ESTIMATE

ESTIMATE
 Accurate assessment of amount of work
required to complete the project scope in time,
quality and customer’s delight

 Estimate begins as quantification of resource

units required which is then translated in to a
financial budget using rate tables or actual
costs.
 ESTIMATE
Components of cost of a Project

 Labor : Cost of people employed for the project directly or

indirectly
 Material: Cost of material bought, constructed or consumed
during the project.
 Equipment: Equipment hired / purchased which are deployed
in executing the project and are reusable on
subsequent projects. - e.g. Crane, Lifting
Equipment etc.
ESTIMATE

Components of cost of a Project

 Sub-Contract: Material and labour provided by the contractor ,

where the control is not within the scope of the
present organization.
 Management: Cost of people and materials managing the
projects. These costs are directly attributable to the
project, but not specific tasks. Includes cost of the
managers, team leaders, support office etc
 Overheads: These includes costs attributed to Transport,
procurement and Storage, support staff and other
such costs.
ESTIMATE

Components of cost of a Project

Fees and Taxation: Insurance, Financing cost, Legal, BG,

License, Agreements and Taxation
Inflation: Sometimes added in projects, which is of long
duration and inflation may have an impact on the
project costs.
Contingency: Estimate to cover risks and unforeseen in
the projects.
ESTIMATE METHODS
ANALOGOUS ESTIMATION

Estimates generated based on previous

projects that are similar.

TOPDOWN ESTIMATES
Project estimate is broken to WBS levels
which is then further broken down to
work packages and then to activities.
BOTTOM UP ESTIMATION

Estimate individual work items, then

rolling up the individual estimates to
WBS level and then total project
estimate.
EXPERT JUDGEMENT

Consulting one or more experts to

validate the estimate of the proposal
against the experience and
understanding of the experts for
tempering / concurring with it.
ESTIMATES DEPLOYED AT
DIFFERENT STAGES OF
PROJECT CYCLE
Two Types of Estimates

Conceptual
Detailed

Probability of estimate’s accuracy is between

+10% (Detailed) and + 40% (Conceptual)
CONCEPTUAL ESTIMATE

Order of Magnitude Estimates

 Made at the earliest stages of the Project

 Minimum Technical details available
 Done based on Past Project, Scaling Down, Using
Parametric methods
 Accuracy -30% to + 50%
 CONCEPTUAL ESTIMATE

Budget Estimates

 Prepared after Project scope and schedule is finalized

 Used by owner of the Project for bid Proposals,
evaluation, contract change order
 Not used for controlling the project

 Accuracy -15% to + 30%

DETAIL ESTIMATE

Definitive Estimate

 This is prepared as soon as the basic engineering is

complete and bulk materials take off sheets are
made.
 Well defined data, specifications, drawings, unit
prices etc are available

 Probability of estimate’s accuracy is between -5%

and 10%.

 This can be used for budgeting and to initiate

procurement action.
 PROJECT COST PERCENTAGE
FACTORS

The following are the percentages of the

project cost factors

 Project Development and DPR – 2 %

 Engineering & Design – 13%

 Bought out Materials and equipment – 55%

 Fabrication and construction – 30%