
Definition
| Often used as an alternative to ROM where the accuracy of the estimate is not well known. Rather than $10M +-30%, the estimate could be stated as $7.5M to $13M. Accuracy: +-35%. |
|
|
Term
| Type of Accuracy: Approximate estimate |
|
Definition
| Based on more information than ROM estimates, but still lacks the detail required for high accuracy. May be possible if the project is similar to previous ones with reliable historical data for costing or where a proven costing model is applicable. Accuracy: +-15%. |
|
|
Term
|
Definition
(or "control" or "detailed")
Based on detailed information about the project work. Developed by estimating the cost for each work package in the WBS. Accuracy: -5% to +10%. |
|
|
Term
| Type of Accuracy: Phased estimate |
|
Definition
or "rolling wave" or "moving window"
Allows the use of ROM or approx estimates for some later parts of the work, while work that must be done earlier in the project life cycle is estimated at the definitive level. Accuracy: +-5% to +-15% in the window closest to present time; +-34% farther in the future. |
|
|
Term
|
Definition
Top-down estimating.
Use experience, historical info, and expert judgment.
Generated for top levels of WBS and aportioned across and then down levels of WBS. |
|
|
Term
| Use Analogous estimating when... |
|
Definition
-limited amt of detailed info about the project is available
-a similar project for comparison can be employed
-requisite expertise is provided |
|
|
Term
| How to Estimate Costs Guidelines |
|
Definition
-Involvement
-Information
-Technique
-Options
-Units of measure
-Risks
-Accounts
-Cost estimates |
|
|
Term
|
Definition
| Involve the work package owners |
|
|
Term
|
Definition
| Gather any relevant input information that may help you prepare the estimates, such as estimating publications and resource rates. |
|
|
Term
|
Definition
| Determine the estimate technique to be used. |
|
|
Term
|
Definition
| Look for alternative costing options |
|
|
Term
| Guideline: Units of Measure |
|
Definition
| Determine the units of measure that will be used. |
|
|
Term
|
Definition
| Consider possible risks that may impact cost |
|
|
Term
|
Definition
| Ensure that all cost estimates are assigned to the appropriate account, according to the chart of accounts. |
|
|
Term
|
Definition
| Ensure that all cost estimates are assigned to the appropriate account, according to the chart of accounts. |
|
|
Term
| Guideline: Cost estimates |
|
Definition
| Make sure your cost estimates include key elements. |
|
|
Term
|
Definition
Time-phased budget that will measure that will monitor cost performance throughout the project lift cycle.
-Developed by adding estimated costs of cost components by period.
-Typically includes budget contingency to accommodate risk of unexpected costs hat may come up. |
|
|
Term
|
Definition
Allocating overall cost estimates to individual activities across project life cycle.
Purpose is to develop a budget and baseline to measure project's cost performance. |
|
|
Term
|
Definition
-Activity cost estimates
-Basis of estimates
-Scope baseline
-Project Schedule
-Resource calendars
-Contracts
-Organizational process assets |
|
|
Term
| Budget Input: Activity cost estimates |
|
Definition
| Cost estimates for each activity are added together to create an overall cost estimate for the work package. |
|
|
Term
| Budget Input: Basis of estimates |
|
Definition
| Supporting information required to justify the activity cost estimates should be specified. Assumptions made to the addition or exclusion of indirect project costs made to the project budget are to be mentioned in the basis of estimates. |
|
|
Term
| Budget Input: Basis of estimates |
|
Definition
| Supporting information required to justify the activity cost estimates should be specified. Assumptions made to the addition or exclusion of indirect project costs made to the project budget are to be mentioned in the basis of estimates. |
|
|
