Contents

- What does Basis of Estimate explain?
- How do you write a basis of estimate?
- Why is basis of estimate important?
- What is basis of estimate in project management?
- Which document will provide you the basis of estimates information?
- What is included in an estimate for a project?
- What is a cost estimating relationship?
- What is cost baseline?
- What is a bottom-up estimate?
- What is the difference between cost estimating and determining the budget?
- How do you define level of effort?
- What is project duration estimate?
- What is parametric estimate?
- What is cost aggregation in PMP?
- What are the three types of cost estimates?
- What is the most commonly used method of estimation?
- What are the most common cost estimating problems?
- What is estimation by analogy?
- What is Bottomup estimate?
- What does cost baseline include?
- What is the difference between cost estimating and determining the budget?
- What are the cost estimation methods?
- Is a budget an estimate?

## What does Basis of Estimate explain?

1.1 Definition

A Basis of Estimate (BOE) is **a document that identifies the logic, data, methodology and calculations used to estimate the resources required to perform a specific task or group of related tasks**. BOEs detail the thought process and calculations used to arrive at the estimate.

## How do you write a basis of estimate?

**Be concise, but include important details that are the basis for your costs**. Technical Approach: Describe the approach that is expected to be followed to perform the work that has been included in the Statement of Work (SOW). The technical approach may have a significant impact on the costs included in the estimates.

## Why is basis of estimate important?

The basis of estimates is an important tool in project management. It involves estimators and project managers to calculate the total cost needed for the entire project. It is used **to support proposals, bidding and executing a project**.

## What is basis of estimate in project management?

The basis of estimates is **the supporting documentation that explains how the cost estimates were developed**. It also includes information like assumptions, constraints, range or accuracy (rough order of magnitude), and confidence level.

## Which document will provide you the basis of estimates information?

Always remember—for many reviewers, **the BOE** is the only document used to judge the quality of the estimate. a cost basis of estimate, how much detail should be includ- ed in the BOE, and also laid out a systematic approach for preparing a complete and concise document.

## What is included in an estimate for a project?

First, calculate how much time will be spent on each task on your list. Next, **add a cost figure by multiplying the hours of each task with each team member’s hourly rate**. Once you have calculated the cost for every task, add them all up to reach an estimated total.

## What is a cost estimating relationship?

**A mathematical relationship that defines cost as a function of one or more variables such as performance, operating characteristics, physical characteristics, etc.**

## What is cost baseline?

The cost baseline is **the budget approved for the project, usually broken down in some detail by cost category and cost period of time**.

## What is a bottom-up estimate?

Bottom-up estimating in project management is **a method of estimating project duration or cost by aggregating the estimates of the lower-level components of the Work Breakdown Structure (WBS)**.

## What is the difference between cost estimating and determining the budget?

**An estimate is an approximation of what your project (or piece of it) will cost.** **The budget is what you’re allowed to spend**. The estimate provides a guideline, the budget provides hard edges. You can’t go ‘over-estimate’, but you can go over-budget.

## How do you define level of effort?

Level of effort (LOE) is **the amount of work needed to support a project’s primary activities**. Effort is the time required to complete a task, activity or project, and it’s as valuable a resource as money or materials. A project manager may express effort in days, hours or minutes or as a percentage.

## What is project duration estimate?

Activity duration estimates are **approximations of how much time a project task will take**. They can be in the form of different time periods, such as hours, days, weeks or months, and usually refer to work or business periods.

## What is parametric estimate?

Parametric estimating is **a statistical and accuracy-based technique for calculating the time, cost, and resources needed for project success**. Combining historical and statistical data, parametric estimating uses the relationship between variables to deliver accurate estimations.

## What is cost aggregation in PMP?

Cost aggregation is the process of taking the individual estimates for each of the activities and aggregating upward to work package level, then rolling these estimates up to high level, sub-deliverable level, and deliverable level, in order to arrive at a bottom-up estimate for portions of the project or the entire

## What are the three types of cost estimates?

The three types of cost estimates are **design, bid, and control estimates**. Design estimates are prepared in the project preliminaries which gives the order of magnitude of the project cost.

## What is the most commonly used method of estimation?

The most commonly used method in three-point estimation technique uses the **Program Evaluation and Review Technique (PERT) model**. Three types of estimates are determined before using their average to arrive at the average cost estimate.

## What are the most common cost estimating problems?

**Top 5 challenges to cost estimating**

- CHALLENGE #1: Quantifying cost impacts. An engineer may need to reduce the cost of a component by 20% through design modifications. …
- CHALLENGE #2: Resource constraints. …
- CHALLENGE #3: Quality of available data. …
- CHALLENGE #4: Large number of organizations involved. …
- CHALLENGE #5: Consistency.

## What is estimation by analogy?

Estimation by analogy (EBA) **predicts effort for a new project by learning from the performance of former projects**. This is done by aggregating effort information of similar projects from a given historical data set that contains projects, or objects in general, and attributes describing the objects.

## What is Bottomup estimate?

Bottom-up estimating in project management is **a method of estimating project duration or cost by aggregating the estimates of the lower-level components of the Work Breakdown Structure (WBS)**.

## What does cost baseline include?

A cost baseline is the authorized spending plan across the life cycle of the project. It includes **every project activity, task and associated resources that are needed for a project**. This includes any contingency reserve funds that are set aside to deal with potential issues that you identify in a risk analysis.

## What is the difference between cost estimating and determining the budget?

**An estimate is an approximation of what your project (or piece of it) will cost.** **The budget is what you’re allowed to spend**. The estimate provides a guideline, the budget provides hard edges. You can’t go ‘over-estimate’, but you can go over-budget.

## What are the cost estimation methods?

The four major analytical methods or cost estimation techniques used to develop cost estimates for acquisition programs are **Analogy, Parametric (Statistical), Engineering (Bottoms Up), and Actual Costs**.

## Is a budget an estimate?

**A budget is an estimation of revenue and expenses over a specified future period of time** and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money.