To establish budgetary parameters, a company often relies on a cost estimator to help conduct proper planning for its various business initiatives. The goal of cost estimators is to reduce the level of financial uncertainty surrounding business projects. Reliable cost estimates allow companies to better plan the scope of their efforts, prioritize projects within their portfolios and allocate excess resources for strategic investment opportunities. Here are some details about cost estimator functions, types of cost estimating by prominent industries and how the field is internally regulated.
Creating Cost Estimates
Most organizations follow standard project management methodologies and practices when beginning and executing company projects. There are about five recognized phases in standard project management methodologies, and the practice of cost estimating is primarily done in the first phases. Cost estimators gather data for all project costs that include but are not limited to labor, material, equipment, and facility use. From these cost elements, a skilled cost estimator projects the cost of each project element and subsequently the total project. During the cost data collection process, cost estimators work closely with the project manager and other stakeholders to help define scope and schedule parameters for projects. While a cost estimator’s primary duties are completed early in the project, they are often called upon to help refine budgets for follow up work. Additionally, cost estimators draw from experience to estimate future operations and maintenance cost in addition to initial procurement costs.
Types of Cost Estimating by Industry
Types of cost estimates depend largely upon the industry conducting the project. For example, cost estimators use different methods when conducting cost analysis for aerospace, construction or computer engineering projects. Companies that embark on projects in these fields generally employ cost estimators who have thorough knowledge and experience working in those specific industries. These cost estimators, who are sometimes called cost engineers, use estimating methods like expert judgement, bottoms up, analogous and parametric estimating depending on the industry or project of their assignment.
It is important that cost estimators work as integrated members of teams because there are other factors that affect the final estimates. For instance, project stakeholders establish key performance parameters during the initial phases of project management for the products they want to develop. If these quality indicators are not adequately defined, a project team may waste valuable time trying to meet customer expectations. In most cases, schedule delays equal increased labor costs. Although other factors may affect a final cost estimate, cost estimators contribute experience and critical quantitative results to the project management planning process.
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Cost Estimating Best Practices
Cost estimators develop professionally through experience, but they do have help a long the journey. Over the years, cost research analysts discovered that some cost estimating methods and techniques worked better on certain projects than others. Cost estimators began forming professional societies to promote ethics and excellence in their career field. These organizations like the American Society of Professional Estimators and the International Cost Estimating and Analysis Association provide a body of standards and best practices for cost estimators at all career levels.
Nearly all industries benefit from reliable cost estimates that come from the expert application of cost estimating best practices. A skillful cost estimator also learns through training opportunities sponsored by cost estimating professional associations and societies as well as through each project experience.