1. 1- EXPERT JUDGMENT  

Expertise should be considered from individuals or groups with specialized knowledge or training in the following topics:  

  • * Previous similar projects;  

  • * Information in the industry, discipline, and application area; and  

  • * Cost estimating methods.  

  1. 2- ANALOGOUS ESTIMATING  

Analogous cost estimating uses values, or attributes, of a previous project that are similar to the current project.

Values and attributes of the projects may include but are not limited to:

scope, cost, budget, duration, and measures of scale (e.g., size, weight).  

  1. 3- PARAMETRIC ESTIMATING  

Parametric estimating uses a statistical relationship between relevant historical data and other variables

(e.g., square footage in construction) to calculate a cost estimate for project work.  

  1. 4- BOTTOM-UP ESTIMATING  

Bottom-up estimating is a method of estimating a component of work.

The cost of individual work packages or activities is estimated to the greatest level of specified detail.  

  1. 5- THREE-POINT ESTIMATING  

The accuracy of single-point cost estimates may be improved by considering estimation uncertainty

and risk and using three estimates to define an approximate range for an activity's cost:  

  • * Most likely (cM). 

  • The cost of the activity, based on realistic effort assessment for the required work and any predicted expenses.  

  • * Optimistic (cO).

  •  The cost based on analysis of the best-case scenario for the activity.  

  • * Pessimistic (cP).

  •  The cost based on analysis of the worst-case scenario for the activity.  

Depending on the assumed distribution of values within the range of the three estimates,

the expected cost, cE, can be calculated using a formula. Two commonly used formulas are triangular and beta distributions. The formulas are:  

  • * Triangular distribution. 

  • * Beta distribution. 

    cE = (cO + 4cM + cP) / 6 

Cost estimates based on three points with an assumed distribution provide an expected cost and clarify the range of uncertainty around the expected cost.  

  1. 6- DATA ANALYSIS  

Data analysis techniques that can be used in the Estimate Costs process include but are not limited to:  

  • * Alternatives analysis.

  •  Alternatives analysis is a technique used to evaluate identified options in

  • order to select which options or approaches to use to execute and perform the work of the project.  

  • * Reserve analysis.

  •  Cost estimates may include contingency reserves (sometimes called contingency allowances)

  • to account for cost uncertainty. Contingency reserves are the budget within the cost baseline that is allocated for identified risks.  

  • * Cost of quality.

  •  Assumptions about costs of quality may be used to prepare the estimates. This includes evaluating

  • the cost impact of additional investment in conformance versus the cost of nonconformance.  

  1. 7- PROJECT MANAGEMENT INFORMATION SYSTEM (PMIS)  

The project management information system can include spreadsheets, simulation software, and statistical analysis tools to assist with cost estimating.  

  1. 8- DECISION MAKING  

The decision-making techniques that can be used in the Estimate Costs process include but are not limited to voting.