Basis of Estimate
The basis of estimate is an important element in project
management, providing a detailed breakdown of the estimated costs,
resources, and time required to complete a project. It serves as
the foundation for budgeting, planning, and monitoring the
project's progress.
by charles kevin menor
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Components of a Basis of Estimate
Labor
Materials
Administrative
Includes the cost of hiring skilled
Encompasses the cost of raw
Covers the overhead expenses, such
personnel, such as project
materials, equipment, and other
as office space, utilities, and
managers, engineers, and
supplies needed to execute the
administrative support, associated
technicians, to complete the
project.
with the project.
project's tasks.
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Purpose of a Basis of
Estimate
1
Cost Calculation
2
Bidding and Proposals
Provides a detailed breakdown
3
of the total project cost,
Supports the development of
enabling accurate budgeting
competitive and comprehensive
and financial planning.
bids for potential projects.
Project Execution
Serves as a reference point
4
Stakeholder
Transparency
for monitoring and controlling
Offers transparency to project
project costs during the
stakeholders, such as clients
execution phase.
and funding agencies,
regarding the project's
financial requirements.
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Relation to Earned Value
Management
Project Proposal
The basis of estimate is developed during the proposal stage,
providing a foundation for the project's budget and schedule.
Project Execution
The basis of estimate transitions the project from proposal to
execution, enabling the implementation of earned value
management (EVM) techniques.
Performance Monitoring
The basis of estimate serves as a reference point for EVM,
allowing for the tracking of project progress and cost
performance.
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Usage of Basis of Estimate
Proposals
Bidding
The basis of estimate is a critical
Contractors use the basis of estimate
component of project proposals,
to submit competitive bids for
providing a detailed cost breakdown
potential projects.
to win contracts.
Execution
Reporting
The basis of estimate serves as a
The basis of estimate is used to
reference point for monitoring and
generate financial reports and
controlling project costs during the
updates for project stakeholders.
execution phase.
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Developing a Comprehensive
Basis of Estimate
1
Scope Definition
Clearly define the project's scope, objectives, and deliverables to
ensure the basis of estimate accurately reflects the work required.
2
Resource Estimation
Accurately estimate the labor, materials, and administrative
resources needed to complete the project.
3
Cost Calculation
Calculate the total project cost by applying appropriate rates and
factors to the estimated resources.
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Importance of Accurate Basis of Estimate
1
3
Successful Bidding
2
Effective Budgeting
An accurate basis of estimate helps project teams submit
A well-developed basis of estimate ensures the project
competitive and winning bids for new contracts.
budget accurately reflects the true cost of the work.
Efficient Execution
4
Stakeholder Confidence
A comprehensive basis of estimate enables effective cost
An accurate basis of estimate builds trust and confidence
monitoring and control during project implementation.
among project stakeholders, including clients and funding
agencies.
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Challenges in Basis of Estimate
Development
Scope Uncertainty
Data Availability
Complex Dependencies
Incomplete or changing project
Lack of historical data or industry
Interdependencies between project
scope can make it challenging to
benchmarks can hinder the
tasks and activities can complicate
accurately estimate the required
development of reliable cost and
the process of estimating resource
resources and costs.
resource estimates.
requirements.
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Continuous Improvement of
Basis of Estimate
Lessons Learned
Data Refinement
Analyze past project performance
Continuously collect and analyze
to identify areas for improvement
project data to enhance the
in the basis of estimate
accuracy and reliability of future
development process.
cost and resource estimates.
Process Optimization
Stakeholder Feedback
Streamline the basis of estimate
Engage with project stakeholders
development process by
to gather insights and incorporate
incorporating best practices and
their feedback into the basis of
leveraging technology solutions.
estimate development.
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