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LECTURE OVERVIEW
Definition
Purpose
Categorising
Estimates
DEFINITION
Planning,
Cost
Estimating,
Cost
Budgeting,
Cost
Control .
PCM642 Topic 4
DEFINITION
Definition (contd)
PMI:
AACE:
COST ESTIMATING
Economic Evaluation
Time Estimating
g
Funding Approval
Comparing Alternatives
PCM642 Topic 4
PURPOSES (CONTD)
T d i
Tendering
Client
CATEGORISING ESTIMATES
BENEFITS
Standardises basis of estimate:
CATEGORISING ESTIMATES
Estimating methodology
Accuracy range
stochastic
t h ti ( b
based
d around
d relationships
l ti hi b
between
t
costs
t & project
j t
parameters generally other than direct measure of project
elements)
deterministic - definitive measure of items
PCM642 Topic 4
TYPES OF ESTIMATES
Class
Level of
Project
Definition
0 2%
4
3
2
1
Typical
purpose of
estimate
Typical
estimating
method
Screening or Stochastic or
Feasibility
Judgement
1 5%
Concept study
Primarily
or Feasibility
Stochastic
10 40%
Budget,
Mixed, but
Authorisation,
primarily
or Control
stochastic
30 60%
Control or
Primarily
Tender
deterministic
50 - 100%
Check
Deterministic
Estimate or
Tender
Accuracy Effort
relative relative
to Class 1 to Class
5
10 to 20
1
5 to 10
2 to 4
3 to 6
3 to 10
2 to 3
5 to 20
10 to
100
In construction projects;
Project
stageCost
AIQSmanagement
Cost planning
AIQS
Cost
AIQS
Manual
stage
Common name
of
specifies
types:
Brief stage
cost
costing
Inception
A Brief
Development
Indicative cost
Preliminary estimate
C Sketch design
Sketch design
cost plan
Limit of cost
estimate
D - Documentation
Tender
Tender estimate
document cost
plan
However,,
generally
g
y accordingg to level
of project definition
PCM642 Topic 4
ORDER-OF-MAGNITUDE ESTIMATES
Characteristics
BUDGET ESTIMATES
DEFINITIVE ESTIMATES
Characteristics
Characteristics
PCM642 Topic 4
LEVEL OF EFFORT
Participants
P
i i
then
h
k
know
expected
d level
l
l of
f effort
ff
f
for
types of estimate
Accuracy
range (%)
$1,000,000
project
$10,000,000
project
$20,000,000
project
-5+ 15
20,000
50,000
90,000
-15 + 30
6,000
15,000
30,000
-30 + 50
1,500
4,000
8,000
LEVEL OF EFFORT
ESTIMATING
now
now answer Class exercises: Question 2
PCM642 Topic 4
QUALITY OF AN ESTIMATE
Validity
Estimate considered valid if basis for preparing it is also valid
eg if previous similar project used to estimate proposed
project, all differences between the two must be properly taken
into account
Reliability
Reliable = methodical process followed by identifying,
evaluating, using and recording all relevant information available
Accuracy
Accuracy = freedom from error
Precision
= how many significant digits we use in calculations
precise figure can still be inaccurate if error is made
.
COST COMPONENTS
Labour - 2 parts:
Direct costs
I di t costs
Indirect
t
PCM642 Topic 4
ESTIMATING
ESTIMATING INPUTS
Project Documents
Historical Information
ESTIMATING INPUTS
Organisational Policies
eg
g project
p j
team,, consultants,,
subcontractors, suppliers .
PCM642 Topic 4
SOURCES OF DATA
Suppliers quotes
Trade literature,
literature tech lit,
lit textbooks
Company historical data, standard costs
Computer systems
Government figures
PLUSPMs experience
ESTIMATING - OUTPUTS
Cost Estimate
Supporting Detail
ESTIMATING
PCM642 Topic 4
ETHICS
Ethics:
Fudge estimates !! (Bent & Humphreys
, 1996)
manipulate
man pu a to suit
u a particular
par u ar purpose
purp
ESTIMATING - SUMMARY
The
ESTIMATING - SUMMARY
End of topic
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