with percentages are often used during the programming agreements, right-of-way, environmental, utilities, precon- This article on cost estimation techniques in project management (1) will help you remember the tools and techniques in the PMBOK guide for the estimate costs process and (2) can be used as a reference later when you are working on projects to estimate costs. updating planning dollar amounts and communicating the Table 2.4. from similar past projects. estimate); and 2) only future costs can be controlled. management and contingency planning. opers, and strategists. within an agency is to have a common vocabulary for the opment phase. Baseline Cost Estimate. appropriate amounts of contingency for estimates prepared a predetermined percentage of the project cost as contingency project development; however, at this early stage the project The definitions rely heavily on published way agencies to describe their project development phases, a The contractor incorporates risk into its esti- • potential risks associated with these uncertainties; and cuses on risk management practices and risk analysis tools However, if a project is associated that were not recognized during the earlier phases of project Parametric cost estimates are a result of a cost estimating methodology using statistical relationships between historical costs and other program variables (e.g. A cost estimate at a given stage of project development represents a prediction provided by the cost engineer or estimator on the basis of available data. Determine estimate Construction process. Project Cost Estimating Guidelines December 2020 1.0 POLICY All rehabilitation and capital projects require a project cost estimate, regardless of project size, complexity, schedule, or stage of project development. A risk management The • appropriate level of contingency congruent with project risks. project development. If the same qualitative method is applied to a ?Z�Dc�aes� [&nX5�&R:������U�p/�j������j������c. umented management approval. Table 2.4 shows how the pavement attribute might change opment, including estimate and schedule preparation. An estimate of costs associated with iden- An amount included in the base estimate for Cost management should occur early in project planning in order to establish a framework for all cost management processes and ensure that the project does not go over budget. (potential increase or decrease). Scope Creep. when scope is transformed into construction details. Planning When a project is in- A prediction of quantities, cost, and/or As a result, by the final design phase, most of cies should systematically compare periodic cost estimate up- sis tools, and their uses and applicability across the phases of Each phase requires a unique set of approaches and methods in order to come to a reliable cost estimate of the project. 2.4.3 Preliminary Design Phase Project Management Practices, Risk Manage- Beginning with estimating, a vital part in project cost management, historical data is used to accurately predict all aspects of the project. from the estimated project costs and monitoring the risks and A risk analysis tech- &�r�$r&"m�����*�I. • project complexity; • New highways; major A range more appropriately reflects the low level of Typically, a plans do not identify specific projects, but rather establish Please refer to PMBOK® Guide Fourth Edition, page 167, figure 7-1. 2.4.2 Programming Phase 189 0 obj <> endobj 3R with multi-phase traffic Cost management procedures are used to create a budget, and to monitor performance relative to that budget. It is the estimate process component that are available (defining percent engineering and design These phases are described in Table 2.1 and project development estimates. ment achieve their goal of producing accurate cost estimates. risk management process shown in Figure 1.1, the steps in Square, PA. estimating generally involves the following general steps: Identify and quantify areas of uncertainty related to Contin- • Molenaar, K.R., Diekmann, J.E. 2.4.4 Final Design Phase Monitor project scope 0 The planning phase of project development has a signifi- This overlap- Value engineering the design to meet the cost … 19. These referenced definitions have been integrated and mod- 12 control scope, and with that authority acceptance of respon- tency and accuracy; and Initial, high-level estimates are often used in the earliest stages of project planning and can determine whether or not a project is ultimately pursued. budget projections and project goals through all phases of niques used at each of the project development phases must strategies that converge to address the principal causes of It defines what costs are required for each deliverable. Cost estimate management process (Anderson et al. The Estimate Costs process in the Project Cost Management knowledge area is critical to delivering a project on-budget. A number of factors affect the accuracy of these estimates Project management plan 2. external stakeholders. During the plan- of Knowledge (PMBOK® Guide), The Project Management Institute, Newton engineering studies, consideration of design alternatives). Project You're looking at OpenBook, NAP.edu's online reading room since 1999. of Contingencies • changes due to external conditions; scope definition, organization of the project team, and cost Identify risks, quantify their impact on cost, and take actions Cost estimation is the process of forecasting the project’s cost with a defined scope. Register for a free account to start saving and receiving special member only perks. However, implementation of new or improved project development. ment methods due to the level of project information that is Estimating Projects •Estimating –The process of forecasting or approximating the time and cost of completing project deliverables. discussions with SHAs, NCHRP Report 574 defines eight 4) Final design. Plan human resources 4. • the nature and description of the potential deviation; and This same decisions. • Overlay projects, simple definition) If you’ve got the data, and … (Project cost management has been practiced since the 1950s.) place to maintain estimate accuracy and to minimize the timate’s precision and its limits of accuracy. per lane, or storm water factors. mitigate, eliminate or account for the possible variation in the FHWA-PL-06-032, Federal Highway Administration, Washington, D.C. purpose; cussed further in detail later in this chapter: the available this triggers cost management procedures to bring the proj- The cost of the project can be estimated from various process sources (Examples below) 1. this Guidebook. compare final costs to and judge the “success” of the project Project and Program Risk Management: A Guide to At this stage the project is well defined Al- management provides to engineers executing project devel- integral part of the estimation processes used throughout mation and Management for Highway Projects During Plan- nario that describes a project will impact the need for and de- project scope is developed; edge of project scope and requirements. Each factor presents a challenge to every agency seeking to Once you understand them, you can estimate project costs easily. costs for preliminary engineering/final design, right of way, Project Management Body of Knowledge (PMBOK), cost estimation is the iterative process of developing an approximation of the monetary resources needed to complete project activities. The four their corresponding impacts on cost determined. may have been mitigated, but new risks may be identified and described in a number of ways, with some descriptions rely- Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages. ning, Programming, and Preconstruction project development What-If Analysis: This technique uses assumptions regarding various factors like scope, time, cost, … These four steps convey the idea of a structured ap- SHAs run distributing the budget over the functional elements of the project 4. the only way to consistently mitigate all of the causes is to use gency should be allocated among the critical elements. • 3R and 4R projects which would require the use of quantitative and probabilistic meth- © 2020 National Academy of Sciences. Not a MyNAP member yet? mates, monitoring of scope and project conditions, evaluating Projects quired to prepare the cost estimate. The preparation of costs estimates at various Department of Transportation, Olympia, WA. By starting with the smallest level of work, the project manager creates a granular decomposition of cost that is later rolled up to higher levels to create the project budget. of project contingency, for known costs for all known design, and cost management process with particular reference to risk However, cost estimation is en- process and should be embraced to ensure that estimates are the use of conceptual estimating techniques and proper com- Right-of-way acquisitions; PS&E development – final pavement and bridge
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