Project Cost Estimation Methods
Rudy Warnock, a civil engineering executive from Jackson, Mississippi, is the owner of Warnock & Associates, LLC, a civil engineering company. Rudy Warnock performs a wide range of duties for the company, including project budget scoping and scheduling.
When it comes to project budgeting, it is essential to estimate costs correctly. To that end, executives in charge of project budgeting employ various methods. The most prominent methods include bottom-up, top-down, analogous, parametric, and three-point approaches.
The bottom-up method starts with assessing the costs of all individual parts and adding them together to obtain the total project cost. This approach offers a clear plan and allows for easy tracking of budget items.
The top-down approach starts with the total project budget, which is then broken down into milestones and tasks. This approach can be especially useful in the early stages of a project. The analogous method relies on the previous experience of the individual or the team responsible for budgeting: It uses data from prior, similar projects to estimate costs for the current project.
The parametric estimation approach uses multiple data sets from similar projects. It includes data from projects run by other teams or companies.
In the three-point method, the executive or the team creating the budget provides three estimates for each task and milestone — the worst-case scenario estimate, the most likely scenario estimate, and the best-case scenario estimate — to arrive at an average estimate.
