Match The Appropriate Cost Estimate Process To The Scenario

Match The Appropriate Cost Estimate Process To The Scenarioterms1 A

Match the appropriate cost estimate process to the scenario. Terms: 1. Apportion 2. Bottom-up estimates 3. Direct Costs 4. Delphi Method 5. Overhead Costs 6. Padding estimates 7. Range estimate 8. Ratio method 9. Time and Cost Databases 10. Top-down estimates

Answer choices:

A. John is the Department Manager for the IT department of a large company. He is responsible for three large projects over the next year with a total budget of one million dollars. He decides that Project 1 will use 10% of the budget, Project 2 will use 35% of the budget, and Project 3 will use 55% of the budget. It is the only way he knows how to quickly get an estimate to the executive officers.

B. Sarah has been asked as a member of many project teams in her company to help her manager determine the costs on the next two projects they will both be a part of in the next couple of months. They will turn their budget numbers for their tasks into the project manager. Other team members will be turning in their estimates as well.

C. The salaries for the staff members and the money needed to hire an outside consultant to work on the fire extinguisher installation project will be incorporated in the entire project cost.

D. Abdul, an executive with a larger utility company, has brought in experts in installation, current, wiring, and technology to get the best cost estimates for the big projects the company will be working on over the next year. He plans for these experts to give him accurate figures and may even run their estimates by other experts in the field.

E. Jaime is an accountant for a construction company that works entirely on project basis. It is his job to determine the units of time and labor for the administrative staff, as well as the percentage of building costs that should be charged to every project the company is working on.

F. Henrietta knows that it isn’t good practice, but she overestimates the cost of her projects by 15% because with every project she has been a manager of in the past, the budget gets cut by 10%.

G. Kurt and Sari have to get costs together quickly for a huge two-year project for the company they work for. The projects will use multiple outside resources. The two project managers are asking for estimates from these resources which include the average cost, the lowest cost that could possibly happen, and the “worst case scenario”—these three estimates will help them gauge the project budget.

H. Lucy’s boss asked her this morning for a cost estimate on the new design project. He needs the information before she leaves for the day. The project is different from what she’s done before, but in order to give a quick estimate she looks at four other projects she’s done in the past. Based on those, she “guestimates” the project cost.

I. Ruth has been promoted to Senior Project Manager. She keeps a spreadsheet of all her projects’ costs, time, effort, and lessons learned, which helps her produce accurate estimates for future projects.

J. Frank is unsure about his ability to manage projects effectively. He finds that projects often go over budget or over time. His boss has told him that upper management sets the time and budget constraints, limiting his input.

Paper For Above instruction

Cost estimation is a fundamental aspect of project planning that influences project success, resource allocation, and stakeholder satisfaction. Different scenarios demand specific estimation techniques aligned with the project's complexity, available data, and required accuracy. This paper explores the appropriate cost estimate processes corresponding to various realistic project scenarios, emphasizing the strategic application of estimation methods in diverse contexts.

Introduction

Effective cost estimation is vital for ensuring projects are completed within budget and on schedule. The selection of an appropriate estimation process depends on factors like project scope, data availability, time constraints, and stakeholder expectations. Understanding these factors enables project managers to employ techniques that provide reliable estimates, mitigate risks, and facilitate informed decision-making.

Scenario Analyses and Corresponding Estimation Processes

Scenario A: Strategic Budget Allocation

John, responsible for allocating a fixed budget across multiple large projects, requires a quick and straightforward estimation approach suitable for high-level planning. The top-down estimates process fits best here. This method involves allocating the overall budget to individual projects based on strategic priorities or percentages, providing a rapid estimate suitable for initial planning and resource allocation (Kerzner, 2017). John’s decision to assign budget percentages aligns with this approach, emphasizing speed over detailed accuracy.

Scenario B: Collaborative Task Estimation

Sarah’s scenario involves multiple team members contributing estimates for upcoming projects. This collaborative environment benefits from the range estimate technique, where different team members provide estimates that include best-case, worst-case, and most likely costs (PMI, 2017). Such a method captures variability and uncertainty, enabling the project manager to assess potential cost fluctuations and develop contingency plans (Fleming & Koppelman, 2016).

Scenario C: Incorporating Direct Costs

Specific direct costs, like staff salaries and external consultancy fees, are manageable through the bottom-up estimates approach. This involves estimating individual work packages or components and summing them to obtain an overall project cost. Bottom-up estimates are highly accurate because they consider detailed tasks and resources, especially suitable when precise data on direct costs are available (Larson & Gray, 2018).

Scenario D: Expert Judgment and Delphi Method

Abdul's approach utilizes expert judgment, with consultants providing estimates after field assessments. The Delphi method, a structured process involving multiple rounds of anonymous expert inputs aggregated to reach consensus, suits this scenario (Hanna et al., 2020). It reduces bias and leverages collective expertise to refine accurate cost forecasts for complex or uncertain projects.

Scenario E: Cost Distribution and Apportioning

Jaime’s role involves distributing costs across projects based on predefined units and percentages, aligning with the apportion method. This process allocates shared costs, such as administrative salaries and overheads, proportionally across projects based on relevant factors like labor hours or costs (Clements & Gido, 2016).

Scenario F: Padding Estimates

Henrietta’s practice of overestimating by a fixed percentage reflects the padding estimates process. Padding involves adding contingency or extra costs to safeguard against uncertainties, though it may lead to inflated budgets. This technique aims to mitigate risk associated with estimation inaccuracies (Meredith & Mantel, 2017).

Scenario G: Range Estimates from Multiple Sources

Kurt and Sari’s use of best, worst, and average cost estimates from external resources aligns with the range estimate technique. It provides a realistic understanding of the possible cost spectrum, aiding in risk management and contingency planning (PMI, 2017).

Scenario H: Expert Judgment Using Analogous Estimating

Lucy’s approach of estimating based on analogous past projects employs the analogous estimating method, which utilizes historical data to predict costs of similar projects quickly. Though less precise, it offers a timely estimate useful when project parameters are similar, and rapid decision-making is required (Kerzner, 2017).

Scenario I: Historical Data and Estimation

Ruth’s detailed record-keeping exemplifies using historical data and learning from completed projects. This aligns with the time and cost databases approach, which leverages stored data to generate accurate forecasts based on past performance metrics (Fleming & Koppelman, 2016).

Scenario J: Limited Input and Fixed Constraints

Frank’s situation highlights environmental constraints where project parameters are set by upper management. Although not ideal, this scenario often results in the use of top-down estimates or fixed budgets, with limited scope for detailed estimation due to organizational policies and predefined constraints (Larson & Gray, 2018).

Conclusion

Choosing the appropriate cost estimation process is crucial for project success, affecting planning accuracy, resource allocation, and stakeholder confidence. Each scenario demands a specific approach, whether it be quick high-level estimates like top-down, collaborative methods like range estimates, or detailed bottom-up techniques. Recognizing the context and requirements of each project scenario allows project managers to select the most suitable estimation method, thereby enhancing project control and outcomes.

References

• Clements, J. P., & Gido, J. (2016). Effective project management. Cengage Learning.
• Fleming, Q. W., & Koppelman, J. M. (2016). Earned value project management. Project Management Institute.
• Hanna, M., et al. (2020). Enhancing project cost estimates with the Delphi method. International Journal of Project Management, 38(2), 145-157.
• Kerzner, H. (2017). Project management: A systems approach to planning, scheduling, and controlling. Wiley.
• Larson, E. W., & Gray, C. F. (2018). Project management: The managerial process. McGraw-Hill Education.
• Meredith, J. R., & Mantel, S. J. (2017). Project management: A managerial approach. Wiley.
• PMI (Project Management Institute). (2017). A Guide to the Project Management Body of Knowledge (PMBOK Guide). PMI.
• Hanna, M., et al. (2020). Enhancing project cost estimates with the Delphi method. International Journal of Project Management, 38(2), 145-157.
• Larson, E. W., & Gray, C. F. (2018). Project management: The managerial process. McGraw-Hill Education.
• Clements, J. P., & Gido, J. (2016). Effective project management. Cengage Learning.