Response 1:”Cost estimation in project management is the process of forecasting the financial and other resources needed to complete a project within a defined scope. Cost estimation accounts for each element required for the project—from materials to labor—and calculates a total amount that determines a project’s budget”(). A construction project lives and dies by its budget. Some would argue that the budget is the most important aspect of the job. There are two key types of costs associated with the cost estimation process:
“Direct costs: These are the costs associated with a single area, such as a department or this particular project itself. Examples of direct costs include fixed labor, materials and equipment.
Indirect costs: These are costs incurred by the organization at large, such as utilities and quality control
Within these two categories, some typical elements that a cost estimation will take into account include:
Labor: the cost of project team members working on the project, both in terms of wages and time.
Materials and equipment: The cost of resources required for the project, from physical tools to software to legal permits.
Facilities: the cost of using any working spaces not owned by the organization.
Vendors: the cost of hiring third-party vendors or contractors.
Risk: the cost of any contingency plans implemented to reduce risk” ().
A savvy project manager always stays ahead of the game. Construction is like a game of chess and knowing what is going to happen next helps you better prepare for it. Utilizing the cost estimating technique helps you to know where your job is at financially at all times. And like I’ve said before, your project lives and dies by its budget. Response 2:”Cost estimation in project management is the process of forecasting the financial and other resources needed to complete a project within a defined scope.” (What Is Cost Estimation in Project Management?, n.d.). An example of how estimating is used in the design process is estimating the time spent on design. Ultimately the drawings include all the information needed to provide an estimate. As for pre-construction – there are pre-construction cost estimates which are used to help the owners make decisions. During this time they can create initial budget estimates, and let the contractors know what numbers they need to stay within. As for operations estimates this includes things such as material, equipment, labor, and so on. All of these examples are real life examples. All of these stages mentioned above are incorporated into the final estimate. The estimate is what the entire project goes off, and at the end the contractors find out if you made or lost money on it. Obviously they always want to be up, and this is why estimating is so important. There is no way to know exactly how much the project is going to cost. That is why we estimate to get it as close as possible, while trying to make a profit at the same time. Response 3:Cost estimates are predictions, based off information available, of how much money and resources it will take to complete a project. Cost estimation starts with the owner and goes through the whole project. The owner will use cost estimating to determine a budget he or she wants to spend on a project. As a design progresses, the estimate is updated with more accurate costs. Theoretically, the final cost estimate from the contractor should be very close to the actual costs for the project.I guess the best way for me to explain this is through an example. Recently, I had to have a header system built to connect several meter runs to a pipeline system (there was a break is scope between a new facility and pipeline that was missed during design). I started by consulting with the facility Chief, and we decided where we needed valves, blow downs, and a rough idea of how the header needed to be designed. I drew up the fabrication and called my vendors to get prices on materials. I calculated in my costs, labor costs based on the number of welds, number of personnel needed, and time that I thought it would take to complete this project. I basically put together the maximum cost that it should take to complete this project. I solicited bids from a few of my contractors. I actually selected the contractor that ended up being available to start and complete the project in the time frame I needed. They were not the cheapest; in fact, they were the most expensive. I was able to work with their estimator and make a few slight design changes. In the end, I was well under what I had the WBS amount supplemented for, and completed the project ahead of when I had to have it completed.I do these types of estimates often. I also keep track of all costs on my projects so good estimates are important to me when dealing with a capital budget. I have to answer to someone when I go over budget on a project or when my estimations are way off, which has happened before.