Budget Estimation

Running head: BUDGET ESTIMATION
Budget Estimation
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1BUDGET ESTIMATION
Table of Contents
Part 1: Budget estimation..............................................................................................................2
1. Determine vendor’s bid..........................................................................................................2
2. Conditions for parametric, analogous and bottom up estimation techniques........................3
3. Cost management plan..........................................................................................................4
Part 2: Budget estimation..............................................................................................................6
Part 3: Budget estimation..............................................................................................................8
References..................................................................................................................................11

2BUDGET ESTIMATION
Part 1: Budget estimation
1. Determine vendor’s bid
Vendor’s analysis is such a technique used to estimate the project cost based on
response from the qualified vendors. It is used to compute if the cost is being asked by the
vendors appears to become reasonable. When various vendors are involved to complete the
project work, then it is being reasonable to suppose that lowest accountable offer is fair. When
the bid provides details regarding prices, then it is included information such as qualifications of
company, guarantees and others (Larson & Gray, 2015). In order to determine if bids of vendor
are reasonable, following steps are to be followed such as:
1. The bid should be in line with estimation for the project cost and should add by it.
2. The bid which should be submitted by the contractor is genuine and they should have
good reputation.
3. The bid should follow all the legal needs of the project work.
4. There should be valid license for the project and it should satisfy with all the components
for the project work (Kaplan & Atkinson, 2015).
5. It is required to develop an outline for the project specifications. It ranges from general to
detail. The specifications of bid are not based on single capabilities of the suppliers.
6. There should be development of supplier selection criteria where the selection is based
on lower cost for the bid, functional abilities, user interface, incumbent vendors and
others (Nicholas & Steyn, 2017).

3BUDGET ESTIMATION
2. Conditions for parametric, analogous and bottom up estimation
techniques
Parametric estimation: It is estimation considered on both historical as well as
mathematical approaches (Woodhouse et al., 2016). It is utilized of statistical data. It takes the
variables from the project and applies to the current project work.
For example, from the historical data, it is known that in order to install one machine, it
will take 1 day and the user have 10 machines to install one after other, and then it will take 10
days. 1 machine 1 day is considered as historical data and 10 machines 10 days are considered
as mathematical approaches. Other example is there is a survey of 100 customers to conduct
and during the survey, 35 yes and no questions are being asked. In a source, it is seen that rate
for 30-40 questions to be answered is 15 minutes. Then total work is = 15 minutes * 100 = 150
minutes of work.
Analogous estimation: It is estimation based on the historical data. This particular
technique is used to estimate the cost for the project when few details about the project are
accessible (Lock, 2017). This estimation technique is not provided consistent estimation. The
benefit of this
For example, similar type of project carried out from last five years and the projects are
to be taken approximately 6 months to be completed. The project manager is undertaken similar
project now. In this current project work, it is considered that the estimation to complete the
work is 6 months. Other example is in an organization; the colleague builds a fence last month
and tells that the fence cost is $5000 for fence was 100 feet long. As the fence is half as long,
then the cost is $2500.