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Project Estimating Techniques Essay


     Project estimating techniques are important to project managers, because they provide them with accurate predictions on which good planning and risk assessment are more soundly based. An estimate is used as an assessment tool to determine the quantitative outcome of a project. Project estimation is important because it justifier’s the project, usually at the initial stage of the project. This is because it enables the project managers to compare the costs with the anticipated benefits, thus determining the profitability of the project.

Project estimation is important because it assists in enforcing the various disciplines required to make the project succeed as well as enabling everyone understand the impact of the project. Project estimation is usually based on three components, which include experience, expert judgment and task decomposition. In experience, the project is compared with projects that have been previously completed. In task decomposition, the project is decomposed into various components known as work breakdown structures and estimating the outcome of each work package. (Rad, 2002).

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Cost estimation technique

      Cost estimation and budgeting involves estimation of the cost allocated to various duties in the project and the budget for each duty. The initial cost estimation of a project determines the fate of that particular project. It is very important to make accurate cost estimation, because if the cost is over estimation, there is a high likelihood of losing the project. Cost estimation involves identifying various elements, which include resources that are required for the project profits to be made from the project, overheads involves into the technology and the total expenses of the project. The total costs of the project should be analyzed in relation to the work packages of the project. In cost estimation, the total budget cost of each work packages in the projects identified and the process distributed over the time spent on each work package.

The cost of each work package is then determined based on the activities and time spent on the package. The cumulative budget cost is used to determine the cost spent over a period of time and it analyzes the cost performance of the project.   The cumulative budget cost is used as a baseline against the actual cost and performance of the project. While preparing the cost estimation budget of a project it is important to consider decision-making processes, investment opportunities and performance reviews.

During the project, project managers are advised to keep tract of the committed cost as well as the actual cost by collecting data and maintaining it in an information system. The committed cost should be set aside because it is money that has to be paid out in future. Another important element in cost estimation is determining the earned value for a project. This is determined by the value of work that has been performed and requires collection of data on the complete percentage of each work package. ( Lock,2007).

Base and contingency estimation

      In base and contingency technique, the estimation involves two components the base and the contingency. The base is referred to as the minimum expected time that is required to complete the project if everything goes as planned. The contingency is the level of trust that is usually placed on the base when all risks taken are put into account. Contingency costs are set aside only for unexpected events and omissions that may arise during the project. Separating the base and contingency cost is determined by considering everything that fail or go wrong during the project. The contingency cost is determined by using the risk analysis technique.

Importance of project estimation techniques in an organization base and contingency estimation in an organization, the project manager is required to take into account all the wide risks that the project may encounter. The manager is also required to undertake a risk analysis and determine the appropriate amount of contingency to be set aside. The project contingency can be estimated by determining the money and resources to be used in the project.

In order to produce an estimation of the project, the project manager is required to decompose the project into various tasks, otherwise known as a work breakdown structure. The project manager will then estimate each task as appropriate, add the estimates together and finally add the project contingency. Contingency estimation is usually based on expert judgment dependent on various cost engineering.

Cost estimation

     The cost estimation technique in an organization is required in order to support good-decision making processes as well as making a schedule of the work. Project managers use the cost estimation technique to determine whether the project is worth the effort being put into it. The development of cash flow needs and time-phased budgets requires a proper cost and time estimation technique. Project estimation is important in an organization because it enables them decide whether investing in a certain project is good for the company. (Verzuh, 2005).


    Project estimation is the foundation of planning a project because it establishes appropriate targets for the cost and the work packages. Project that are planned based on unrealistic estimations turn out poorly and with very high budgets and schedules. In order to achieve reliable estimates, the project scope should be well identified and defined. If the product scope is defined as unrealistic, then the estimation may be inaccurate therefore leading to very unrealistic targets; initially the project estimation is based on decomposition of the project into work packages. Project estimation is thus, essential for project planning and target setting.


Rad, P. F. (2002). Project estimation and cost management. Management concepts.

Lock, D. (2007). Project management. Gower publishing

Verzuh, E. (2005). The fast forward MBA in project management. John Wiley and sons.

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