Cost Estimation Techniques for Projects

Cost estimation techniques are the methods that all the project managers use in order to calculate the total cost of a project before it even starts. How much the project will cost is a question that all the stakeholders will make when they are going to be informed about the project. So it is important to make use of numerous techniques in order to estimate fast and as accurate as possible the cost. The cost includes the cost of human hours that is why it is also necessary to estimate first the duration of the project, cost of equipment and the materials that are required for the project, as well as any contingency cost. Estimating the cost of the project always include a lot of uncertainty. This uncertainty derives from the fact that every project is unique, so important role plays the experience of the manager with similar projects. Moreover, the complexity and the duration of the project can affect the uncertainty of the estimation. The longer the duration of the project is, the bigger the uncertainty for the cost estimation. Lastly, the people that are involved with the project always come with an uncertainty as early in the project a project manager may not even know the specific people that he is going to need. In this article there are going to be analyzed the most important techniques that project managers use in order to estimate the cost of a project. These are the expert judgment, the analogous estimating, the parametric estimating, the three point estimating and the bottom up estimating technique. These techniques differ to each other, to the point that some need more time to estimate the cost, others are cheaper than others and some are more accurate. Project managers have to consider all the parameters possible and use the appropriate technique for that moment or a combination of techniques.