How to Estimate Project Costs: A Method for Cost Estimation
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- Опубліковано 28 чер 2024
- There are two reasons why cost estimation is important for project managers. First, it’s extremely hard to estimate project costs well. And second, poor cost estimates are often the biggest reason for a project budget over-run.
And there's another factor, which I refer to as the 'project knife-edge'. This is the competing pressures to:
- reduce your costs to satisfy your funder
- increase your budget to de-risk your project
All of this makes estimating project costs tricky. So, in this video, I'll talk you through the best way to estimate project costs:
1. The Project Cost Estimating process
2. The sources of costs in project management
3. Estimating methods and my cost estimation tips
4. How to add a contingency to your project costs
5. From Estimates to Budget to Cash flow.
You may also like the companion videos:
- How to Deliver Effective Project Cost Management
... • How to Deliver Effecti...
- Project Financial Management - 5 Tips for Good Cost Control | Video
... • Project Financial Mana...
- What is a Discounted Cash Flow (DCF)
... • What is a Discounted C...
- What is a Business Case?
... • What is a Business Cas...
- Project Business Case: Write an Effective Project Proposal
... • Project Business Case:...
For more details, check out three thorough articles on our website:
1. Project Estimation: Master the Art and Craft
- onlinepmcourses.com/project-e...
2. Project Cost Management - The Essential Things to Know and Do
- onlinepmcourses.com/project-c...
3. Great Big Guide to the Project Business Case
- onlinepmcourses.com/project-b...
My basic introductory book to Project Management is How to Manage a Great Project (published by Pearson): geni.us/4Iz6M (affiliated link).
________
For more great Project Management videos, please subscribe to this channel: / @onlinepmcourses
For all our great Project Management articles and resources, please check out the OnlinePMCourses website: onlinepmcourses.com/
For basic Management Courses - free training hosted on UA-cam, with 2 new management lessons a week, check out our sister channel, Management Courses: / managementcourses
For more of our Project Management videos in themed collections, join our Free Academy of Project Management: onlinepmcourses.com/free-acad...
#ProjectManagement #ProjectCostManagement #CostManagement
That is probably the best Estimation Explanation I have seen. Simple, effective and almost perfect explanation. Thank you so much for this video.
Thank you very much.
as usual, very precise, informative and clear as crystal. Thanks for sharing your knowledge and broad experience.
My pleasure!
Thank you a lot for this video I found it easy to understand but very concise and complete explanation.
You're very welcome. Thank you.
Thank you! Thank you! Thank You..🌸
Your teaching is clear and easy to understand.
So glad I came across your channel.
You are so welcome!
Came here for estimating left falling asleep. Such a soothing voice😂
Sleep is healthy.
I have ASMR, great videos and information. However as you have a great soothing voice, its hard to stay awake lol. Subscribed as I love your info and videos. Keep up the good work
I love interpreting info with the soothing voice!
Me too. I'm sleepy
Estimating sleeping project 😂😂
The is the first video class I'd enjoy in this journey
Thank you.
Knowing the people and material to do the work is the easy part. It's understanding the work in detail and effort required that is the hardest bit.
A very good point.
I always enjoy your presentations, so precise and yet very informative.. you make things easy and I like them(you) for that. From Uganda, East Africa.
That's great to hear, Patrick. Thank you
From Uganda as well am new here happy see u here just trying to understand project cost estimating
This was a great video. Thank you!
You're very welcome!
You are amazing with how you explain concepts
Thank you!
I really enjoy how you teach. Thank you.
You're very welcome, it's great to hear.
Another great topic well explained - well done!
Thanks!
New subscriber from Brazil. Thanks for the knowledge.
You're very welcome. Glad to have you on board, Felipe.
Really appreciate your videos. Thank you
My pleasure!
I love this!!! Thank you so much❤
You're so welcome!
Amazing content in a short amount of time 👏 (couldn't find this info anywhere on UA-cam)
Happy to help!
Good video, I think you have done it quite well, thanks.
I appreciate that, thanks!
Great video. Learnt a lot. Well explained.
Thank you.
You sir just got a new subscriber!!!
Welcome aboard!
Great job!
Thank you
Good explanation. Thanks a lot
You're very welcome.
Great explanation sir.. Thank you
My pleasure.
Thank you🌹
You’re welcome 😊
Good presentation...Thx
Glad it was helpful!
Thanks for the explanation... please what are the mechanisms that project managers can use to improve on project cost estimation
Take a look at my full length article on estimating: Project Estimation: Master the Art and Craft onlinepmcourses.com/project-estimation-master/
Your voice is sooooo sweet. 😊
I struggled not to fall asleep 😂😂😂
There there. Just close your eyes………… 🥱😴
thank you
You're welcome
Love the red team idea
Thank you, Nicholas.
Good afternoon!
I am stuck in one problem that my prof.assigned me as an internal assessment and it goes like this : Explain the concepts of cost estimation as applied in the mining industry and
give reasons why you may prefer a particular approach used for
determining these costs.
Unfortunately, I don't know the mining industry. And anyway, you should research your own assignment, or you won't learn. I recommend you hit the library and find out the options. Then do some careful thinking. Good luck.
great content
Thank you
THANK YOUUUUUUUUUUUU!!!!!!!!!!
Welcomeeeeeeee!!!!!!!!!!
Good afternoon!
I am stuck in one problem that my prof.assigned me as an internal assessment and it goes like this : Take an imaginary company . Work out its project cost, means of financing, estimate working capital requirements for 3 years, profitability estimates, cash flow and balance sheet for 10 years.
Work out its payback period and NPV using 10 years as life of project.
It is possible to get some tips in how to do it .
Nadiya, I hope you will understand that I cannot help people with educational assignments. Quite aside from the time commitment, I don't think it is ethical.
What I would note is that you have plenty of missing information here, but the essence seems to be to test your ability to build a Discounted Cash Flow (DCF). We have a video: ua-cam.com/video/Pr_2fYwldmw/v-deo.html
You will also find formulas in the Investment Appraisal section of this article: onlinepmcourses.com/pm-formulas-understanding-the-math-of-project-management/
@@Onlinepmcourses
Thank you so much !
The fundamental starting point is not the WBS. It’s the project functional requirements (Statement of Requirements and the Design Basis), the Design (the key plans and specifications that define what needs to be delivered) and execution plan (the document that describes the methods, schedule and resources that will be used to deliver the project) that drive cost. The WBS and CBS are simply a way to coherently breakdown the work into manageable elements.
The fundamental starting point of what? I agree that requirements are an important starting point for a project. But, for cost estimation, I have chosen to start with a knowledge of the what. This video is about one step in the project process, so I start where I choose. That is not to say that this is the beginning of the whole process.
@@Onlinepmcourses Fair enough. Good debating with you on a subject that often leads to heated opinions. I never fail to be surprised by customers who struggle with the basic concepts involved in creating robust estimates and execution plans. Your description of the “knife edge” and competing pressures between project promoters (sponsors) and project deliverers (PMs) is one I recognise well.
@@donharrold1375 Thanks, Don.
Great
Thanks.
Thanks
Welcome
Do you know of any good project cost history programs/softwhere that works like modelogix but is not modelogix?
Paige - sorry, no. I don't keep up with project software, I'm afraid.
Please let me know how to calculate the projected revenue for the Quarter Ptk
I'm not sure I understand your question. What's Quarter Ptk?
I took several estimating courses to estimate paper, hourly rates, skills, timing, etc. However; how can you find up-to-date data for your project? Also, the waste ratings; how do you deal with it?
Finding data for making parametric estimates relies on having access to information about comparable projects. This requires one or more of:
- hard experience in the project team
- a data store in the organization
- a great network of other PMs and experts (who are not bound by confidentiality)
I do not understand what you mean by 'waste ratings'. If you can explain, I will tr to give you my answer.
good video
Thank you.
A construction design estimator not only calculates design costs, he/she looks into those design details, to head off design problems before the problems get to the construction phase.
That makes a lot of sense. My background is not in construction, but that rings true to me. Thank you.
Make sense because the construction phase has a big uncertainty factor!
Hi, I need to use Monte Carlo to justify my project cost estimation, is it possible to get some tips on how to do it?
I'd like to help, but I am not sufficiently expert on Monte Carlo methods to offer you practical advice.
However, for anyone wondering 'What is the Monte Carlo Method?' check out my video that gives the answer: ua-cam.com/video/PMISi2ZyuR8/v-deo.html
@@Onlinepmcourses Thanks
Good evening
Please, I really need the diagram that appeared in your presentation, where we see the chain from the problem/opportunity to the risk register.
I purchased your kit templates and the checklist documents but no one contains this diagram
I made the diagram to illustrate my video, Project Planning 101 - How to Build Effective Project Plans ua-cam.com/video/9G_LwG8ozpo/v-deo.html
There is a download link for the diagram, in the description below that video: ua-cam.com/video/9G_LwG8ozpo/v-deo.html
Thank you for purchasing my templates and checklist. Others can learn more about them at:
- PM Templates: onlinepmcourses.com/project-management-tools/project-management-template-kit/
- PM Checklists: onlinepmcourses.com/project-management-tools/project-management-checklists/
- Productivity Bundle (with both): onlinepmcourses.com/project-management-tools/project-management-productivity-bundle/
My prof said elements of cost estimate are:base, allowance and contingency. Can you please explain these.
Maybe you should ask your Prof to explain.
I am not sure what he/she means by this but I would assume:
Base: the core predictable costs
Allowances: amount to cover known unknowns - eg you don't know the weather so you allow for the worst-case
Contingency: amount added to cover unknown unknowns - things you cannot anticipate
Thank you. She provides links of your videos for understanding the concept so there's no point asking her.
Hay quá
Thank you - Cảm ơn
How can i subscribe on your courses ? i looked online but i didnt find any sources
No problem: my courses are at onlinepmcourses.com
Can we implement your technique in machine learning with linear regression for estimating the project cost. Please suggest
Frankly, I have no idea. I know nothing about machine learning. Linear regression suggests to me a series of data. Not sure what data set you are referring to. So, I am unable to help you, I'm afraid.
Do you know how construction companies do this?
I've never worked in a construction environment, Steve. But I do know that the starting points will be:
- The technical drawings - how things need to go together
- Quantity Surveyor's bills of quantities - how much of each thing is needed
I also suspect that is often the civil engineers who will lead on the early stages of planning.
Maybe hit up Michael Fisher at Leadership in Construction. He will know better than I do.
ua-cam.com/video/fZLHMXRaPHg/v-deo.html
@@Onlinepmcourses I grew up in construction. My dad built houses. I would watch him go over a set of plans counting all the things he would need- from yards of concrete to light switches. In many construction projects, the contractors have to pay for the overruns. I have seen them go broke paying penalties. What if software people had to do that?
@@tangobayus As I say, I don't know this industry. But a lot of the risk management will be through selecting the right kind of contract and procurement model. This article is written from the perspective of the PM procuring services. But the ideas may be helpful. onlinepmcourses.com/project-procurement-management/
@@Onlinepmcourses The key point is that successful contractors keep detailed records of estimated and actual costs and use those to estimate new projects.
Absolutely. I completely agree.
any MGN384 :D
???
Not that easy to execute all sir lol
Agreed - estimation is a hard discipline to learn, and fraught with difficulties and biases. professional estimators are very skilled.
I am unable to understand your presentation at all.
I'm sorry to hear it, Sajjad.
Is it my speaking style, my choice of words, how I explain things, the structure, or is the concept unclear to you?
Great job!
Thanks!
Hay quá
Thank you.
[Google tells me you said 'so cool' in Vietnamese]