Lecture 6: Cost Estimation and Budgeting COPY Flashcards
What are commong sources of project costs?
- Labor
- skilled, semiskilled laborers
- salary/hourly rate + pension/health benefits -
Materials
- building (wood, concrete, insulation, paint, paving) - Subcontractors
- Equipment and facilities
- Travel
What’s the difference between direct and indirect costs?
Direct costs:
-clear connection to part of project that makes them up (material, labor, workers)
→ f.e. total direct labor costs (direct lab rate)*(total lab hours)
-NOT DIRECT: support personal for mutliple PJ
Indirect costs:
-overhead (gemeinkosten): indirect materilals, utilities, taxes/insurance, property/repairs, health/retirement benefits
-selling and generel advertising:
advertising, shipping, salaries, sales commissions
→ linking cost is not a easy a direct cost, there are different methods
→ f.e. flat rate charge, indirect costs make an extra of 20%-50% off the direct costs
What are normal and expedicted costs?
-
Normal costs:
- planned in before
- agreed by all PJ stakeholders at the beginning of the PJ -
Expedicted costs:
- unplanned costs to speed up PJ (transportation/logistic speed up)
- crashing costs: overtime, hiring more workers, contracting with support organisations
What are Nonrecurring and Reccuring costs?
-
Nonrecurring
- associated with charges at the beginning or end of PJ: preliminary marketing analysis, personell training or outplacement -
Recurring
- continue to operate PJ life cycle: most labor, material, logistics
What are fixed and variable costs?
-
Fixed
- do not vary with usage (e.g. leasing costs. Mashine costs 10€ either for 5h or 50h usage) -
Variable
- have direct proportion to usage level (material, leasing rate)
What are the phases of cost estimation?
- Estimating
- Cost control
- Estimate to finish
What are the drivers cost estimating accuracy?
- Projects phase (labour portion is not yet performed)
- Level of engineering progess (required resources def.)
- Realiabilty for the cost data available (database of historical data availability)
→ estimates accuracy increases with PJ lifecycle
List some Cost Estimation methods/tools
- Comparative
- Ballpark
- Feasibility
- Analytic/Definitive
What is comparative estimation? (Parametric or analogous estimation) + Name a use case
→ assumes that historical data can be used to frame current estimates for similar projects
Use case:
-Boeeing uses “parametic estimation”
-managers develop estimates for current PJ based on past one by inserting a multiplier which includes:
1. impact of inflation
2. labour and material increases
3. other direct costs
→ offers highly accurate estimates for costs estimation
→even for new tech, historical data is useful
What is the Ball Park Estimate and what is it known for?
- sometimes named as magnitude estimates
- used when info or time is scarce
→ estimates ressource requirements or if a bid can be placed for a PJ
-aims for an +-30% accuracy
Known for:
- Plant typology
- Plant size
- whole costs for same type plants
Name the Ball Park Estimate- Scale Factor and its compontens
Bring the Scale Factor into a linear form using the logarithm
When does the accuracy of the Ball Park estimate -SF increase?
- P is close to P0
- historical data is recent
→ if data is not available for plant type, its possible to divide plant in its components
What types of corrective factors are available for the BPE-SF?
- Location Factor (LF)
→ part of plant cost variation connected to the location, where it will be build - Escalation Factor (LF)
→ index summarizing the temporal cost trend for ressource used to build plant
What are Feasibilty or Factorial estimates and what are they used to?
→ estimates based on real numbers/figures after the disign work
Used for:
1. comparing different design choices
2. perform feasibilty studies
3. estimate stock in hand allocation (budget)
→ based on cost breakdown and consider: analytic cost items, other estimates by per cent factors
Name the principle behind the leaning curve and its formular
Each doubling of outputs results in a reduction in time (and often cost) to perform the last iteration
