Budget Estimation Assignment: Project Cost Analysis and Planning

This assignment solution delves into the core aspects of budget estimation within the context of project management. It begins by addressing the evaluation of vendor bids, outlining the steps and considerations necessary to determine their reasonableness. The solution then explores various estimation techniques, including parametric, analogous, and bottom-up methods, providing detailed explanations and practical examples for each. A significant portion of the assignment focuses on the importance and components of a cost management plan, emphasizing its role in controlling project costs and ensuring successful project delivery. Furthermore, the assignment includes a practical component where a time-phased budget is developed, illustrating the daily and cumulative costs for a resource-leveled project, complete with visual representations. The assignment also showcases the application of these concepts through real-world scenarios and provides a comprehensive understanding of project cost analysis, planning, and control.

Running head: BUDGET ESTIMATION
Budget Estimation
Name of the Student:
Name of the University:

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.

4BUDGET ESTIMATION
Bottom up estimation: It is estimation from the activities to the work packages level
towards the project levels. It is a way to measure entre value by approximating the values for
smaller components and using total value as entire value (Stark, 2015).
For example, the local hardware store is suggested a fencepost cost of $75/post. There
are total of 10 posts, therefore the parametric cost is $750. Last month, 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, which is analogous cost. The bottom up cost is
$(2500+750) = $3250. It is overall cost for the project. Facebook is a bottom up approach where
the investors can understand the products plus services as well.
3. Cost management plan
The cost management plan is required to control the cost which is over the budget, and
then it is role of project manager is to exercise the strict supervision of project cost. The project
manager should identify the sources for the project cost. The plan is required to procure
required products, resources as well as services needed to deliver the project work successfully
(Fleming & Koppelman, 2016). Example, in the construction project, the project manager
estimates the cost starts from land acquisition cost, material, labor, direct, indirect and
construction costs. Cost management is important in any project as no project can start without
any budget. The project success is to be decided based on how the project cost is to be
handled in the project work. It is required to come with correct cost estimation required for the
project work (Heagney, 2016). The steps involved in the cost management are as follows:
 Way the cost estimation is performed is stated in the cost management plan
 Accuracy levels of the cost estimation
 Instructions to track and report the cost performance
 Reporting formats

5BUDGET ESTIMATION
 Cost expenditures
 Change in the control processes for the change in project costs
The project manager can manage as well as report the cost for the project throughout
the entire project lifecycle. The cost management is included in processes needed to make sure
that the project is to be completed with approved project budget. It is embraced some of the
project activities such as planning of resources, estimation of cost, controlling of cost and
budget (Nicholas & Steyn, 2017). The project manager can determine the total cost required to
deliver project plan. For the project manager, cost management is a process to estimate,
allocate and control the project costs. It allows the business to predict the coming expenses to
reduce the chances and go for the over budget. Through the planning phase of the project work,
the project cost is being calculated and required approval before starting to work in the project
plan.

6BUDGET ESTIMATION
Part 2: Budget estimation
WBS Task Name WBS
Predecessors
Duration
(in days)
Resource
Names
Work
hours
per day
Work
rate
(per
hour)
January February March
A Evaluate freezers 2 Alcides 6 $
45.00
$
540.00
B Chart temperatures 6 Joan 4 $
50.00
$
1,200.00
C Review service record 2 Alcides 6 $
45.00
$
540.00
D Consult with HVAC
engineer
A,B,C 3 Alcides 6 $
45.00
$
810.00
E Develop construction
plan
D 10 Joan 4 $
50.00
$
2,000.00
F Complete IC
assignment
E 2 Alcides 6 $
45.00
$
540.00
G Complete ROI
analysis
E 5 Joan 4 $
50.00
$
1,000.00
H Conduct regulatory
review
E 4 Joan 4 $
50.00
$
800.00
I Obtain construction
approval
F,G,H 2 Alcides 6 $
45.00
$
540.00
Monthly cost value $
5,090.00
$
2,340.00
$
540.00
Cumulative cost
value
$
5,090.00
$
7,430.00
$
7,970.00

7BUDGET ESTIMATION
Figure 1: Time phase budget
(Source: Created using Ms Excel)
January February March
$-
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
$7,000.00
$8,000.00
$9,000.00
$-
$5,090.00
$7,430.00 $7,970.00
Time Phase Budget

8BUDGET ESTIMATION
Part 3: Budget estimation
WBS Activity Immediate
predecessor
Duratio
n (in
weeks)
Resourc
e Names
Hours/
week
Hourly
rate (per
hour)
January February March April May
1 Process improvement
project
20.53
1.1 Operational definition 7.88
1.1.1 Research literature 3 Becky 30 35 $
3,150.00
1.1.2 Identify and define
terms
1.1.1 1 Ann 30 60 $
1,800.00
1.1.3 Obtain approval of
definition
1.1.2 2 Clive 20 50 $
2,000.00
1.2 Target selection 10.45
1.2.1 Solicit partners for pilot 2 Ann 30 60 $
3,600.00
1.2.2 Hold brainstorming
meeting
1.2.1 2 Becky 30 35 $
2,100.00
1.2.3 Identify characteristics
of targets
1.2.2,1.3.1 1 Ann 30 60 $
1,800.00
1.2.4 Obtain approval of
partners
1.2.3,1.1.2,1.3.
4
1 Clive 20 50 $
1,000.00
1.3 Question set 20.53
1.3.1 Identify process group
members
2 Clive 20 50 $
2,000.00
1.3.2 Develop question set 1.2.3 4 Ann 30 60 $
7,200.00

9BUDGET ESTIMATION
1.3.3 Prototype and validate
question set
1.3.2 3 Becky 30 35 $
3,150.00
1.3.4 Add partners 1.3.1,1.2.1 3 Becky 30 35 $
3,150.00
1.4 Pilot process 10
1.4.1 Schedule with target
audience
1.2.4 2 Becky 30 35 $
2,100.00
1.4.2 Conduct beta test 1.3.4,1.2.4 2 Clive 20 50 $
2,000.00
1.4.3 Process feedback from
target audience
1.4.2 2 Ann 30 60 $
3,600.00
1.4.4 Conduct pilot 1.4.3 2 Clive 20 50 $
2,000.00
1.4.5 Analyze results 1.4.4 2 Clive 20 50 $
2,000.00
Weekly cost $
10,850.0
0
$
8,750.00
$
12,300.0
0
$
8,750.00
$
2,000.00
Cumulative
cost
$
10,850.0
0
$
19,600.0
0
$
31,900.0
0
$
40,650.00
$
42,650.00

10BUDGET ESTIMATION
Figure 2: Time phase budget estimation
(Source: Created using Ms Excel)
January February March April May
$-
$5,000.00
$10,000.00
$15,000.00
$20,000.00
$25,000.00
$30,000.00
$35,000.00
$40,000.00
$45,000.00
$-
$10,850.00
$19,600.00
$31,900.00
$40,650.00 $42,650.00
Budget Estimation

11BUDGET ESTIMATION
References
Fleming, Q. W., & Koppelman, J. M. (2016, December). Earned value project management.
Project Management Institute.
Heagney, J. (2016). Fundamentals of project management. Amacom.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Larson, E. W., & Gray, C. F. (2015). A Guide to the Project Management Body of Knowledge:
PMBOK (®) Guide. Project Management Institute.
Lock, D. (2017). The essentials of project management. Routledge.
Nicholas, J. M., & Steyn, H. (2017). Project management for engineering, business and
technology. Routledge.
Stark, J. (2015). Product lifecycle management. In Product Lifecycle Management (Volume
1) (pp. 1-29). Springer, Cham.
Woodhouse, D., Bale, M., Palmer, S., & Tocher, W. (2016, May). An evolution in cost effective
power utility grounding asset management: Plan, design, build, assess & operate.
In Transmission and Distribution Conference and Exposition (T&D), 2016 IEEE/PES (pp.
1-5). IEEE.