Define And Apply Estimating Processes And Concepts To The Project

Reading samples

Learning outcomes of the unit

Learnings from your weekly study, experience, this and prior unit readings and assignments

Supporting documentation including any prior learning

Mandatory Readings

· Smith Chapters 6;

· Edwards at al., Chapter 26 from Edwards J. D., Hermanson R. H., Ivancevich S D. (2010) Accounting Principles Vol 2: Managerial Accounting

The rate of project failures has gone up in the recent years and the common reason detected in such failures is poor budgeting or cost management. Most of the projects define the costs in the initial stage and these values are never updated during the timeline. This shall not be followed and the review and upgrades in the costs shall be done in the basis of project variances and tolerance levels. The project costs may vary on the basis of stage and deliveries.  

a The advancement in technology has led to the development of automated tools that can be used for estimating the costs. These tools eliminate the possibilities of errors that may be encountered in the manual stages. There are also tools in place for tracking these costs.

Enshassi, A., Rashid Abdul Aziz, A., & El Karriri, A. (2008). Investigating the overhead costs in construction projects in Palestine. Journal Of Financial Management Of Property And Construction, 13(1), 35-47. https://dx.doi.org/10.1108/13664380810882066

The estimation or forecasting methods shall list out all of the project costs that may be one-time or recurring. The financial and budgeting risks have declined probability with the increased project maturity.  

The large-scale projects ensure that any of the alterations expected in the advanced stages of the project are predicted in advance and the impact analysis of such situations is also done. This leads to the elimination of major risks and severe consequences in the later project stages.

Li, H., Arditi, D., & Wang, Z. (2013). Factors That Affect Transaction Costs in Construction Projects. Journal Of Construction Engineering And Management, 139(1), 60-68. https://dx.doi.org/10.1061/(asce)co.1943-7862.0000573

The uncertainties and the various project risks shall be considered and analysed before defining the project costs. There are several stages that are involved in the projects. Sanction and tender are the most significant out of all.

Most of the project managers follow the methodology on one-time costs declaration and assessment. However, it shall be done in every phase of the project. Such a practice provides the ability to keep the costs in track and in control during the entire life cycle of the project.  

Lopez, R., & Love, P. (2012). Design Error Costs in Construction Projects. Journal Of Construction Engineering And Management, 138(5), 585-593. https://dx.doi.org/10.1061/(asce)co.1943-7862.0000454

The benefits that may be earned may be tangible or intangible. Similarly, the profits may also vary on the basis of the project parameters and factors.

The costs that are associated with the project can be forecasted on the basis of several techniques. Cost benefit analysis must be included as a mandatory process as it provides the in-depth details and values of all the costs involved along with the benefits. These costs and benefits are then mapped and analysed to understand the value that will be generate din the form of rates of return.  

Miri, M., & Khaksefidi, M. (2015). Cost Management in Construction Projects: Rework and Its Effects. Mediterranean Journal Of Social Sciences. https://dx.doi.org/10.5901/mjss.2015.v6n6s6p209

The estimations that are done in the initial stages of the project have high significance in the projects. It is therefore essential that these values shall be assessed by the senior leaders and subject matter experts so that any of the possible risks are also identified and handled.

All of such risk areas must be identified, assessed, and evaluated. The techniques and methods for estimation may differ.  

Any of the risks associated with costing and budgeting must be tackled through the risk management plan and guidelines. These shall include the identification, analysis, treatment, and control of the risks. The treatment strategy shall be defined in such a manner that is addresses and mitigates the issue and the risk that is assessed.