Wiss construction

👉𝑯𝒐𝒘 𝒕𝒐 𝑬𝒔𝒕𝒊𝒎𝒂𝒕𝒆 & 𝑪𝒂𝒍𝒄𝒖𝒍𝒂𝒕𝒆 𝑷𝒓𝒐𝒋𝒆𝒄𝒕 𝑩𝒖𝒅𝒈𝒆𝒕

🚧𝐂𝐨𝐬𝐭 𝐄𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧

Quantitative assessment of amount likely to be spent to complete project

⏺𝐏𝐫𝐨𝐣𝐞𝐜𝐭 𝐁𝐮𝐝𝐠𝐞𝐭

Total cost required to complete project tasks & contingency reserve for known risks

Budgeting is process, not project event Budget is developed at project start & later refined as more info becomes available about project & detailed WBS prepared

At project start, Rough Order of Magnitude (ROM) estimate created, with accuracy range -25% to +75%, result in outcomes to get initial budgetary approvals & get project off ground

ROM estimate further refined into preliminary estimates when more information becomes available

After creating detailed WBS, definitive estimates developed with accuracy range -5% to +10%.

⏺𝐏𝐫𝐨𝐣𝐞𝐜𝐭 𝐁𝐮𝐝𝐠𝐞𝐭𝐢𝐧𝐠 𝐈𝐦𝐩𝐨𝐫𝐭𝐚𝐧𝐜𝐞

》Essential to secure funding
》Essential to make good project plan
》Essential to manage project, as budgetary estimates address cost constraints
》Compare actual costs against approved budget to determine variance
》Help improve project profitability

⏺𝐂𝐨𝐬𝐭 𝐄𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧 𝐌𝐞𝐭𝐡𝐨𝐝𝐬

𝟏》𝐄𝐱𝐩𝐞𝐫𝐭 𝐣𝐮𝐝𝐠𝐦𝐞𝐧𝐭
Get estimates from expert (consultant/ In-house) with specialized experience understanding project’s domain area

𝟐》𝐓𝐨𝐩-𝐝𝐨𝐰𝐧 𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧
Estimates overall project cost, then decompose whole project into smaller components & allocates part of total budget to these components

𝟑》𝐀𝐧𝐚𝐥𝐨𝐠𝐨𝐮𝐬 𝐄𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧

Look at historical data from previous similar projects to drive estimate for current project

𝟒》𝐏𝐚𝐫𝐚𝐦𝐞𝐭𝐫𝐢𝐜 𝐄𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧
Use historical data from previous projects to calculate cost estimate for current project, using mathematical formula & statistical relationship between different variables to estimate complete project cost

𝟓》𝐁𝐨𝐭𝐭𝐨𝐦-𝐮𝐩 𝐄𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧

Estimate WBS smaller components, aggregate them to calculate project budget

𝟔》𝐓𝐡𝐫𝐞𝐞-𝐩𝐨𝐢𝐧𝐭 𝐄𝐬𝐭𝐢𝐦𝐚𝐭𝐢𝐨𝐧

Done by taking average of 3 different estimates to calculate expected cost

•Optimistic(O): Best-case scenario
•Pessimistic(P): Worst-case scenario
•Most likely(M): Realistic scenario

⏺Expected cost (E) driven using:

》Triangular Distribution Formula
E= (O+P+M)/3

》Beta Distribution Formula
E= (O+P+4*M)/6

▶️𝐏𝐫𝐨𝐣𝐞𝐜𝐭 𝐁𝐮𝐝𝐠𝐞𝐭 𝐃𝐞𝐯𝐞𝐥𝐨𝐩𝐦𝐞𝐧𝐭 𝐒𝐭𝐞𝐩𝐬

》Prepare ROM budget at project start utilising top-down or analogous estimation techniques
》Get initial budget approval
》Create WBS & define work packages
》Decompose work packages into activities
》Estimate each work package cost
》Add contingency reserve
》Create sum total of work package cost estimates
》Add project-level contingency reserves as required
》Refine budget further to reconcile with initial budgetary estimates & constraints
》Get approval on final budget
》Refine budget in case any changes impact project.

Wiss construction
Wisam Ehsan