Time
5 hours 14 minutes
Difficulty
Intermediate
CEU/CPE
10

Video Description

This lesson covers how to estimate costs. The estimate cost process focuses on making accurate estimates of the project budget. This creates the activity cost estimates and basis of estimates. [toggle_content title="Transcript"] The next area is estimate costs. Estimate cost process is focused on making accurate estimates of the project budget. This will create the activity cost estimates and the basis of the estimates. Your activity cost estimates is taking your resources and activities and applying dollar amounts to it. If you know who your people are how many hours you can figure out what the costs is going to be for that activity. The basis of estimates is your justification on how you came up with that dollar amount. If am using ten people I assume this risks it's going to cost a lot of money. Its best to hear that logic and why that budget is that a lot of money. Your inputs are the cost management plan which we just created...human resources management plan. You need to know who is available and what the cost is. Scope baseline is your WBS. Your WBS dictionary and your scope statement. You are going to use your WBS which encompasses other work to figure out how much it's going to cost using that information. Your project schedule is giving you the time frame of what it takes to get that project done. In your risk register, if you are calculating high risk for items that will have an impact on your budget. The tools for estimating costs are expert judgement. You might have past experience of what something costs and you are going to use that information to come up with a budget. Analogous estimating is comparing apples to apples or apples to oranges. It is using something similar that you know in trying to justify costs to that project. Parametric estimating is knowing if something costs for example $50 an hour and this task is going to take ten hours it is going to cost me $500. Parametric estimating is knowing every single item, putting a cost associated to it and then adding up the sum of the entire project. Very time consuming but can be accurate. Three point estimating is taking three points. You are taking the most likely, the pessimistic view and what you assume under normal conditions. You are taking all three of those, adding them up and dividing by three. Reserve analysis, this is taking the unknowns and trying to come up with a dollar amount. If I think this project is going to be a million dollars, but chances are there are things that I don't know about, I am going to throw a ten percent. So I am going to say this project is $1100000 to complete. For all the unknowns I am taking out of the $100,000 and doing my budget based on that. That would be part of my justification. The unknowns are there. For example a construction company...if you are building a new structure what could be one of those unknowns. You are going to assume ten percent extra for putting up a building. Cost of quality, the quality knowledge area is conformance to non-conformance to quality. If you have an item that has a very high quality to it it's going to cost more. Value bid analysis...you might want to subcontract the work out and that's when you are using the analysis. Is it better to have a subcontractor doing this or is it better to do this in house. Project management software could be...we like to use in my office, excel but it could be Microsoft project. It is using the software to come up with a budget. A summary of the estimate costs, your inputs are cost management plan, your HR management plan, scope baseline, project schedule and risk register. Your tools are expert judgement, analogous estimating, parametric estimating, reserve analysis, cost of quality, venue bid analysis, and project management software. Your output is your activity cost estimates and your basis of estimates. [/toggle_content]

Video Transcription

00:04
the next area is estimate cost, so estimate cost process is focused on making accurate estimates
00:11
of the project budget.
00:12
Ah, this will create the activity cost estimate in the basis of the estimates.
00:18
So
00:19
your activity cost estimates is taking your resource is and activities and applying dollar amounts to it.
00:27
So if you know who your people are, how many hours?
00:32
Uh, you can figure out what the cost is gonna be for that activity.
00:36
The basis of estimates
00:39
is your justification on how you came up with that dollar amount. If I'm using
00:43
10 people, I assume these risks,
00:46
it's gonna cost this amount of money. So it's basically your logic and why that budget is that amount.
00:52
Your inputs are the cost management plan, which we just created
00:56
Human resource management plane. You need to know who's available and what their cost is.
01:02
Scope Baseline is your W B s your W. B s dictionary in your scope statement. So you're gonna use your W B s with encompasses all the work to figure out how much it's gonna cost Using that information.
01:15
Your project's schedule is, ah
01:19
giving you the time frame off what it takes to get that project done
01:23
and your risk register.
01:25
If you are calculating high risk for items that will have an impact on your budget,
01:32
the tools for estimating cost our expert judgment
01:37
You might have passed experience of what something costs.
01:41
And you're gonna use that information to come up with a budget.
01:45
Analogous. Estimating is comparing apples to apples or apples to oranges. It's using something similar that you know and tryingto justify a cost.
01:55
Uh, to that project
01:57
Parametric estimating is knowing
02:00
if something costs for example, $50 an hour and this task is gonna take 10 hours, it's gonna cost me $500.
02:08
Bottom up, estimating is knowing every single, uh, item putting a cost associate to it
02:15
and then adding up the sum of the entire project
02:17
very time consuming, but can be accurate.
02:22
Three point estimating is you're taking three points. You're taking the most likely
02:28
the pessimistic view. And,
02:30
uh, what
02:31
you assume under normal conditions and you're taking all three of those, you're adding them up and dividing by three
02:39
reserve analysis.
02:40
This is taking the unknowns
02:44
and trying to come up with a dollar amount.
02:46
Um, so basically you're creating
02:50
if I think this project's gonna be $1,000,000 But chances are there's things I don't know about someone to throw in 10%.
02:57
So I'm gonna say this project is $1,100,000 to complete
03:02
for all the unknowns I'm taking out of the $100,000
03:07
do my budget based on that. And that would be, ah, part of my justification. There's unknowns out there.
03:15
For example, a construction company.
03:16
If you're building,
03:19
Ah, a new structure,
03:21
whether could be one of those unknown. So you're gonna assume 10%
03:25
um,
03:27
extra for
03:29
putting up a building
03:30
cost of quality. So in the quality knowledge area,
03:35
um, there's conformance, not conformance to quality.
03:38
So if you have an item that has very high quality to it, it's gonna cost more.
03:44
Then your bed analysis.
03:46
You might want to subcontract the work out, and that's where you're using the analysis is, is it better to have a subcontractor do list? Or is it better to do lists and house
03:58
and project man, it's been software could be Ah,
04:01
we like to use my Office XL, but it could be Microsoft Project. It's using software to come up with that budget, so in summary of estimate costs, your inputs are cost. Mansion Plan your HR management plan, sculpt baseline
04:17
project schedule and risk register.
04:20
Your tools are expert judgment
04:23
enologist, estimating
04:25
parametric, estimating reserve analysis,
04:28
cost of quality vendor bed analysis and project management software.
04:32
Your output is your activity cost estimates in your basis of estimates.

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Instructed By

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Vince McKeown
Senior Program Manager at FGS, LLC
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