Project Management: Comparing Cost Estimating Methods and Analysis

This report delves into project management cost estimation techniques, contrasting top-down and bottom-up approaches. It begins by defining and comparing these two methods, highlighting their respective advantages and disadvantages. Top-down estimation, favored for early project phases, utilizes high-level information from similar projects, making it quick and less resource-intensive. Conversely, bottom-up estimation involves the project team in developing detailed cost estimates, potentially leading to more accurate budgeting and improved employee morale. The report then analyzes which method produces better cost estimates, arguing that bottom-up estimation, while time-consuming, offers greater accuracy by considering individual project components and the expertise of those involved in execution. The report references various studies and experts to support its claims, ultimately concluding that bottom-up estimation is a superior method for detailed project budgeting and scheduling, despite the additional time and effort required.

Running head: PROJECT MANAGEMENT
Project management
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Author’s Note

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Table of Contents
A) Compare and contrast top-down versus bottom-up cost estimating...........................................2
B) Analyze which you think produces the better cost estimates.....................................................3
References........................................................................................................................................5

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A) Compare and contrast top-down versus bottom-up cost estimating
Top down estimation is considered as one of the technique that is mainly utilized by the
upper level of the management for estimating the entire cost of the project by utilizing
information from similar projects. On the other hand, bottom up estimation is one of the
technique of project management that engages people who are generally going to take part within
the entire estimation procedure (Lemmens, 2016). It is found that the bottom up estimation is
considered as one of the most accurate approach of cost estimation. In this type of estimation, the
entire project team is involved for getting the opportunity to take part within the development of
estimates that is mainly utilized for measuring the work.
According to Batselier and Vanhoucke (2015) top down estimation can be very much
useful when the cost estimates are generally needed in the early phases of the project. As this
technique is generally dependent on the high level of information, the estimated cost can be
calculated with very much less resources as well as effort. Thus, it is considered as one of the
less expensive as well as quick methodology for properly establishing the project budget in
comparison to other cost estimation techniques which generally requires much more detailed
information involving both project resources as well as time (Abdelhalim & Khoury, 2017).
On the other hand, bottom up approach are considered to be very much accurate as each
department mainly utilizes its specialized knowledge for developing the individual line items of
the budget (Annadanam & Kota, 2019). This type of the entire budgeting procedure helps in
improving the morale of the company and the motivation of the employees as the team generally
gets involved in properly formulating the budget and takes appropriate ownership over achieving
the budgeted targets of the project.

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It is stated by Nicod et al. (2016) that top down estimates are considered to less accurate
as compared to other types of cost estimation techniques. It is found that this approach overlooks
the lower levels of input and can mislead. However, bottom up estimation needs time and for
this the individual managers needs to create their own budget by properly referencing past
budgets (Casey et al., 2017). Moreover, the managers who generally helps in using bottom up
estimation generally overestimate budget which can create misinterpretation in the budget
figures. Moreover, the bottom up estimation generally requires the managers to prepare the
budget without the benefit in context to the organization.
It is stated by Jiang, Yu and Wang (2016) that top down estimation has number of
disadvantages. The first and the major disadvantage of the project is lack of accuracy of the
project due to exclusion of details. A bad estimation can generally result in good project getting
scraped. It is found the accuracy of the estimation so it is generally dependent on the similarities
between the projects that is being compared and the level of exercise of making the appropriate
cost estimation (Abdelhalim & Khoury, 2017). On the other hand, it is found that utilization of
bottom up estimation method is very much time consuming, misinterprets the budgeted figures.
In addition to this, it is found that the bottom up estimation are done by the people who are
associated with the project tasks and if the individuals are not experienced then it can cause
number of challenges in performing the project work effectively.
B) Analyze which you think produces the better cost estimates
Bottom up estimation is considered as one of the best method of cost estimation. It is one
of the basic method of cost estimation that helps in estimating the cost of the project quite
effectively. The accuracy is generally achieved by using this methodology as this cost estimation
approach takes into considerations number of different types of approaches each components of

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the project work (Lemmens, 2016). In addition to this, it is found that accuracy is generally
achieved within the project because the estimate for each of the project component are generally
provided by the individuals who are mainly associated with the execution of that project
activities. The main advantage of using the bottom up estimation is that it generally takes proper
time to complete On the other hands, other types of cost estimation techniques generally utilizes
high level of project requirements that are needed to be used to start at the project process
(Batselier & Vanhoucke, 2015).
Bottom up estimation helps in providing much more detailed schedule but it is considered
as one of the time consuming approach that is compared with the top down task planning
approach. It is found that this particular schedule that is created is generally based on the direct
input from the experts that will be properly implementing the entire project (Annadanam & Kota,
2019). Furthermore, this technique is generally considered to be useful for properly developing
proper detailed budget of the project, schedule as well as monthly project forecast. It further
helps in defining the specific resource skills that are generally required during the key phases of
the project for getting more accurate schedule of the project.
Furthermore, the trade-off of utilizing the approach is that it generally requires much
more time. It is opined by Casey et al. (2017) that bottom up estimation is one of the helpful
technique in project management as it generally follows proper ability of getting much refined
estimate for each of the component of the project. In addition to this, it is found that the bottom
of estimate generally helps in providing the customers within an opportunity to properly compare
the low cost, efficient method approach with any imposed restrictions.

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References
Abdelhalim, A., & Khoury, A. E. (2017). Critical appraisal of the top-down approach for
vesicoureteral reflux. Investigative and clinical urology, 58(Suppl 1), S14-S22.
Anghilante, R., Colomar, D., Brisse, A., & Marrony, M. (2018). Bottom-up cost evaluation of
SOEC systems in the range of 10–100 MW. International Journal of Hydrogen
Energy, 43(45), 20309-20322.
Annadanam, S. K., & Kota, S. H. (2019). Emission of greenhouse gases and criteria pollutants
from railways in India estimated using a modified top-down approach. Journal of
Cleaner Production, 213, 610-617.
Batselier, J., & Vanhoucke, M. (2015). Construction and evaluation framework for a real-life
project database. International Journal of Project Management, 33(3), 697-710.
Casey, E., Beaini, S., Pabi, S., Zammit, K., & Amarnath, A. (2017). The triple bottom line for
efficiency: Integrating systems within water and energy networks. IEEE Power and
Energy Magazine, 15(1), 34-42.
Jiang, Z. W., Yu, H. Y., & Wang, X. S. (2016). Improvement of the “Bottom-up” Approach in
Value Engineering. In Proceedings of the 22nd International Conference on Industrial
Engineering and Engineering Management 2015(pp. 461-468). Atlantis Press, Paris.
Lemmens, S. (2016). Cost engineering techniques and their applicability for cost estimation of
organic Rankine cycle systems. Energies, 9(7), 485.
Nicod, E., Jackson, T. L., Grimaccia, F., Angelis, A., Costen, M., Haynes, R., ... & Kanavos, P.
(2016). Direct cost of pars plana vitrectomy for the treatment of macular hole, epiretinal

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membrane and vitreomacular traction: a bottom-up approach. The European Journal of
Health Economics, 17(8), 991-999.