2.1.2 Cost Estimate Classifications Flashcards Preview

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Flashcards in 2.1.2 Cost Estimate Classifications Deck (29)
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primary parameter for the classification of estimates

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maturity level of project definition upon which the estimate is based

purpose of the estimate

methodology used in development of the estimate

acuracy of the estimate

relative effort required to produce the estimate

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ACCURACY RANGE

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An expression of an estimate’s predicted closeness to final actual costs or time. Typicallyexpressed as high/low percentages by which actual results will be over and under the estimate along with the confidence interval these percentages represent

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Allowance

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For estimating, resources included in estimates to cover the cost of known but undefined requirements for an individual activity, work item, account or sub-account.

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Contingency

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An amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, or effect is uncertain and that experience shows will likely result, in aggregate, in additional costs

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KNOWN-UNKNOWN

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An identifiable quantity or value having variability or an identifiable condition lacking certainty

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UNKNOWN-UNKNOWN

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A quantity, value or condition that cannot be identified or foreseen, otherwise referred to as unknowable

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The term “unit hours” refers to

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Work hours per unit of production.

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LEARNING CURVE

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A graphic representation of the progress in production effectiveness as time passes

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PROFITABILITY

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A measure of the excess income over expenditure during a given period of time

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PROFITABILITY ANALYSIS

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The evaluation of the economics of a project, manufactured product, or service within a specific time frame.

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VARIANCE

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The difference between what was originally expected and what actually happened

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The key areas are to be practice by the Cost Estimator

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The key areas are: Ethics; Leadership; Information Management; Quality Management; Value Management; Health and Safety. If all of these are practiced by the Cost Estimator, there will be continuous improvement in the estimating process and the final project or process that is being produced.

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What allows an ethical behavior, well develop database

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Ethical behavior leads to a more harmonious society.
A well‐developed database leads to a quality estimate.
The input of cost estimating is important to value engineering to provide a more effective project.
The continuous use of the Deming Cycle (Plan‐Do‐Check‐Act) leads to better estimates.

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CONCEPT PHASE

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First phase of a project in which need is examined, alternatives are assessed, the goals and objectives of the project are established and a sponsor is identified

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PARAMETRIC ESTIMATE

 

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In estimating practice, describes estimating algorithms or cost estimating relationships that are highly probabilistic in nature

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Location Factor

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An instantaneous (current – has no escalation or currency exchange projection) overall total project factor for translating the summation of all project cost elements of a defined construction project scope of work, from one geographical location to another. Location factors include given costs, freights, duties, taxes, field indirects, project administration, and engineering and design. Location factors do not include the cost of land,scope/design differences for local codes and conditions, and the cost for various operating philosophies.

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Uncertainty

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The total range of events that may happen and produce risks (including both threats and opportunities) affecting a project (Uncertainty = threats + opportunities.)

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All events, both positive and negative whose probabilities of occurrence are neither 0% nor 100%. Uncertainty is a distinct characteristic of the project environment.

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Strategic Risk

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A risk for which the potential impact threatens a project objective, even if the probability of occurrence is low or risk matrix severity rating is within screening thresholds. In projects, these risks are generally funded through management reserves.

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TACTICAL RISK

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Risk for which the potential impact does not significantly threaten an overall project objective or have a significant potential impact on enterprise, portfolio or other higher objectives or plans beyond the project level.

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Risk Management goal

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Risk Management is designed to reduce the risk caused by uncertainty.

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Range estimating

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A formalized risk analysis technology that synergistically combines Pareto’s law to identify the relatively few critical elements, heuristics governing the assignment of probabilistic ranges to such elements, and Monte Carlo Simulation to provide decision making information quickly and at reasonable effort.

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CONTRACT, COST PLUS CONTRACTS

 

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In cost plus contracts the contractor agrees to furnish to the client services and material at actual cost, plus an agreed upon fee for these services. This type of contract is employed most often when the scope of services to be provided is not well defined.

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methods of estimating algorithms:

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There are five major methods of estimating algorithms:
Factored
End‐Product Unit
Capacity Factor
Physical Dimension
Parametric

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Factored Estimates

Ratio or factored estimating methods are used in situations where the total cost of an item or facility can be reliably estimated from the cost of a primary component. Two of the most popular types of this method are the Lang and Hand Factors. Both the Lang and Hand Factors are based on the cost of equipment in a process plant. The Lang Factor is a ratio of the equipment cost to the total installed plant cost. The Hand Factor is a ratio of the individual equipment item cost to the direct field cost of the installed item, excluding instrumentation.

The Hand Factor does not account for project indirect costs.

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End‐Product Unit Estimate

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This method is used when the estimator has enough historical data available from similar projects torelate the end‐product units (capacity units) of a project to its construction costs.

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Capacity Factor Method

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A capacity‐factored estimate is one in which the cost of a new facility is derived from the cost of a similar facility of a known (but usually different) capacity.

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Parametric Method

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A parametric estimate comprises cost estimating relationships (CERs) and other parametric estimating functions that provide logical and repeatable relationships between independent variables, such as design parameters or physical characteristics and the dependent variable, cost. A very simple example of this would be a highway where the concrete, reinforcing, and finishing are of constant cross section and the only input needed to calculate the quantities is length.

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attributes that make a good code of accounts

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There are four attributes that make a good code of accounts

Usage: The code of accounts must be designed in a way that serves the stakeholders needs.

Content: The amount of content that can be included in a code is limitless, but it must be restricted to a level that does not become burdensome to the users.

Structure and Format: Structure and format increases usability and providing definitions of all elements in a reference dictionary or similar document improves clarity.

Standardization: A consistent coding structure on all projects assists users and provides a better historical record.

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BENCHMARKING

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A measurement and analysis process that compares practices, processes, and relevant measures to those of a selected basis of comparison (i.e., the benchmark) with the goal of improving performance.