Assignment 1
The culture of an organization is an important factor that influences the quality of cost estimates set by an organization. An organization’s culture of an organization in relation to the costs estimates of a project being undertaken by an organization can be defined by a number of aspects or factors. This paper will seek to discuss some of the aspects of an organization’s culture to determine how they influence the cost estimates formulated by an organization.
An example of a factor that affects the quality cost estimates formulated by an organization is the type of data that is normally they use to arrive at cost estimates. Some organizations may have a culture of using historical or secondary data to calculate cost estimates while others may opt to use primary data. In most cases, primary data will most likely yield more accurate cost estimates as compared to secondary data.
The cost management plans used by various organizations also determine the quality of their cost estimates. For example, organizations that are keen to ensure that they use a cost management plans that factor in all costs of a project are likely to obtain more accurate and quality cost estimates as compared to organizations that use few cost considerations when calculating their costs.
An organizations quality of cost estimates can also be affected by the criteria they normally use to calculate their costs. For example, some organizations may use a criteria that involves the addition of individual cost estimates while other firms may opt to use a criteria that consider the rough estimate of the overall costs that are likely to be incurred in a certain project. Organizations that factor in individual costs are likely to have more accurate cost estimates than those organizations that factor in overall cost estimates.
Assignment 2
Project Estimation Techniques
During the planning process of a project, most organizations consider the estimation of costs that are likely to be incurred during the implementation stage of the project. The process of estimating the costs that will be incurred in a project is a complex one and it involves the consideration of a number of factors. For example, the sources of information and the technique to be used to estimate the costs of a project are some of the factors that are considered. The main techniques used to estimate the costs of a project include:
- Analogous estimating
This technique of cost estimation is also known as top-down estimating. The method involves estimating the costs that are likely to be incurred in a current project by analyzing the costs of a similar project that was carried out some time in the past. This method of cost estimation is one of the cheapest that can be used by an organization. However, it is also the least accurate method of cost estimation.
When to use Analogous Estimating
Analogous estimating is mostly used to estimate the costs that will be incurred by a project in situations where there is little information about important aspects that are likely to affect the costs of a project. The method will greatly be relied upon when similar projects have been done in the past and the personnel involved in estimating costs have the required expertise.
- Parametric Modeling
Parametric modeling is another method that can be used to estimate the costs of a project. The method involves the use of mathematical models to calculate the cost estimates of a project. Simple or complex models may be used to arrive at the correct cost estimates of a project.
When Parametric Modeling is used to estimate costs
This method of estimating costs is mostly used when the historical information that has been used to formulate the model has a great level of credibility and when quantifiable parameters are used within parametric model. The method is also well suited when estimating the costs of big projects.
- Bottom-up Estimating
IT is the third technique that can be used for cost estimation. The method involves the calculation of individual costs estimates that will be incurred in a project and, thereafter, summing them to get the total cost estimate for the project.
When the Bottom-up method is used
This method of cost estimation is generally used when there is a need to for project managers to consider the accuracy of the cost estimate against the additional costs that the organization will incur when increasing the accuracy of the cost estimate.
- Computerized tools
The method involves the use of computerized tools to estimate the costs that are likely to be incurred during the implementation of a project. Examples of computerized tools that are used in cost estimation include project management software and statistical tools. Simulation is also used in this cost estimation technique.
When the method is used
This method of estimating costs is mostly used when there is a need to simplify the use of the cost estimation techniques that have been discussed above since they assist in carrying a quick consideration of the costing techniques that are available.
Sources of information used when selecting the cost estimating technique to use
The method cost estimation technique to be used largely depends on the type or sources of information that is available to be used by the members of personnel estimating a project’s costs. For example, an analysis of a projects work breakdown structure (WBS) is a source of information that can be used to determine an appropriate project estimation technique since it provides a detailed outline of all the tasks that will be carried out in the project. An analysis of the tasks that will be involved in a project will provide a guideline of the best costing technique to be used.
The resource rates that will be used to calculate the quantities of each resource that will be used in each project is another source of information that is vital when selecting a costing technique or method to be used in a project. Resource rates such as the cost of staff per hour or the cost of cubic meter in a yard as well as other source estimates will help to come up with a good cost estimation technique.
Historical information concerning a certain project may also act as a vital source of information. This is because it will assist in giving project managers knowledge concerning the success and failures of previous cost estimation of previous projects and how they can successfully estimate the cost of their project.
The risks facing certain project are also another important consideration when deciding the cost estimation technique to use in a project. Project managers will always strive to use the cost estimation technique that will reduce the risks of coming up with wrong cost estimates.
References:
Larson , G. (2008). Project Management: The Managerial process. New York: McGgraw Hill.
Project Management Institute. (2000). A guide to the Project Management Body of Knowledge. Pennsylvania: Project Management Institute.
