What is project estimation?
Project estimation is a process of calculating and predicting the costs necessary for its successful realization . It is an essential part of project management and cost management. The final sum which is the end goal of estimating is called a cost estimate and indicates to stakeholders the necessary budget for completing a project.
A budget is a key variable in project cost management which affects major processes of managing it, its components and ultimately its fate. There are two ways in which an estimate and budget affect a project’s fate:
- A project can be realized only if the given estimate does not exceed the available budget . If it does, the party which orders a project’s completion won’t be able to implement it unless it finds additional financing.
- The actual costs incurred during completion can’t exceed the provided budget. Otherwise, the stakeholders responsible for implementation will run out of funds and the project will stop (and perhaps never be realized).
Typically, besides actual sums, an estimate breaks down all work to be done into specific work sequences and tasks, indicates and explains the resources needed, provides a timeline and duration information with deadlines, and provides specific rates besides containing much more important information.