Cost Estimation: Project Management
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I believe i have the 2 and 3rd questions answered but please let me know if I need to add or change. I would greatly appreciate someones opinionated answer for the 1st question.
Thank you in advance
1. Identify the three primary methods of cost estimations. In your opinion, which cost estimation method would you prefer to utilize if you were a project manager? Explain your decision making process.
2. Analyze the following statement: All projects overrun cost estimations and therefore we do not need cost estimations. Support your response with examples.
3. Describe the process for determining the critical path in a network. Also, discuss how a PM would manage critical path tasks differently than noncritical path tasks.
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Solution Summary
This solution explains three methods of cost estimation in project management. The sources used are also included in the solution.
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1. Identify the three primary methods of cost estimations. In your opinion, which cost estimation method would you prefer to utilize if you were a project manager? Explain your decision making process.
The three methods of cost estimation are historical projects, estimation using the three point method, and the definitive technique.
In the historical project method, the costs of similar projects executed in the past are found and the project cost which is closest to the current project is used for estimation of the cost of the current project. Price increases are factored into the cost.
In the three point method, three estimates are developed of the current project. One is the most likely cost, the second is the pessimistic cost and the third is the optimistic cost. These costs are averaged. The most likely cost is given a higher weight. In some cases the most likely cost is given twice the weight of the pessimistic cost and optimistic costs combined together. This method is expected to reduce biases and uncertainties in reducing costs.
The third primary method is the definitive technique. In this technique the cost of every activity is determined with detail at the bottom levels and then costs of other activities are also added to get the total cost. This method is most accurate for estimating project cost.
The method that I prefer to use is the definitive method. My decision making process is that every project is different and has activities that are distinct. Because of rapid technological change several activities are new and cannot be found in previous projects. Using data from earlier projects or accepting opinion based estimates can lead to serious deficiencies in budget and can lead to project failure. I prefer the definitive method.
2. Analyze the following statement: All projects overrun cost estimations and therefore we do not need cost estimations. Support your response with examples.
Accurately estimating the cost of a project is the ultimate planning foundation for any project. If estimates are as close to the real cost of the project as possible then the work can be conducted and ...
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