Purpose of Basis of Estimates
The basis of estimates is a vital tool in project management. It involves estimators and project managers in calculating the total cost required for the entire project. This information is used to support proposals, bidding, and executing a project. The primary purpose of the basis of estimates is to mitigate the cost risk of the project by documenting important aspects of the cost estimate.
Key Facts
- Purpose: The basis of estimates is used to support proposals, bidding, and executing a project. It helps mitigate the cost risk of the project by documenting important aspects of the cost estimate.
- Documentation: It is a clear and concise document that allows project managers and stakeholders to understand and assess the estimate. It describes the techniques used to create the cost estimate and includes attachments such as estimate deliverable checklist, reference documents, benchmarking reports, risk analysis, and reconciliation reports.
- Cost Management: The basis of estimates plays a crucial role in project cost management. It helps determine the cost, funding options, pricing basics, cost risk, allowances, and opportunities using standard practices.
- Risk and Opportunities: A well-written basis of estimates helps identify both the risks and opportunities involved in the project. It provides valuable insights into the project management blueprint.
Documentation of Basis of Estimates
The basis of estimates is a clear and concise document that allows project managers and stakeholders to understand and assess the estimate. It describes the techniques used to create the cost estimate and includes attachments such as an estimate deliverable checklist, reference documents, benchmarking reports, risk analysis, and reconciliation reports.
Role in Cost Management
The basis of estimates plays a crucial role in project cost management. It helps determine the cost, funding options, pricing basics, cost risk, allowances, and opportunities using standard practices. By providing a comprehensive view of the project’s financial aspects, the basis of estimates enables project managers to make informed decisions and effectively manage costs throughout the project lifecycle.
Risk and Opportunities Identification
A well-written basis of estimates helps identify both the risks and opportunities involved in the project. It provides valuable insights into the project management blueprint, allowing stakeholders to anticipate potential challenges and capitalize on favorable conditions. This proactive approach enhances the likelihood of project success and minimizes the impact of unforeseen circumstances.
Conclusion
The basis of estimates is a critical component of project cost management. It serves as a comprehensive documentation of the cost estimate, facilitating understanding and assessment among project stakeholders. By employing standard practices and considering both risks and opportunities, the basis of estimates empowers project managers to make informed decisions, effectively manage costs, and increase the chances of project success.
References
- Project Management Wiki: Basis of Estimates (https://project-management.fandom.com/wiki/Basis_of_estimates)
- Project Management Knowledge: Basis of Estimates (https://project-management-knowledge.com/definitions/b/basis-of-estimates/)
- Wrike: What Is Cost Estimation in Project Management? (https://www.wrike.com/project-management-guide/faq/what-is-cost-estimation-in-project-management/)
FAQs
What is the purpose of a basis of estimates?
The basis of estimates is used to support proposals, bidding, and executing a project. It helps mitigate the cost risk of the project by documenting important aspects of the cost estimate.
What information is included in a basis of estimates?
The basis of estimates includes a description of the techniques used to create the cost estimate, as well as attachments such as an estimate deliverable checklist, reference documents, benchmarking reports, risk analysis, and reconciliation reports.
How does the basis of estimates contribute to project cost management?
The basis of estimates plays a crucial role in project cost management by helping determine the cost, funding options, pricing basics, cost risk, allowances, and opportunities using standard practices.
How can a basis of estimates help identify risks and opportunities in a project?
A well-written basis of estimates can help identify both the risks and opportunities involved in a project by providing valuable insights into the project management blueprint. This enables stakeholders to anticipate potential challenges and capitalize on favorable conditions.
What are some key considerations when developing a basis of estimates?
When developing a basis of estimates, it is important to consider factors such as the project scope, the resources required, the project schedule, and potential risks and uncertainties.
How can the basis of estimates be used to improve the accuracy of cost estimates?
The basis of estimates can be used to improve the accuracy of cost estimates by providing a detailed and transparent record of the assumptions, methods, and data used to develop the estimate.
How can the basis of estimates be used to communicate project costs to stakeholders?
The basis of estimates can be used to communicate project costs to stakeholders by providing a clear and concise explanation of how the cost estimate was developed. This can help stakeholders understand the rationale behind the estimate and make informed decisions.
What are some best practices for developing a basis of estimates?
Best practices for developing a basis of estimates include involving key stakeholders in the process, using accurate and reliable data, and documenting all assumptions and methods used.