Facilities: The cost of renting or using specialized equipment, services, or locations.
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Software: Non-physical computer resources.Services: The cost of external work that a company seeks for any given project (vendors, contractors, etc.).Equipment: The cost of buying and maintaining equipment used in project work.Materials: The cost of resources needed to create products.Labor: The cost of human effort expended towards project objectives.The basis of estimate report allows project stakeholders to interpret project costs and to understand how and where actual costs might differ from approximated costs.īeyond the broad classifications of direct and indirect costs, project expenses fall into more specific categories. These assumptions (along with estimates of cost accuracy) are compiled into a report called the basis of estimate, which also details cost exclusions and inclusions. In project management, quality control, security costs, and utilities are usually classified as indirect costs since they are shared across a number of projects and are not directly billable to any one project.Ī cost estimate is more than a simple list of costs, however: it also outlines the assumptions underlying each cost. Indirect costs, on the other hand, cannot be associated with a specific cost center and are instead incurred by a number of projects simultaneously, sometimes in varying amounts.They can include project team wages, the costs of resources to produce physical products, fuel for equipment, and money spent to address any project-specific risks. In project management, direct costs are expenses billed exclusively to a specific project. Direct costs are broadly classified as those directly associated with a single area (such as a department or a project).These project costs can be categorized in a number of ways and levels of detail, but the simplest classification divides costs into two main categories: direct costs and indirect costs. A cost estimate may also be used to prepare a project cost baseline, which is the milestone-based point of comparison for assessing a project’s actual cost performance.Ī cost estimate is a summation of all the costs involved in successfully finishing a project, from inception to completion (project duration). An accurate cost estimate is critical for deciding whether to take on a project, for determining a project’s eventual scope, and for ensuring that projects remain financially feasible and avoid cost overruns.Ĭost estimates are typically revised and updated as the project’s scope becomes more precise and as project risks are realized - as the Project Management Body of Knowledge (PMBOK) notes, cost estimating is an iterative process.
#LEAST ACCURATE STANDARD COST ESTIMATING TECHNIQUE PROFESSIONAL#
Professional estimators use defined techniques to create cost estimates that are used to assess the financial feasibility of projects, to budget for project costs, and to monitor project spending. (Project cost management has been practiced since the 1950s.) The approximate total project cost, called the cost estimate, is used to authorize a project’s budget and manage its costs. It is the primary element of project cost management, a knowledge area that involves planning, monitoring, and controlling a project’s monetary costs. No-code required.Ĭost estimating is the practice of forecasting the cost of completing a project with a defined scope.
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