The right cost estimation method plays a vital role in laying a foundation for a project’s success. Therefore a competent cost estimator must know the way to manage a project with sheer excellence, and to do that, the estimator definitely should use a perfect cost estimating method. Finding a method to do your work more effectively is immensely important. You can look at it this way: a train cannot travel without its tracks, and you can not reach your destination without a path. A simpler example of this would be that a building can not be built without a proper floor plan. Therefore, you must have a cost estimation method for your project to keep you aligned and determined, to avoid the risk of errors, and to increase the caliber of your project. Moreover, if the best construction estimating company, like SMA Estimating LLC, is using methods we will be talking about in the article to make their business high-grade, then you should too.
Factors you should consider while finding the best method specifically for your project.
Complexity of the project
If your project is complex then you are going to need
methods that are meticulous and elaborative.
- Project size
For bigger projects, you’ll need a comprehensive approach while smaller projects can be estimated by less detailed methods efficiently.
- Time and resources
Even though a speedier approach may be less thorough, it may be required when time or resources are limited. Though more time and work may be required, more comprehensive methods are preferable.
4. Available Data
It is possible to attain a better degree of precision if you have reliable data at your disposal. However, depending on professional advice may be your best option if you have limited information at your disposal.
5. Stakeholder Requirements
Your method must also depend upon what is expected from you by the stakeholder. If they want detailed accuracy you will have to use a kind of method that can fulfill their demand.
6. Required Detail Level
You might need a method that digs deep if you have to account for every single detail; otherwise, a rough estimate can do the job.
7. Regulatory and contractual obligations
In some circumstances, regulatory or contractual constraints will determine the method you must choose, leaving little space for flexibility.
8. In the case of risks
This is another important point you should keep in mind while choosing your cost estimation method. Risks can cause uncertainty that can affect your project cost and schedule.
Now that we have discussed what we need to choose the right method for your cost estimation project we will come towards the methods you can choose from. So continue reading ahead.
Recommended cost estimation methods you can choose from.
1. Parametric Estimation
It is a well-known method used by cost estimating firms for the calculations of costs, time, and resources done by using statistics and formulations.
It is best used for projects that require high-level estimates or projects that are simpler.
2. Analogous Estimation
It is most appropriate for the early stages of a project when detailed knowledge is scarce. This method uses historical data from similar projects to produce a cost estimate rapidly and easily. However, its accuracy may be compromised if the present project changes greatly from the ones utilized for comparison.
3. Monte Carlo
Monte Carlo explores multiple alternative outcomes by varying distinct elements through computer simulations. It provides a thorough probability distribution of expenses, which aids in your comprehension of the variety of possible hazards and how they might affect the project budget. It is best for complex projects and projects with risks.
4. Bottom-up Estimation
The above-mentioned method involves the estimation of project duration and costs by collecting lower-level WBS components.
This method is very important for final budgeting, contracting and resource allotment as it gives the most precise estimate.
This method is great for detailed and accurate estimates.
5. Three-Point Estimation
This method estimates tasks by using 3 different estimates.
- The most optimistic estimate
- The most pessimistic estimate
- The most likely estimate
These three then are used to find the final estimate. This helps in gaining accuracy, decision-making, better expectation management, and historical data analysis.
Three-point estimation is very helpful for projects that have risks and uncertainties.
6. Expert judgment
Expert judgment is another strategy that is best suited for unique projects that necessitate specialist knowledge. It is based on the insights of experienced individuals who have worked on similar projects. While subjective, it gains significant value when other data is unavailable or insufficient.
To conclude
In conclusion, we would like to state that, as you can tell now, all of the cost estimation methods serve different purposes; hence, it is very important to find an appropriate method mindfully that serves the purpose of your project. Therefore, you must make sure you are using the right factors given above while considering the method for your cost estimation project to make your company the best cost estimation company.
