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TOPIC: “Cost Estimation in Project”


Miss. Manpreet kaur PRABHJOT SINGH
A project is a series of tasks that need to be completed in order to reach a specific outcome. A
project can also be defined as a set of inputs and outputs required to achieve a particular goal.

Project management is the practice of initiating, planning, executing, controlling, and closing
the work of a team to achieve specific goals and meet specific success criteria at the specified

Why do people learn PM?

• To explore the latest concepts and techniques of project management.

• To increase value/contribution to the organization. To prove yourself skillful
in managing projects.
• To learn a new thought process that helps organized thinking and structured
• To acquire a professional degree/ recognition and increase job prospects.
• Endless possibilities and benefits.

Why do companies use PM?

• To handle projects effectively in an organization.

• To define the project and agree with the customer
• To plan and assess resource needs for the project
• To estimate project cost and make proposals
• To plan & schedule activities in a project.
• To allocate the right resource at the right time.
• To assess risk and failure points and make backup plans.


 In built Monitoring/ Sequencing

 Easy and Early identification of Bottlenecks
 Activity based costing
 Identification and Addition of missing and new activities
 Preempting unnecessary activity/expenditure
 Timely Completion
 Assigning tasks
 Reporting
Characteristics of Project:

 The project should have a specified target.

 The project should be unique and cannot be replicated with the same task and
resources giving the same results.
 The construction project should not be a routine work, although there are some
aspects that are routine.
 The construction project shall consists of a number of associated activities
contributing to the project as a whole.
 The time limit for completion of project shall be defined.
 The total cost of construction project shall be defined and project shall be
completed within the given budget.
 The project should provide unique opportunities to acquire new skills
 Uniqueness. Project requires the doing of something different, something that was
not done previously. Even in what are often called “routine” projects such as
home construction, the variables such as terrain, access, zoning laws, labour
market, public services and local utilities make each project different. A project is
a one-time, once-off activity, never to be repeated exactly the same way again.


A cost estimate is the approximation of the cost of a program, project, or operation. The cost
estimate is the product of the cost estimating process. Cost estimation is needed to provide
decision makers with the means to make investment decisions, choose between alternatives
and to set up the budget during the front end of projects. For this, estimates made by
vendors and contractors need to be validated by clients as well. In later phases of the
project, the budget estimate is used as a baseline to assess the performance of a project.


A cost estimate is often needed to support evaluations of project feasibility or funding

requirements in support of planning. A cost estimate is often used to establish a budget as the
cost constraint for a project or operation.

Order of





 Order of Magnitude: This estimate is made when a project has been identified and
the entrepreneur wants to get a rough idea of the investment so as to decide whether to
presue the project or not. Order of Magnitude Estimates are rough guesses made at the
very beginning of the project. At this time not much is known about the project and
everything can change as planning progresses. Order of magnitude estimates use
historical project data.

 Study Estimate: This estimate is for studying the economic viability of the project
and also for arranging funds for the project. This factor takes care of civil, elecrtical,
piping, instrumentation, insulation and installation cost. The factors are vary
accordingly by the type of the plant and processing scheme.

 Preliminary Estimate: An approximation of the probable cost of a product, program,

or project, computed on the basis of available information. Cost estimation are made
successively whenever adequate information is available.
 Definitive Estimate: The definitive estimate is the most accurate estimate for the
amount of work and resources needed to complete the project. For accurate estimate
following are must available:-
1. Equipment purchase specifications.
2. Schedule of items for work tenders.
3. Reasonable accurate material take-offs
for steel, piping and electrical equipment
based on general arrangement drawings.
4. House general arrangement drawings.

 Detailed estimate: This estimation may be made on completion of engineering,

ordering of eqiupment and machinery and award of major field contracts.
For accurate estimate :

1. Ordered value of plant equipment and

2. Final material take-offs.
3. Ninety percent construction drawings.
1. Equipment purchase specifications.
2. Schedule of items for work tenders.
3. Reasonable accurate material take-offs
for steel, piping and electrical equipment
based on general arrangement drawings.
4. House general arrangement drawings.

 Residential Projects
Current Projects:- Sunny Villas, Sunny Urban Greens, Sunny Heights, Sunny ECO
Accomplished Projects:- Sunny Enclave Greater Mohali, Sunny Enclave Patiala,
Whispering villas, Amazon Tower, Para-Dise Apartments, Sunny Views

 Commercial Projects

Sunny Enclave is a beautiful township spread in over 400 acres in Greater Mohali. A
trans-urban development that redefines trendy and modern urban living. Pockets of
Commercial seemingly


They check the cost by checking the previous similar project done only by them.
For example: The project of kharar which is residential project, the total cost on it is 300
crore (Appox). Then they have to decide where they Want to start a similar project and the
cost of that project is this much.
If Sunny enclave wants to start the project in Ludhiana or Mohali then they decide according
to the previous project which cost 300 crore( Appox). This is called ORDER OF