21/02/2025
๐๐ฏ๐๐ ๐๐ ๐ฌ๐๐๐๐๐๐๐ & ๐ช๐๐๐๐๐๐๐๐ ๐ท๐๐๐๐๐๐ ๐ฉ๐๐
๐๐๐
๐ง๐๐จ๐ฌ๐ญ ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง
Quantitative assessment of amount likely to be spent to complete project
โบ๐๐ซ๐จ๐ฃ๐๐๐ญ ๐๐ฎ๐๐ ๐๐ญ
Total cost required to complete project tasks & contingency reserve for known risks
Budgeting is process, not project event Budget is developed at project start & later refined as more info becomes available about project & detailed WBS prepared
At project start, Rough Order of Magnitude (ROM) estimate created, with accuracy range -25% to +75%, result in outcomes to get initial budgetary approvals & get project off ground
ROM estimate further refined into preliminary estimates when more information becomes available
After creating detailed WBS, definitive estimates developed with accuracy range -5% to +10%.
โบ๐๐ซ๐จ๐ฃ๐๐๐ญ ๐๐ฎ๐๐ ๐๐ญ๐ข๐ง๐ ๐๐ฆ๐ฉ๐จ๐ซ๐ญ๐๐ง๐๐
ใEssential to secure funding
ใEssential to make good project plan
ใEssential to manage project, as budgetary estimates address cost constraints
ใCompare actual costs against approved budget to determine variance
ใHelp improve project profitability
โบ๐๐จ๐ฌ๐ญ ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐๐ญ๐ก๐จ๐๐ฌ
๐ใ๐๐ฑ๐ฉ๐๐ซ๐ญ ๐ฃ๐ฎ๐๐ ๐ฆ๐๐ง๐ญ
Get estimates from expert (consultant/ In-house) with specialized experience understanding projectโs domain area
๐ใ๐๐จ๐ฉ-๐๐จ๐ฐ๐ง ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง
Estimates overall project cost, then decompose whole project into smaller components & allocates part of total budget to these components
๐ใ๐๐ง๐๐ฅ๐จ๐ ๐จ๐ฎ๐ฌ ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง
Look at historical data from previous similar projects to drive estimate for current project
๐ใ๐๐๐ซ๐๐ฆ๐๐ญ๐ซ๐ข๐ ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง
Use historical data from previous projects to calculate cost estimate for current project, using mathematical formula & statistical relationship between different variables to estimate complete project cost
๐ใ๐๐จ๐ญ๐ญ๐จ๐ฆ-๐ฎ๐ฉ ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง
Estimate WBS smaller components, aggregate them to calculate project budget
๐ใ๐๐ก๐ซ๐๐-๐ฉ๐จ๐ข๐ง๐ญ ๐๐ฌ๐ญ๐ข๐ฆ๐๐ญ๐ข๐จ๐ง
Done by taking average of 3 different estimates to calculate expected cost
โขOptimistic(O): Best-case scenario
โขPessimistic(P): Worst-case scenario
โขMost likely(M): Realistic scenario
โบExpected cost (E) driven using:
ใTriangular Distribution Formula
E= (O+P+M)/3
ใBeta Distribution Formula
E= (O+P+4*M)/6
โถ๏ธ๐๐ซ๐จ๐ฃ๐๐๐ญ ๐๐ฎ๐๐ ๐๐ญ ๐๐๐ฏ๐๐ฅ๐จ๐ฉ๐ฆ๐๐ง๐ญ ๐๐ญ๐๐ฉ๐ฌ
ใPrepare ROM budget at project start utilising top-down or analogous estimation techniques
ใGet initial budget approval
ใCreate WBS & define work packages
ใDecompose work packages into activities
ใEstimate each work package cost
ใAdd contingency reserve
ใCreate sum total of work package cost estimates
ใAdd project-level contingency reserves as required
ใRefine budget further to reconcile with initial budgetary estimates & constraints
ใGet approval on final budget
ใRefine budget in case any changes impact project.
Wiss construction
Wisam Ehsan
