![]() ![]() The basis of estimate report allows project stakeholders to interpret project costs and to understand how and where actual costs might differ from approximated costs.Įstimates are adjusted for accuracy during the planning phase, as project stakeholders and sponsors may ask for revisions before they are willing to authorize a budget.Īfter this early stage, the accuracy of estimates is systematically increased. These assumptions (along with estimates of cost accuracy) are compiled into a report called the basis of estimate, which also details cost exclusions and inclusions. In project management, quality control, security costs, and utilities are usually classified as indirect costs since they are shared across a number of projects and are not directly billable to any one project. They can include project team wages, the costs of resources to produce physical products, fuel for equipment, and money spent to address any project-specific risks. In project management, direct costs are expenses billed exclusively to a specific project. These project costs can be categorized in a number of ways and levels of detail, but the simplest classification divides costs into two main categories: direct costs and indirect costs. Project cost management has been practiced since the 1950s.) The approximate total project cost, called the cost estimate, is used to authorize a projects budget and manage its costs.Īn accurate cost estimate is critical for deciding whether to take on a project, for determining a projects eventual scope, and for ensuring that projects remain financially feasible and avoid cost overruns.Ī cost estimate may also be used to prepare a project cost baseline, which is the milestone-based point of comparison for assessing a projects actual cost performance. It is the primary element of project cost management, a knowledge area that involves planning, monitoring, and controlling a projects monetary costs. This complete guide to project cost estimating will walk you through the key concepts and major estimating techniques.Īdditionally, find how-tos, templates, and tips for key industries to help you get started with your estimates. ![]() ![]() Some project budgets are authorized based on the preliminary estimate.Ĭost estimations forecast the resources and associated costs needed to execute a project, which helps ensure you achieve project objectives within the approved timeline and budget.īy understanding the nuances of cost estimating and using standard estimation techniques, you can improve your forecasts. ![]()
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