Cost Estimation

1 An Introduction and definitions.

Cost Estimation Methodologies

Cost Estimation 2 Select the most appropriate cost estimating methodology (or combination of methodologies)

for the data available to develop a high-quality cost estimate.

Basic Course
 Cost Estimation
1 An Introduction and definitions.

Cost Estimation Methodologies

Cost Estimation 2 Select the most appropriate cost estimating methodology (or combination of methodologies)

for the data available to develop a high-quality cost estimate.

Basic Course Cost Estimation Life cycle

3 Passes through the duration of work and projects with accurate changes and difficulties affecting

decision-making. It is very important that are given very high attention during all stages of project life

Cost Estimation Processes

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Bottom-Up (Engineering Build-Up)

5 Methodology and procedure.
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Chapter 02

Cost Estimation
 Topics
2.1. Parametric Cost Estimating (Modular ESTIMATING)
1
2.2. Analogy Cost Estimating Methodology
(ANALOGOUS ESTIMATING) 2
2.2.1.Project manager Rules:[4]
SUBTITLE TEXT HERE 3
2.2.2.The analogous methodology tools:
4
2.3. Engineering Build-Up Methodology
5

06-Aug-19 Eng. Ahmed Said

2 . 1 . Pa r a m e t r i c C o s t E s t i m a t i n g ( M o d u l a r E S T I M AT I N G ) :

This method also called Modular Estimating, which uses historical data for modules
that are developed to predict the cost, duration and resources of similar projects.

This method is characterized by the speed of data extraction and the possibility
of repetition of previous projects with the difference of any of the variables
considered such as the time of implementation and the duration and size of the
project provided the stability of functional characteristics and quality.

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 Parametric Estimation

Historical Data collection ( previous projects)

Define Estimating
Start Collect "relationship" Data
"Hypothesis"

Data not Comply

Evaluation & Normalize Data

Data not Comply

Data Ok

Data not Comply

Analyze Data Test Data & Result
( previous & new projects) ( previous & new projects)
Analyze Data For Candidate Test

Parametric Projects

Data Ok
Relationships

cost Perform Statistical

Modeling (Regression) Analysis Confirm

Estimating
Relationship

Process Data Ok

Final Result
(Modular Estimate)
Data Ok

9/12/2019 Eng. Ahmed Said 7

Example
2.2. Analogy Cost Estimating Methodology (ANALOGOUS
E S T I M AT I N G ) :

Analogous models are normally used for early estimates that are called order of
magnitude, conceptual, or ballpark estimates.[4]
• Analogous estimating depends on the accuracy of the historical data.
• This technique identifies a currently fielded system (comparable system) similar in
design and/or operation to the proposed system.

The analogy method uses the cost of a similar system, adjusts for differences,
and estimates the cost of the new system.
Called also Ballpark estimates is an approximation, made with a degree of
knowledge and confidence that the estimated figure falls within a reasonable
range of values. Also called rough order of magnitude.

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2.2.1.Project
manager
Rules:[4]
Example
Example
Example:
Estimate hotel cost based on the following:
Current 300 room cost = 300 Million.
Current 400 room cost = 390 Million.
Proposed hotel 450 room
To compare more information using a straight-line extrapolation or interpolation, then cost of proposed project or item
can be determined.
This done by obtaining the exponent for a particular class of construction project.
This is based on the following modified formula:
?
𝐶 ⁄𝐶 = (𝑆 ⁄𝑆 )
390 ⁄300 = (400 ⁄300 ) Obtaining the exponent.
log (390 ⁄300 ) = 𝑥 log(400 ⁄300 )
( ⁄ )
𝑥= ⁄
= 0.912
( )

For proposed hotel

.
𝐶 ⁄𝐶 = (𝑆 ⁄𝑆 )
.
𝐶 ⁄390 = (450 ⁄400 )
Cost of proposed hotel 450 room = 434.23 Million

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Example:

With graphic application can be represent the straight line defining the modeling system
and can be updated with future changes and more data.
Next figure is representing last example.

14

4. The Two-Thirds Rule:
• Depends on the following
formula:
• 𝐷 = 𝐷 (𝑁 ⁄𝑁 )
.
where
𝐷 = 𝐷𝑢𝑟𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑝𝑟𝑜𝑝𝑜𝑠𝑒𝑑 𝑝𝑟𝑜𝑗𝑒𝑐𝑡
𝐷 = 𝐷𝑢𝑟𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑗𝑒𝑐𝑡
𝑁 = 𝑆𝑖𝑧𝑒/𝐶𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑝𝑜𝑠𝑒𝑑 𝑝𝑟𝑜𝑗𝑒𝑐𝑡
𝑁 = 𝑆𝑖𝑧𝑒/𝐶𝑜𝑠𝑡 𝑜𝑓 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑗𝑒𝑐𝑡
• Another tools
5. Range Estimate: • 6.EXPERT JUDGMENT:
• Analyze these data and classify
them into three categories, one of With the growing experience and the
which is the most optimistic and development of technology, there are
the other the most pessimistic. many ways of collecting expert
The most likely project cost or information on the subjects studied,
time is calculated. including Delphi technique, interview,
focus group, facilitated workshops and
• The most common formula for meetings.
this tool:
This done in the same place or by
• where social media.
.
2.3. Engineering Build-Up Methodology:

• Sometimes referred to as “grassroots” or “bottom-up” estimating,

• The engineering build-up methodology produces a detailed

project cost estimate that is computed by estimating the cost of
every activity in a Work Breakdown Structure, summing these
estimates, and adding appropriate overheads.

• The cost estimator’s role is to review the grassroots

estimate for reasonableness, completeness, and
consistency with the project Ground Rules &
Assumptions (GR&A).

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