Marginalia

• Enterprise environmental factors in this context refer to influencing factors like "marketplace conditions" or "commercial databases" containing things like "resource cost rate information" (comp. PMBOK3, p. 162).

• And Organizational process assets in this context refer to aspects like "cost estimating policies", "cost estimating templates" or "historical information" about other projects (comp. PMBOK3, p. 162)

(4.1) Cost Estimating

(4.1.1) Process Input

... generated by predecessor processes

... introduced by external units

  • Enterprise Environmental Factors
  • Organizational Process Assets

(4.1.2) Process Definition

Cost Estimating is the process of "developing an approximation of the costs of the resources needed to complete the project activities". Cost estimating is part of the Project Cost Management which "[...] includes the processes involved in planning, estimating, budgeting, and controlling costs so that project can be completed within the approved budget" (comp. PMBOK3, p. 157).

By comparing Cost Estimating and Cost Budgeting one sees that cost estimating means estimating the costs of each activitiy: Cost estimating is executed on the level of the activity list. Cost budgeting aggregates and is executed at least on the level of work packages if not on the level of control accounts. Cost estimates are "[...] expressed in units of currency"; the accuracy will be increased during the iterative loops of the planning phase and may be expressed as a decreasement of the "rough order of magnitued" (comp. PMBOK3, p. 161).

The subject Cost operates on the base of other cost concerning concepts

(4.1.3) Tools and Techniques

PMBOK Mentioned Methods

  • Analogous estimating means estimating on the base of historical information by using a special idea / assumption: the actual costs of an activity should be similar like those of a similar activity of another project, which already has (successfully) been executed. Naturally, cost estimating itself generates costs. Decreasing the estimating costs by using worse estimating techniques (like analogous estimating) might increase the project costs by increasing corrective actions.
  • Determine resource cost rates is the step of collecting unit cost rates.
  • Bottom up estimating means decomposing an identified activity, estimating the subtasks and aggregating the results as estimating for the activity as whole.
  • Parametric estimating computes the costs by formulars which operates on more or less unsure values.
  • Project managment software often helps to collect, document, and compute estimates and the needed basic values,
  • Vendor bid analysis means that the bid of a vendor will be compared with bids of other vendors and/or by an own detailed cost analysis
  • Reserve analysis regards the more or less hidden contingency reserves  which may be implicitly embedded into activity durance or explicitly integrated by the critical chain method. A good method is to integrate estimatings for known unknowns into the cost baseline.
  • Cost of quality analysis normally delivers results which can influence the cost estimatings.

(comp. PMBOK3, pp. 164ff)

Open Source Tools

  • NN

(4.1.4) Process Output

  • Activity Cost Estimates are "[...] quantitative assessments of likely costs of the resources required to complete schedule activities": for each activity of the activity list the document of the Activity cost estimates contain one value.
  • Activity Cost Estimate Supporting Detail is the activity specific documentation which "[...] (provides) a clear professional, and complete picture by which the cost estimate was derived". It contains constraints, assumptions, comutations and basic values.
  • Requested Changes may be generated if - for example - the cost target budget can't be met and the scope or the WBS and the activity list must be refined
  • Updates of the Cost Management Plan may be generated by changings which are elaborated of the basis of the practice and which concern the definitions, how to manage the costs.

(comp. PMBOK3, pp. 166f).

(4.1.5) Output Using Successor Processes

Successors using the initially generated output as own input(1):

Processes using the updates as input(2):

  1. For details see FAQ::Q001:1
  2. For details see FAQ::Q001:2