Project Management: Tools and Techniques for Cost Estimation and Cost Management

This article discusses the tools and techniques used for cost estimation and cost management in project management. It covers the steps involved in budget development and cost control. The article also includes a cost estimation table and a work breakdown structure for a greenhouse construction project.

Running head: PROJECT MANAGEMENT
BSBPMG514
Name of the Student
Name of the University
Author’s Note

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PROJECT MANAGEMENT
Table of Contents
Assessment 2..............................................................................................................................2
Answer to question number 1................................................................................................2
Answer to question number 2................................................................................................2
Answer to question number 3................................................................................................3
Answer to question number 4................................................................................................3
Answer to question number 5................................................................................................4
Assessment 3..............................................................................................................................5
Answer to question number 1................................................................................................5
Answer to question number 2................................................................................................6
Answer to question number 3................................................................................................7
Answer to question number 4................................................................................................9
Answer to question number 5..............................................................................................10
Answer to question number 6..............................................................................................12
Answer to question number 7..............................................................................................14
Answer to question number 8..............................................................................................15
Answer to question number 9..............................................................................................16
Answer to question number 10............................................................................................16
Answer to question number 11............................................................................................17
References................................................................................................................................18

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PROJECT MANAGEMENT
Assessment 2
Answer to question number 1
The examples of budgeting process tools as well as techniques are generally listed
below:
Expert Judgement: Expert judgement generally utilizes the knowledge as well as
experts for estimating the cost of the project.
Analogous estimation: It mainly utilizes historical data as well as information from
same types of project for estimating the project cost (Kerzner & Kerzner, 2017).
Parametric estimation: Parametric estimation utilizes statistical modelling for
developing the cost estimation.
Bottom up estimation: Bottom up estimation utilizes the individual work packages
that are generally summarized for determining the overall cost estimation of the entire project
(Fleming & Koppelman, 2016).
Three-point estimation: Three-point estimation utilizes the most likely, optimistic as
well as pessimistic. It is found that by utilizing this specific method, the cost of the project is
generally calculated.
Project management estimation software: It generally includes simulation
applications, cost estimating software applications, as well as different types of statistical
software tools.
Answer to question number 2
It is found that in the past, cost estimation tools and techniques are generally utilized
for estimating project costs. The tool and technique that are used for cost estimation mainly
include Microsoft project management software. It is found that with the help of MS project

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PROJECT MANAGEMENT
software, the budget that is generally required for executing each of the activities of the
project are estimated so that the project work can be executed successfully..
Answer to question number 3
The tools and methods that are mainly used for costing as well as cost analysis are
generally listed below:
Cost analysis software: Cost analysis software is mainly used for costing as well as
for analyzing the cost of the project (Mir & Pinnington, 2014).
Spreadsheet: It is found that by using spreadsheet the cost that is associated with the
project are identified as well as analyzed by allocating direct as well as indirect costs.
Answer to question number 4
The budget for a project will be developed by following the steps that are generally
elaborated below:
Identifying the project needs: The needs as well as requirements of the project must
be properly identified so that we can estimate the project requirements (Svejvig & Andersen,
2015).
Analyzing the market cost: The market price of the resources which are required for
the work of the project must be successfully analyzed so that proper idea about the budget of
the project can be gained (Kerzner, 2017).
Allocating materials as well as resources: It is quite necessary to allocate material as
well as resources within the project activities such that work of the project can be executed on
time.

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Cost estimation: In the last step, the budget which is required for accomplishing the
project activities are identified and added in order to analyze the required budget for the
project.
Answer to question number 5
Cost management is mainly related with the procedure of planning as well as
controlling the entire budget of the project business (Serra & Kunc, 2015). It generally
includes number of activities including estimation, budgeting as well as managing and
controlling of the project cost that is required for finishing the project. The steps that are
generally required for the purpose of cost management are generally elaborated below:
Resource planning: In the initial project phases, it is very much necessary to define
the needed resources of the project. WBS as well as other historical information that are
associated with similar project can be used in order to identify the resources that are needed
for the project.
Cost estimation: Cost estimation tool are generally applied for estimating the cost that
is generally needed for performing the activities of the project (Joslin & Muller, 2015). It is
found that the choice of cost estimation generally depends on the information that is generally
needed.
Cost budgeting: It is found that the cost estimation is generally formed with the help
of the project schedule as the input for the cost budgeting. It is found that the budget helps in
providing overview about the total cost of the project (Hornstein, 2015).
Cost control: Cost control is mainly related with measuring the variances from the
cost baseline by taking proper effective action for achieving the minimum costs of the
project.

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PROJECT MANAGEMENT
Assessment 3
Answer to question number 1
Construction of
greenhouse by greenhouse
construction company
Project initiation phase
Development of
business case
Checking the
feasiability
Development of
project charter
Hiring project team
members
Milestone 1:
Completion of
project initiation
phase
Project planning phase
Project plan
development
Resource plan
development
Finacial plan
development
Risk management
plan development
Qulaity plan
development
Human resource
management plan
Communication plan
development
Milestone 2:
Completion of
project planning
phase
Project execution phase
Selection of the
greenhouse
style/frame
Doors and Hardware
Installation of
greenhouse
covering
Cooling and
Ventilation
Selection of heating
system
Utilization of proper
environmental
controls
Installtion of simple
irrigation system
Bechmarking
Building
greenhouse
Milestone 3:
Completion of
project execution
phase
Project closure phase
Post project review
Sign off from the
stakeholders
Project
documentation
Milestone 4:
Completion of
project closure
phase
Figure 1: Work breakdown Structure
(Source: Created by Author)

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Answer to question number 2
The estimation of the project cost is mainly reflected with the help of figure that is
generally given below:
0
1
1.1
1.2
1.3
1.4
1.5
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
3
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
4
4.1
4.2
4.3
4.4
Construction of greenhouse
by greenhouse construction
company
$1,366,400.00 4,384 hours
Project initiation phase
$7,400.00 128 hours
Development of business
case
$2,080.00 32 hours
Checking the feasiability
$1,320.00 24 hours
Development of project
charter
$2,400.00 40 hours
Hiring project team
members
$1,600.00 32 hours
Milestone 1: Completion of
project initiation phase
$0.00 0 hours
Project planning phase
$14,560.00 280 hours
Project plan development
$3,120.00 48 hours
Resource plan
development
$1,600.00 32 hours
Finacial plan
development
$2,200.00 40 hours
Risk management plan
development
$1,440.00 32 hours
Qulaity plan development
$1,800.00 40 hours
Human resource
management plan
$2,400.00 48 hours
Communication plan
development
$2,000.00 40 hours
Milestone 2: Completion of
project planning phase
$0.00 0 hours
Project execution phase
$1,329,040.00 3,696 hours
Selection of the
greenhouse style/frame
$20,000.00 400 hours
Doors and Hardware
$621,600.00 432 hours
Installation of
greenhouse covering
$520,160.00 448 hours
Cooling and Ventilation
$21,600.00 432 hours
Selection of heating
system
$74,000.00 480 hours
Utilization of proper
environmental controls
$15,840.00 352 hours
Installtion of simple
irrigation system
$20,800.00 416 hours
Bechmarking
$15,840.00 352 hours
Building greenhouse
$19,200.00 384 hours
Milestone 3: Completion of
project execution phase
$0.00 0 hours
Project closure phase
$15,400.00 280 hours
Post project review
$5,760.00 128 hours
Sign off from the
stakeholders
$3,640.00 56 hours
Project documentation
$6,000.00 96 hours
Milestone 4: Completion of
project closure phase
$0.00 0 hours
Figure 2: Cost estimation for each of the project activities.
(Source: Created by Author)

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PROJECT MANAGEMENT
Answer to question number 3
The budget for the construction of greenhouse project is provided in the form of table.
It is assumed that the greenhouse building will be constructed within the budget which is
around $1,336,400.
WBS Task Name Duration Resource Names Cost
0
Construction of greenhouse
by greenhouse construction
company
303 days $1,366,400.00
1 Project initiation phase 16 days $7,400.00
1.1
Development of business
case
4 days Project manager $2,080.00
1.2 Checking the feasibility 3 days Financial manager $1,320.00
1.3
Development of project
charter
5 days Project planner $2,400.00
1.4
Hiring project team
members
4 days Human resource manager $1,600.00
1.5
Milestone 1: Completion
of project initiation phase
0 days $0.00
2 Project planning phase 35 days $14,560.00
2.1 Project plan development 6 days Project manager $3,120.00
2.2
Resource plan
development
4 days Human resource manager $1,600.00
2.3
Financial plan
development
5 days Financial manager $2,200.00

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PROJECT MANAGEMENT
2.4
Risk management plan
development
4 days Risk management manager $1,440.00
2.5 Quality plan development 5 days Quality analyst $1,800.00
2.6
Human resource
management plan
6 days Human resource manager $2,400.00
2.7
Communication plan
development
5 days Human resource manager $2,000.00
2.8
Milestone 2: Completion
of project planning phase
0 days $0.00
3 Project execution phase 231 days $1,329,040.00
3.1
Selection of the
greenhouse style/frame
25 days
Construction manager,
Contractor
$20,000.00
3.2 Doors and Hardware 27 days
Construction manager, IT
manager, Equipment’s [1]
$621,600.00
3.3
Installation of greenhouse
covering
28 days
IT manager, Supervisor,
Materials [1]
$520,160.00
3.4 Cooling and Ventilation 27 days
Construction manager, IT
manager
$21,600.00
3.5
Selection of heating
system
30 days
Construction manager,
Contractor, Other additional
cost [1]
$74,000.00
3.6
Utilization of proper
environmental controls
22 days Contractor, IT manager $15,840.00
3.7 Installation of simple 26 days Construction manager, IT $20,800.00

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PROJECT MANAGEMENT
irrigation system manager
3.8 Benchmarking 22 days IT manager, Supervisor $15,840.00
3.9 Building greenhouse 24 days
Construction manager,
Contractor
$19,200.00
3.10
Milestone 3: Completion
of project execution phase
0 days $0.00
4 Project closure phase 21 days $15,400.00
4.1 Post project review 8 days Quality analyst, Supervisor $5,760.00
4.2
Sign off from the
stakeholders
7 days Project manager $3,640.00
4.3 Project documentation 6 days
Project manager, Project
planner
$6,000.00
4.4
Milestone 4: Completion
of project closure phase
0 days $0.00
Answer to question number 4
The plan that is generally developed for managing the project cost are generally
illustrated in the steps that are listed below:
Planning cost management: In the initial step of cost management, it is very much
necessary to define the project resources that are generally required for finishing the
activities of the project (Todorovic et al., 2015). It is quite important to develop proper work
breakdown structure for listing the information that are related with the project.
Estimation of cost: In this step, the cost management generally involves prediction of
the cost that is mainly required for finishing the project. It is identified that it is necessary to

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PROJECT MANAGEMENT
use proper cost estimation method that generally depends on the information that is generally
available about the project and its tasks.
Determining budget: Cost estimation generally helps in defining the expenditures that
are mainly associated with the specific project objectives and with the entire cost of the
project (Kaiser, El Arbi & Ahlemann, 2015).
Controlling cost: Cost control generally involves measurement of various types of
inconsistencies that generally occur and are considered to be different from the cost baseline.
It is necessary to discover them effectively with the help of proper corrective actions for
avoiding the cost overrun of the project.
Recording cost and calculating metrics: Proper cost control must be established for
every expenditure of the project. Proper cost control as well as calculation of metrics
generally helps in managing the project effectively (Too & Weaver, 2014).
Answer to question number 5
The project can be monitored with actual expenditure against the budget of the project
is generally showcased within the table that is given below:
Task Name Planned cost Actual expenditure
Development of
business case
$2,080.00 $2,190.00
Checking the feasibility $1,320.00 $1,520.00
Development of project
charter
$2,400.00 $2,700.00
Hiring project team
members
$1,600.00 $1,500.00

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PROJECT MANAGEMENT
Project plan
development
$3,120.00 $2,900.00
Resource plan
development
$1,600.00 $1,400.00
Financial plan
development
$2,200.00 $2,700.00
Risk management plan
development
$1,440.00 $1,540.00
Quality plan
development
$1,800.00 $1,400.00
Human resource
management plan
$2,400.00 $2,500.00
Communication plan
development
$2,000.00 $2,200.00
Selection of the
greenhouse style/frame
$20,000.00 $20,100.00
Doors and Hardware $621,600.00 $621,000.00
Installation of
greenhouse covering
$520,160.00 $520,060.00
Cooling and Ventilation $21,600.00 $21,400.00
Selection of heating
system
$74,000.00 $74,500.00
Utilization of proper
environmental controls
$15,840.00 $15,870.00

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PROJECT MANAGEMENT
Installation of simple
irrigation system
$20,800.00 $20,900.00
Benchmarking $15,840.00 $15,940.00
Building greenhouse $19,200.00 $19,500.00
Post project review $5,760.00 $5,260.00
Sign off from the
stakeholders
$3,640.00 $3,240.00
Project documentation $6,000.00 $6,700.00
Answer to question number 6
The cost variations within the budget of the project is reflected in the below table.
Task Name Planned cost Actual expenditure Variation
Development of
business case
$2,080.00 $2,190.00
$110.00
Checking the
feasibility
$1,320.00 $1,520.00
$200.00
Development of
project charter
$2,400.00 $2,700.00
$300.00
Hiring project team
members
$1,600.00 $1,500.00
-$100.00
Project plan
development
$3,120.00 $2,900.00
-$220.00
Resource plan
development
$1,600.00 $1,400.00
-$200.00
Financial plan $2,200.00 $2,700.00 $500.00

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PROJECT MANAGEMENT
development
Risk management
plan development
$1,440.00 $1,540.00
$100.00
Quality plan
development
$1,800.00 $1,400.00
-$400.00
Human resource
management plan
$2,400.00 $2,500.00
$100.00
Communication
plan development
$2,000.00 $2,200.00
$200.00
Selection of the
greenhouse style/frame
$20,000.00 $20,100.00
$100.00
Doors and
Hardware
$621,600.00 $621,000.00
-$600.00
Installation of
greenhouse covering
$520,160.00 $520,060.00
-$100.00
Cooling and
Ventilation
$21,600.00 $21,400.00
-$200.00
Selection of
heating system
$74,000.00 $74,500.00
$500.00
Utilization of
proper environmental
controls
$15,840.00 $15,870.00
$30.00
Installation of
simple irrigation
$20,800.00 $20,900.00 $100.00

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PROJECT MANAGEMENT
system
Benchmarking $15,840.00 $15,940.00 $100.00
Building
greenhouse
$19,200.00 $19,500.00
$300.00
Post project review $5,760.00 $5,260.00 -$500.00
Sign off from the
stakeholders
$3,640.00 $3,240.00
-$400.00
Project
documentation
$6,000.00 $6,700.00
$700.00
The alternative action that is taken in order to analyze the cost variation is only with
the help of Microsoft project software.
Answer to question number 7
The cost variation can be implemented as well as monitored by using methods that are
generally reflected below:
 Analyzing the value for the actual cost
 Identifying the relevant KPI’s
 Proper management of project resources as well as budget

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Answer to question number 8
The financial report for the five years is reflected with the help of the table that is
provided below:
Project
Cost-
Benefit
Analysis
Analysis
Variables
:
Discount
Rate Used
1.00
%
Annual
Benefits
$
8,00,
000.0
0
Annual
Operation
al Costs
$
60,00
0.00
One-Time
Developm
ent Cost
$
13,66
,400.
00
Year of
Project
0 1 2 3 4 5
TOT
ALS
Economic
Benefit $0.00
$
8,00,00
0.00
$
8,00,00
0.00
$
8,00,00
0.00
$
8,00,00
0.00
$
8,00,00
0.00
Discount
Rate
1.000
0 0.9901 0.9803 0.9706 0.9610 0.9515
PV of
Benefits $0.00
$7,92,0
79.21
$7,84,2
36.84
$7,76,4
72.12
$7,68,7
84.28
$7,61,1
72.55
NPV of
all
BENEFIT
S $0.00
$
7,92,07
9.21
$
15,76,3
16.05
$
23,52,7
88.17
$
31,21,5
72.44
$
38,82,7
44.99
$
38,82,
744.99
One-Time
COSTS
$
(13,66
,400.0
0)

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Recurring
Costs $0.00
$
(60,000
.00)
$
(60,000
.00)
$
(60,000.
00)
$
(60,000
.00)
$
(60,00
0.00)
Discount
Rate
1.000
0 0.9901 0.9803 0.9706 0.9610 0.9515
PV of
Recurring
Costs $0.00
$
(59,405
.94)
$
(58,817
.76)
$
(58,235.
41)
$
(57,658
.82)
$
(57,08
7.94)
NPV of
all
COSTS
$
(13,66
,400.0
0)
$
(14,25,
805.94)
$
(14,84,
623.70)
$
(15,42,8
59.11)
$
(16,00,
517.93)
$
(16,57,
605.87
)
$
(16,57
,605.8
7)
Overall
NPV
$
22,25,
139.12
Overall
ROI
1.3424
Answer to question number 9
The activities that are generally done in order to conduct the financial completion of the
project are reflected below:
 Reviewing whether the project is finished within the approved budget or not
 Sign off from the stakeholders
 Documentation.
Answer to question number 10
After reviewing the budget of the project, it is found that the cost management plan
that was developed for the project is quite appropriate. As with the help of the cost
management plan, the project manager is able to manage the cost of the resources as well as
materials and tries to avoid over expense and thus they are capable of managing the budget
successfully. Due to proper management of cost the entire project will be completed within
the budget that is approved.

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PROJECT MANAGEMENT
Answer to question number 11
It is found that the financial manger who is mainly assigned for managing the cost of
the project is not very much experienced and skilled and thus they face little bit difficulty in
managing the project.
For resolving the problem, proper training facility should be given for proper cost
management..

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PROJECT MANAGEMENT
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PROJECT MANAGEMENT
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