COST ESTIMATION IN PROJECT MANAGEMENT

Paper presented and discussed at the INSEAD Workshop, Fontainebleau, September 24, 2001
Contents:
Estimation of IT Projects
object,
timing,
accuracy,
effort,
methods,
monitoring & tracking,
exprience,
installing,
culture.
Function Point Analysis
Checkpoint for Windows
Function Point Prognosis

This paper focuses on problems and their causes and cures in policy and planning for large infrastructure projects. First, the paper identifies as the main problem in major infrastructure developments pervasive misinformation about the costs, benefits, and risks involved. A consequence of misinformation is massive cost overruns, benefit shortfalls, and waste. Second, the paper explores the causes of misinformation and finds that political-economic explanations best account for the available evidence: planners and promoters deliberately misrepresent costs, benefits, and risks in order to increase the likelihood that it is their projects, and not the competition's, that gain approval and funding. This results in the "survival of the unfittest," where often it is not the best projects that are built, but the most misrepresented ones. Finally, the paper presents measures for reforming policy and planning for large infrastructure projects with a focus on better planning methods and changed governance-structures, the latter being more important.

It is well known that software development projects tend to be based on over-optimistic cost estimates. Better
knowledge about software cost estimation is necessary to improve realism in software development project bids and budgets.
In my master thesis, I did a literature review that indicates that many research papers address software cost and effort
estimation, but none of the 150 papers I reviewed addressed the software test effort and/or cost estimation. We therefore
prepared a set of five research questions to address software test effort estimation, and conducted a case study and collected
empirical evidence from software development companies in Nepal. The minimum company size was 30 while the
maximum company size was 200. I performed the case study by conducting interviews with a set of structured
questionnaires. I compared the results obtained from the case study with the literature review and found that there exists
practice for empirical evidence based verification, validation, and testing cost/effort estimations. I also noted that test effort
estimation follow the same pattern as software development project estimates. My results show that 1) all the companies
prepare separate estimates for test effort, 2) empirical data is commonly used to estimate test effort, and 3) test effort
estimation error seems to be closely correlated with development effort estimation error. A company that had estimated total
of 3500 man-months had actually spent 4200 man-months implying 700 man-months of effort/cost overruns to complete the
project. Another company that projected testing effort of 100 man-hour actually ended up in 120 man-hour at the end of
project causing 20 man-hour effort/cost overruns. Therefore, our study indicates that test effort closely follows the
development patterns. However, more studies in this area are clearly needed.

Cost overrun is a very frequent phenomenon and is almost associated with nearly all projects in the construction industry. This trend is more severe in construction projects where is located in relatively remote areas. In order to reduce cost overrun, this paper is aimed at identifying the dominant factors that affect cost overrun and its corrective action, preventive action or mitigation in industrial construction projects. Survey questionnaires were distributed to construction professionals, and data were analyzed through a statistical method. From the seventy-four factors which were identified through literature review, there were classified into thirteen risk events and sixty-one risk sources. Utilizing the Delphi method, thirteen risk events became ten risk events and thirty-six risk sources. Furthermore, with the factor analysis method, thirteen risk events became nine risk events and twenty-five risk sources. Nine factors which affected cost overrun in industrial construction projects, such as material price fluctuations, material distribution costs on project's site, material delay costs, the change of specifications and material type costs, material shortages, material damages, material loss, and excessive material quality.The scope of this study only focuses on the quantitative approaches of risk events allocation that have been shared to contractor side in work implementation, such as costs and resources allocation to modify risk; to reduce material cost overrun.

This paper describes the methodology and results obtained after productivity improvement work conducted on two consecutive building construction jobs.  The first one was used to evaluate production rates and productivity, current construction methods, potentials and lacks of construction equipment, current construction planning methodology, and existing tools to asses productivity.  These are briefly discussed in this paper. The second job was preplanned based on the experience and detailed documentation obtained in the first one. Work was conducted in order to “design” construction methods in detail, develop a detailed production planning based on the construction methods developed, select crew components and select their specific tasks, and design communication and control tools. Although the second job’s schedule and budget were originally calculated using standard methods (i.e. historical production rates), new schedule and budget were calculated based on the preplanning effort. Construction performance was measured against these values.

9Muses.net is an online tutoring platform created by co-founders Akram Dakhli and Tawfik Chelli to develop and market online education in Tunisia and possibly in other countries during the following years.

9Muses is a massive open online course (MOOC) provider. It hosts online university-level courses and professional courses in a wide range of disciplines to a worldwide student body, including some courses at no charge.
This business plan outlines how the company will prepare the launch of this project in the year 2018.

A  simple  UV-Visible  spectrophotometric  method  has  been
developed for the determination of Atorvastatin in its pure form as
well as pharmaceutical dosage form using Methyl Orange reagent.
The  method  is  based  on  the  measurement  of  absorbance  of
Atorvastatin in methanol at 410 nm. The Beer’s law is obeyed
over  the  linear  range  50-300μg  /ml  of  Atorvastatin.  All  the
variables were studied to optimize the reaction conditions. No
interference  was  observed  in  the  presence  of  common
pharmaceutical excipients. The validity of the method was tested
by analyzing the drug in its pharmaceutical preparations. Good
recoveries were also obtained. Assay for the tablet preparation was
performed using UV-Visible spectrophotometric method and the
results were found to be within acceptable limits.

Cost estimation process becomes a crucial factor in any software
development project. There are many previous researches discussed the success
factors that influence in software development project. This paper aimed to
discuss factors that influences to the successful of cost estimation process in
software development project. Literature survey is carried out from the past
researches. Then, this paper presents the success factors that bring to the
effectiveness of cost estimation in software development project. From the
review, a conceptual model was developed to show the influence factors in cost
estimation process. Realisation these factors will help software development
communities contribute positively to the success of cost estimation process in
software development project.

ABSTRAK Setiap pekerjaan konstruksi bangunan harus diusahakan pencegahan atau di kurangi terjadinya kecelakaan atau sakit akibat kerja terhadap tenaga kerjanya. Mengingat kecelakaan kerja terdapat hampir diseluruh tempat kerja, maka upaya untuk mencegah dan mengurangi risiko yang mungkin timbul akibat proses pekerjaan perlu segera dilakukan. Sebagai upaya pengendalian risiko kecelakaan kerja, perlu diidentifikasi sumber bahaya yang ada di tempat kerja dan dievaluasi tingkat risikonya serta dilakukan pengendalian yang memadai. Penelitian ini bertujuan untuk mengetahui potensi bahaya pekerjaan pengecatan terhadap bahan kimia yang terdapat dari komponen cat dan ketinggian pada proyek pembangunan Ruang Kelas SDN SUBANGJAYA 1. Jenis penelitian menggunakan metode deskriptif dan menggunakan analisis dengan pendekatan kuantitatif. Berdasarkan hasil penelitian yang telah dilakukan dengan cara mengidentifikasi bahaya dan mempelajari kondisi pekerjaan Pengecatan di ketinggian proyek pembangunan Ruang Kelas SDN SUBANGJAYA 1 menunjukan bahwa potensi bahaya yang terdapat pada proses pekerjaan di ketinggian yaitu: terjatuh dari ketinggian, kejatuhan benda, jatuh ke tingkat yang sama, terbentur, keseleo, terpeleset, tergelincir, tertabrak, tersambar benda yang berjalan. Saran yang direkomendasikan peneliti adalah sebaiknya dalam pembangunan proyek menerapkan JSA dan mendisiplinkan pemakaian alat pelindung diri (APD). Kata kunci: konstruksi, pengecatann, keselamatan, metode, analisa ABSTRACT Every building construction work must be prevented or reduced the occurrence of accidents or illness due to work on the workforce. Considering that there are work accidents in almost all workplaces, efforts to prevent and reduce risks that may arise due to work processes need to be done immediately. As an effort to control the risk of workplace accidents, it is necessary to identify the source of hazards in the workplace and evaluate the level of risk as well as adequate control. This study aims to determine the potential dangers of painting work on chemicals contained in paint components and height in the Classroom construction project at SDN SUBANGJAYA 1. This type of research uses descriptive methods and uses analysis with quantitative approaches. Based on the results of research that has been done by identifying hazards and studying the conditions of work Painting at the height of the construction project Classroom SDN SUBANGJAYA 1 shows that the potential hazards contained in the work process at height are: falling from a height, falling objects, falling to the same level, knocked, sprained, slipped, slipped, hit, struck by a moving object. The recommendation that researchers recommend is that it is better to develop a JSA project and discipline the use of personal protective equipment (PPE).

A real-world challenge was identified to minimize the costs associated with the development of CST power plants through the implementation of sCO2 cycles. A literature gap on the costs of NDDCT’s for sCO2 cycles offered an opportunity to demonstrate their expenditures. The literature on the sCO2 Brayton cycle, NDDCT’s design points, and cost methodologies have been analyzed to find out the issue. Furthermore, Boundary conditions are set for the NDDCT designs in the thesis based on practicable scales in the future. Performance designs are analyzed and related to a fixed structure using the extensive literature on the NDDCTs’. The modification in air-cooled heat exchangers is made to achieve better performance and reduce the cost of the NDDCT design. Suitable Wetted media Is selected by conducting a detailed literature review to maintain the ambient conditions and improve the performance of the cooling tower during peak summer. The cost model was developed in-depth on the process of constructing NDDCT’s under capital costs and illustrates a method that demonstrates the related cost values

Understanding the cause of cost overruns in transportation infrastructure projects has been a topic that has received considerable attention from academics and the popular press. Despite studies providing the essential building blocks and frameworks for cost overrun mitigation and containment, the problem still remains a pervasive issue for Governments worldwide. The interdependency that exists between 'causes' that lead to cost overruns materialising have largely been ignored when considering the likelihood and impact of their occurrence. The vast majority of the cost overrun literature has tended to adopt a deterministic approach in examining the occurrence of the phenomenon; in this paper a shift towards the adoption of pluralistic probabilistic approach to cost overrun causation is proposed. The establishment of probabilistic theory incorporates the ability to consider the interdependencies of causes so to provide Governments with a holistic understanding of the uncertainties and risks that may derail the delivery and increase the cost of transportation infrastructure projects. This will further assist in the design of effective mitigation and containment strategies that will ensure future transportation infrastructure projects meet their expected costs as well as the need of taxpayers.

Activity-based costing provides a more accurate method of product/service costing, leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers; and makes costly and non-value adding activities more visible, allowing managers to reduce or eliminate them. ABC enables effective challenge of operating costs to find better ways of allocating and eliminating overheads. It also enables improved product and customer profitability analysis. It supports performance management techniques such as continuous improvement and scorecards. It is because; the company should implement ABC rather than traditional costing system.

The construction industry in the UAE has been suffering regularly from time and capital losses due to the incurred delays to completion in projects. Faridi and El-Sayegh (2007) identified 44 factors causing delays to the construction projects in the UAE, where several factors are correlated to post-contract design changes. Few authors concentrated on investigating the reasons for those changes and attempted reducing them.
This study aims to determine the factors causing post-contract design changes in the UAE construction industry, reveal the impact of the changes on the projects’ time, cost, and quality, then highlight the knowledge areas requiring more attention from the project management professionals working in the UAE.
The researcher developed a questionnaire that was addressed to 200 construction professionals in the UAE construction industry, from different businesses (clients, developers, project management companies, consultants, contractors, and subcontractors) and held interviews with few of them.
The researcher identified 26 factors causing post-contract design changes and studied the impact of the caused changes on the time, cost and quality in the studied projects, from different perspectives, in different projects’ types and several contracts’ types. It has been identified “changes in the client’s requirements” ranked as the top factor causing design changes with a medium impact on time and cost while “Utility requirements”, “changes requested by other stakeholders” and “changes in Government policies/regulations” ranked second, third and fourth respectively with a similar impact on time and cost. Emerging factors in the UAE construction industry were also identified “Design changes to reduce project duration”, “Design changes due to value engineering”, “Design changes due to budget constraints (omissions due to lack of funds)”, “Design changes due to incompetent contractor’s technical team” and “Design changes due to sustainability requirements (LEED/Estidama)”. The study shows that the design changes caused by the majority of the identified factors are causing minor to medium delays and cost overrun (10% to 20%) and minor decline to the quality. The root causes of the identified factors are studied and recommendations to project management professionals are drafted, to prevent/reduce design changes and/or reduce their impact on the time, cost, and quality.

This study aims to determine if a failure to perform a good cost estimation would result to a poor project cost budget management plan cycle. A good project cost estimation would be needed in a construction firm and construction company, because this would be mainly the basis of the cost of the project.

DESKRIPSI
Perencanaan biaya pelaksanaan proyek baik untuk proyek fisik maupun non-fisik merupakan hal yang dapat dianggap paling penting. Hal ini berkaitan dengan sukses atau tidaknya pelaksanaan proyek itu sendiri. Sebagai gambaran apabila perencanaan biaya dilakukan dengan baik dan juga diikuti oleh analisis yang komprehensif, setidaknya dapat mengurangi potensi terjadinya kekurangan ataupun kelebihan biaya. Kemampuan yang perlu dimiliki oleh setiap elemen didalam tim proyek khususnya berkaitan dengan perencanaan biaya diantaranya adalah kemampuan meramalkan biaya dimasa yang akan datang dengan sumber data harga-harga di masa lalu yang dianggap cukup representative, analisis seluruh aktivitas didalam proyek sekaligus kaitan antara masing-masing aktivitas serta kemampuan dalam hal manajemen resiko proyek.

Materi Program pelatihan ini dirancang untuk melengkapi para pemimpin proyek dan anggota proyek dengan pengetahuan, keterampilan yang membuat mereka mampu melakukan estimasi terhadap  proyek yang direncanakan. Estimasi merupakan proses dasar dari industri yang menjawab pertanyaan "Berapa banyak proyek tersebut diperkirakan memerlukan biaya?"

Ketidakakurasian dari estimasi proyek akan menimbulkan efek yang mengganggu semua pihak yang terlibat. Karena proyek industri membutuhkan waktu yang relative lama pelaksanaannya, komitmen financial harus didapatkan sebelum proses industri, biasanya sudah didapat harganya sebelum proyek tersebut dilaksanakan pembangunannya. Estimasi biaya proyek beserta pengelolaanya akan sangat berguna bagi pihak perencana, pelaksana, maupun pemberi tugas (owner), serta investor untuk menentukan apakah proyek dijalankan atau tidak. Estimasi biaya proyek juga akan membantu dalam analisis biaya manfaat suatu proyek.

Increase of energy consumption in the world and importance of CO2 reduction
stimulate development of alternative sources of energy. Kazakhstan territory has high
potential for wind energy industry development. As a result, Republic of Kazakhstan
increases energy production from wind, solar and other renewable resources.
This purpose of the Project is Feasibility Report for construction of 50 MW wind farm
station near Ereymentau, Akomla region. Initially, current wind industry situation is
investigated in Chapter 1. After that, Ereymentau’ wind potential assessment is done in order
to calculate possible energy production. Then, turbine type is chosen and technical details of
wind park is analyzed. Afterward, detailed economy analysis of the project is given in
Chapter 6. Safety and Risk assessment are covered in Chapters 7 and 8. Next, environmental
impact is discussed in Chapter 9. Project Management is given in the last Chapter.
Summary of Final Feasibility of the wind park Project near Ereymentau and
recommendations are given in Chapter 11.

Los jefes de proyecto son los responsables de la estimación y gestión de los presupuestos del proyecto. No realizar una estimación o una mala estimación del esfuerzo de desarrollo son causa de muchos fracasos en proyectos de desarrollo software.

Botchkarev, Alexei (2015) "Accuracy of Estimating Project Costs and Benefits: an Overview of Research in Information Systems". Journal of Emerging Trends in Computing and Information Sciences, 6(6), June. Available at: http://www.cisjournal.org/journalofcomputing/archive/vol6no6/vol6no6_4.pdf
Estimating  information  systems  project  costs  and  benefits  is  a  challenging  endeavor  and  is  notoriously  prone  to
uncertainties and errors. The purpose of this study is to review research publications on quantitative estimating accuracy of
costs and benefits (financial returns). The importance of the problem is due to the wide use of cost and benefits evaluations
in  making  critical  business  decisions. The  study  reveals  existing  quantitative  levels  of  estimating  costs  and  benefits
accuracy in the context of the information systems implementations

The proposal of the pedestrian subway system in V.R.S.E.C across the extending canal road thorough the project site. Survey is done for measurements of land primarily. Then a plan is prepared for the selected site considering two entry zones on each side of the passing zone. Design is done manually for various components considering the code provisions of IRC: 6-2000, IS: 456-2000. Estimate is made to know the cost of the project. Here the subway is normally an underpass for pedestrians or cyclists beneath a road or a railway line allowing them to reach the other side safely. So, the estimation of the project is done in detail.

Studying the recent advancements in Industrial Engineering stream, we have tried to examine the trend and behavior of an industry before it is actually commissioned and erected. A need of a detailed plan describing its whereabouts, its capacity, and behavior as well as expense in terms of area, money and parameters like marketability, budget and need of human resource is felt. So, we have tried to develop a detailed business plan according to which the future of industry can be forecasted. We have incorporated various parameters used as a tool in industrial engineering.

Part of each feasibility study of a food production plant is to make an estimation of the “future” investment  costs in such a plant. In this document, the investment cost estimation method of Zevnik-Buchanan is explained, in 10 consecutive steps. The method, requiring a detailed plant flowsheet, can be executed manually by using graphs. However, calculation is more rapid and much simpler by using the Zevnik-Buchanan Excel worksheet, included in this document. For this worksheet, the Z-B graphs had to be converted into mathematical equations. These equations can be found in the corresponding graphs.
2 worked examples explain the basics of Zevnik-Buchanan's estimation method of plant cost investments: one about a 10 000 tons/year mozzarella factory, the other on a 1150 tons/year whole egg powder plant.
Calculations using the Zevnik-Buchanan graphs and equations are valid for the year 1996. To convert these 1996 figures to future estimated plant costs, the Chemical Engineering Plant Cost Indices (CE Plant Cost Index), from 1980 onward, have been included in Annex 2: both as a graph for easy extrapolation, and as a table.
For reference purposes, the 1986 Bartholomai investment costs of some 40 different food factories are listed in Annex 3.

Cost estimation is one of the hardest things to do on a project for many reasons. For starters, it’s an estimate of what is to take place in the future, and when preparing, even experienced project managers tend to be overly optimistic (Warburton, 2013).

Cost estimation is of great importance in project management as it provides substantial information for decision-making, cost scheduling, and resource management (Carr, 1989). Analogy cost estimation techniques, such as Constructive Cost Modeling (COCOMO), involve employing cost profile data from past projects that are similar in design or operation and calibrating the cost of the current system based on the software metric differences such as size and capacity. This approach heavily depends on the availability of information from previous projects, and thus, lack of reliable data often results in the inaccuracy of cost estimating (Doloi, 2011). Parametric cost estimation is an alternative to analogy cost estimation, which involves converting base information into parametric input and is capable of producing more accurate cost estimates. However, it does not account for the specific individual components and the workflow in the system (Frank, 2002).

Kaizen costing is the process of continual cost reduction that occurs after a product design has been completed and is now in production. Cost reduction techniques can include working with suppliers to reduce the costs in their processes, or implementing less costly re-designs of the product, or reducing waste costs.

This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.

Abandoned Construction Projects can pose considerable challenges both to client, contractors And the economy at large. Using both primary and secondary sources of data, the research determines the causes and effects of abandonment of construction projects in jos metropolis. The research obtains data on some abandoned projects, cutting across three cities. The research employs the statistical technique of central tendencies (mean score) and independent sample t test for the evaluation and analysis of the data on the causative factors as well as the impact of abandonment. Research findings established Crises, delay in payment, poor feasibility and viability study, incomprehensive drawings and Corruption for abandonment. The study revealed wastage of resources, lowering standard of living, criminal hid out, use for kidnappings, breeding ground for organism, reduction of employment, decrease in revenue, disappointing people and refuse waste duping, as the impacts of abandonment. The research concludes that fund related factors such as unanticipated inflation, errors in estimation and bankruptcy have a relative higher propensity to lead to abandonment that other causes lead to abandonment. The research recommends that fund related causative factors of abandonment (adequate funding/capital budgeting) be given due consideration at the conceptual stage of projects; this will invariably minimize incidence of abandonment.

Few people would agree that an operation was a success if the patient died during (or immediately after) the procedure. We would all agree that this was a failure. Yet in the project management world, many people claim exactly that-their project was a success despite its failure to meet the business objectives.

ABSTRACT
The Principle objective of this project was to establish the major causes of delays in projects implementation in the construction industry in Kenya. The study delimited itself my limiting the scope into the roads maintained /constructed by the KeNHA in the coast region of Kenya. This was deeply looked at by taking into account four major objectives that included: to establish the extent to which construction project financing influence the delay of construction projects in the road sector, to investigate the extent to which construction project planning influence the delay of construction projects in the road sector, to find out the extent to which contractor’s experience influences the delay of construction projects in the road sector, and ,to investigate the extent to which supervision of work influences the delay of construction projects in the road sector. The study employed a survey research design, since it was an in depth investigation of an individual group of respondents. The questioners were used as the main source of gathering information from selected 55 respondents that cut a cross categories like constrictors, surveyors, engineers and many more. These questionnaires were emailed to some respondents; others were dropped and picked later while some were administered by research assistants. Questionnaires were sorted out, data keyed in into the SPSS for analysis. This information then was presented by use of frequency tables. From the hypothesis testing using the Chi-Square, the calculated Chi-Square values were found to be greater than the critical value of 9.488 thus the alternative hypotheses were adopted in all the four cases as per the objectives. Recommendations for further studies have been included in the last chapter (chapter five).

Durante o desenvolvimento do trabalho, foi realizada uma revisão bibliográfica abordando conceitos de orçamento na construção civil e Modelagem de Informação da Construção (BIM), e como essa tecnologia pode ser utilizada na etapa de levantamento de quantitativos. Posteriormente, foi realizado um estudo de caso voltado para a etapa de levantamento de quantitativos de estrutura, comparando-se as diferenças entre o método convencional e o método assistido por software BIM. Observa-se que por meio da tecnologia BIM pode-se obter uma nova maneira de levantar quantitativos de obras, tendo como principais vantagens sobre o método tradicional a precisão e a rapidez dos levantamentos.
_____________
During the development work, a literature review was conducted, addressing concepts of budget in construction and Building Information Modeling (BIM), and how this technology can be used in the quantitative survey stage. Subsequently, it was conducted a case study focused on the quantitative survey stage, comparing the differences between the conventional method and the method assisted by the BIM software. It is observed that through the use of BIM it is possible to approach a new way of raising quantitative work, the main advantages over the traditional method being accuracy and well-timed surveys.