Project Estimation & Cost Control

A  "Bottom Up" Estimate is one in which the cost estimates area independently estimated for the individual, small details of the project.  All parts of the project details (smaller estimates) are rolled up into one comprehensive estimate for the Total Project.... i.e. The Big Picture...

Top Down Estimates are appropriate when accuracy rates can be compromised a bit.  In other words, there are certainly appropriate times when a "Rough" or "Budget" is in order so as to get on the map.  In time a bottom up or "Definitive Estimate" will certainly be needed to acquire funding and to procure long lead items necessary for your project.

The Cost Baseline for the project is the basis for the earned value reporting system.  It is the budget for the estimated cost of the project spread over the time periods of the project's life.  If you noticed on our Project Management Page, we mentioned there are three baselines for every project.   The three baselines are closely related.  If the Scope Baseline is increased or decreased, the Cost Baseline and Schedule Baseline have to be adjusted accordingly.  

Since, any project will have many risks associated with it, some may result in added work and cost.  In most cases, contingency was factored in to account for some of the unknowns.  In any case, added scope or work must be accounted for, approved, properly planned and inserted into the schedule.  

Cost budgeting or setting the cost baseline for any project is very important since is sets the foundation for the measurement of performance in the underlying project.  A Quality Performance Measurement System will measure the Actual Cost of the project in terms of Time and Quantity and compare that to the Planned Expenditures in terms of Time and Quantity.