Cost estimation is an approximation of the probable cost of a

product, program, or project, computed on the basis of available

information. It is defined by the U.S Government Accountability Office
(GAO) as, "the summation of individual cost elements, using established
methods and valid data, to estimate the future costs of a program, based
on what is known today." [1] It is often needed to support evaluations of
project feasibility or funding requirements in support of planning.
The costs of a constructed facility to the owner include both the
initial capital cost and the subsequent operation and maintenance costs.
The capital cost for a construction project includes the expenses related to
the initial establishment of the facility such as land acquisition, planning
and feasibility studies, architectural and engineering design, construction,
including materials, equipment and labor, etc. The operation and
maintenance cost in subsequent years over the project life cycle include
land rent, if applicable, operating staff, labor and material for
maintenance and repairs, insurance and taxes, etc.
The challenge with estimating is that it always involves some
uncertainty, which depends many factors such as quantity of people and
their skills, project duration, planning horizon, and experience with similar
projects. In order to achieve accurate cost estimates, several tools and
techniques were developed.

Bottom-Up Estimating: each task is broken down into smaller

components. Then, individual estimates are developed to determine
what specifically is needed to meet the requirements of each of
these smaller components of the work. The estimates for the
smaller individual components are then aggregated to develop a
larger estimate for the entire task as a whole. This type of estimate
is generally more accurate than other methods since it is looking at
costs from a more granular perspective.
Expert Judgment: uses the experience and knowledge of experts
to estimate the costs taking into account unique factors specific to
the project. This method however can be biased.
Analogous Estimating: uses a similar past project information to
estimate the duration or cost of the current project, hence the word,
"analogy". The estimate can be adjusted for known differences
between the projects.
It can be used when there is limited
information regarding the current project and in the early phases of
a project. This method, however, is less accurate than the other
methods.

In addition to the methods mentioned above, there are other project

cost estimating techniques including:

Parametric Estimating,

Three-Point Estimates,
Reserve Analysis,
Cost of Quality,
Project Management Estimating Software,
Vendor Bid Analysis.

The
of Jordan

University

School of

Engineering

Methods of Cost Estimation

Student Name: Saif Eddin Zaki Sayed Ahmed

Student ID: 2130044
Department: Civil Engineering
Course: Construction Management

Section: 1
Lecture Time: 9:0010:00
Date: 24.09.2016

References:
[1] GAO Cost Estimating and Assessment Guide, Best Practices for Developing
and Managing Capital Program Costs, GAO-09-3SP, United States Government
Accountabity Office, March 2009, Preface pg i.
[2] Project Cost Estimating Tools & Techniques [Online]
http://www.project-management-skills.com/project-cost-estimating.html
[3] Cost Estimate [Online]
https://en.wikipedia.org/wiki/Cost_estimate#cite_note-2
[4] Project Management for Construction, Fundamental Concepts for Owners,
Engineers, Architects and Builders, Chapter 5 Cost Estimation. by Chris
Hendrickson, Department of Civil and Environmental Engineering, Carnegie
Mellon University, Pittsburgh, PA l52l3 Copyright C. Hendrickson 1998. [Online]
http://pmbook.ce.cmu.edu/05_Cost_Estimation.html