Cost Estimating and Project Planning
Conceptual cost estimating for project work (construction, industrial maintenance, etc.) is usually derived from a mix of estimating software, industry standards (formulas in books) and personal/corporate experience. Estimating software and formulas from books may produce "black box" estimates that lack qualification of one or many issues:
- What does the estimate include (prep work, indirects, clean-up, etc.)?
- What conditions are assumed (controlled environment, outdoors, etc)?
- What methodology (tools, equipment, procedure) is assumed?
- What labor proficiency (productivity) is assumed?
In these cases, estimating becomes more of an art than a science. Normally, there are discrepancies between conceptual cost estimates and project schedules which are planned later. The differences between these two different cost figures can have serious consequences:
- Estimate too high:
- you could lose the bid (or budget approval)
- you could waste money (Parkinson’s Law - "Work expands to fill the time allowed.")
- Estimate too low:
- you could lose money on a hard dollar contract
- you risk overrunning the budget
In an ideal situation, cost estimating and project planning will match up in a one to one relationship. The only way to achieve this consistently is to actually base cost estimates upon detailed plans/schedules.
Project Planning as a Basis for Cost Estimating
The largest obstacle to using detailed project planning as the basis for cost estimating is time. eTaskMaker® solves this problem by allowing estimators/planners the opportunity to generate detailed, resource-loaded project schedules based upon known parameters. It is now possible to generate detailed project schedules as the basis for fully qualified cost estimating.
Refining Project Cost Estimating
By eliminating "black box" estimates and tying cost estimates to project schedules on a one to one basis, organizations have the opportunity to truly refine their estimates over time by analyzing field compliance with project schedules. Finally, estimators have a tool that shifts cost estimating from an art to a science.
Authored by Bernard Ertl, Vice President, InterPlan Systems
Bernard Ertl has a bachelor’s degree in Computer Science and extensive field experience planning and managing turnarounds in the oil refining and petrochemical process industries.