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PROJECT COST ESTIMATION, BUDGETING & CONTROL
ESTIMATION OF RESOURCES
INTRODUCTION
The success of the estimation and control of resources have a major impact on the overall success of the project. The overall process by which resources are controlled is often termed budgeting. The estimate is a model of the cost performance of the project.
Estimates do not exist in isolation and a number of factors impinge on the estimate. Time, resource availability, materials, equipment requirements and quality all have a major impact on the estimate. The budget serves as a baseline for measurement. Deviations of cost plans from original estimates should be examined and analyzed.
As projects are usually funded from external sources, the importance of the budget from the client’s point of view has become pervasive. Budgets are often used as a straight jacket that can inhibit the investigation of opportunities that arise during a project.
Budgets should always be investigated to determine the expected resource usage at the relevant stage of execution. This allows corrective action to be taken before the budget is exceeded.
BUDGETING METHODS
PREAMBLE
Development of a project budget is more difficult than an operating budget. The ability to use past data is limited and the use of this data for project budgeting should be undertaken with care.
Past data can serve as a guide to the budget for the project in question. Many corporations have extensive historical records of past projects that allow information to be transferred from project to project.
In project budgeting inflows and outflows must be task linked. The WBS provides the account numbers for accumulation of this information.
TOP DOWN BUDGETING
Cost estimates are determined at a senior level based on judgment and experience. These estimates are successively broken down by lower level managers.
It is assumed that this process will prevent lower level managers from building an excessive
ESTIMATION OF RESOURCES
INTRODUCTION
The success of the estimation and control of resources have a major impact on the overall success of the project. The overall process by which resources are controlled is often termed budgeting. The estimate is a model of the cost performance of the project.
Estimates do not exist in isolation and a number of factors impinge on the estimate. Time, resource availability, materials, equipment requirements and quality all have a major impact on the estimate. The budget serves as a baseline for measurement. Deviations of cost plans from original estimates should be examined and analyzed.
As projects are usually funded from external sources, the importance of the budget from the client’s point of view has become pervasive. Budgets are often used as a straight jacket that can inhibit the investigation of opportunities that arise during a project.
Budgets should always be investigated to determine the expected resource usage at the relevant stage of execution. This allows corrective action to be taken before the budget is exceeded.
BUDGETING METHODS
PREAMBLE
Development of a project budget is more difficult than an operating budget. The ability to use past data is limited and the use of this data for project budgeting should be undertaken with care.
Past data can serve as a guide to the budget for the project in question. Many corporations have extensive historical records of past projects that allow information to be transferred from project to project.
In project budgeting inflows and outflows must be task linked. The WBS provides the account numbers for accumulation of this information.
TOP DOWN BUDGETING
Cost estimates are determined at a senior level based on judgment and experience. These estimates are successively broken down by lower level managers.
It is assumed that this process will prevent lower level managers from building an excessive