Project Selection and Estimating Technique Paper
Factors that determine how a company selects a project:
c– all are to be considered as factors that are taken into consideration by organizations and project teams as project selection criteria. One must take into account the fact that among the biggest decisions that organizations have to take is to consider which project has to be taken. It is noteworthy that, one of the primary considerations in the context of selecting a project is that; the organization has to look after the fact and ensure that the project under scrutiny is infused with objectives and goals that do not contradict the organizational objectives and goals. Moreover, it should be noted that, “Project selection is a process to assess each project idea and select the project with the highest priority. Projects are still just suggestions at this stage, so the selection is often made based on only brief descriptions of the project” (IES-Social Business School, 2013). Hence, project description should also be considered a point to be considered while selecting a project. Moreover, the two factors – benefits and feasibility – are also taken into consideration by an organization while selecting a project for completion (IES-Social Business School, 2013). It should be noted that, while considering the selection of a project, benefits are to be taken into account along with feasibility and it is the aspect of feasibility to accounts most importantly in the context of project selection. This is primarily because of the fact that, feasibility is a “measure of the likelihood of the project being a success, i.e. achieving its objectives. Projects vary greatly in complexity and risk. By considering feasibility when selecting projects it means the easiest projects with the greatest benefits are given priority” (IES-Social Business School, 2013).
Differences between top-down and bottom-up estimates:
There are some basic differences between top-down and bottom-up estimates and there is also a difference in the context of their usage. In terms of estimation that begins with some form of overall result and application of a new set of tasks, the top-down approach is embraced. It should be noted that, “If a project resembles prior work, the estimator uses relevant components of completed efforts to fill in cost blanks for parts of the current project. Projects that consist of a large number of iterations of a much smaller job or a large version of a small project, lend themselves to to-down techniques that repeat the cost of a small module to derive an overall figure or magnify the cost of a small job to forecast a larger one” (Mott, 2017). In this respect the top-down approach differs from the bottom-up one. This is primarily because; unlike top-down estimates, bottom-up estimates “rely on aggregating all the individual costs of a project to build up to the total for the job” (Mott, 2017). Moreover, from the perspective of process it should be said that the top-down approach to estimation should be used in events where the process of estimation does not require a perfect level of accuracy but it is required that the company well documented and relevant examples from the past to provide relatively quick basis for developing estimates that are reliable and have the potential to contribute to future processes of estimation. But bottom-up approach should be taken in events where there is a need for accuracy. It should be taken into account that “The bottom-up approach may look, and often is, more accurate because it relies on real numbers for actual parts of the project, but it may contain too many holes and gaps to be complete in a timely manner. it also may fail to take into consideration some of the reworking and reconfiguring that records of actual projects document concisely” (Mott, 2017).
Methods for estimating project costs:
There are certain specific methods for estimating project costs. One specific method of estimating project costs is expert judgment. In this process the experience and knowledge of experts are used to estimate the cost of the project (Martinez, 2018). It should be noted that the concerned technique has the potential to take into account some unique factors that are specific to the project, but it can be infused with bias (Martinez, 2018). Then there is the process of analogous estimation. Analogous estimating process deals with historical data obtained from similar projects and use the same as a basis for the cost estimation process. It should be noted that “The estimate can be adjusted for known differences between the projects. This type of estimate is usually used in the early phases of a project and is less accurate than other methods” (Martinez, 2018). Parametric estimating is yet another tool meant for estimating project costs. This process uses statistical melding for developing a cost estimate regime and it uses historical data of key cost drivers for the sake of calculating an estimation for different parameters including cost and duration (Martinez, 2018). Some organizations use the bottom-up estimating process for estimating project costs. Bottom-up estimating “uses the estimates of individual work packages which are then summarized or “rolled up” to determine an overall cost estimate for the project. This type of estimate is generally more accurate than other methods since it is looking at costs form a more granular perspective” (Martinez, 2018). Then there is the method called three-point estimates that is also used to estimate the cost of a project. In this particular approach three estimations are used for defining an approximate range for an activities cost (Martinez, 2018). It should be noted that in this process the cost estimate is usually calculated with the help of weighted average (Martinez, 2018). Reserve analysis is also a method used for estimating project cost and it is used to determine how much contingency reserve (Martinez, 2018). It should be noted that this funding “is used to account for cost uncertainty” (Martinez, 2018).
Types of costs:
There are different types of costs. Costs can be defined as “necessary expenditures that must be made in order to run a business. Every factor of production has an associated cost” (Inc., 2017). Costs can be categorized under fixed and variable costs; direct and indirect costs; product and period costs; controllable and uncontrollable costs; sunk cost; out-of-pocket costs; incremental and opportunity costs; imputed costs, etc (Inc., 2017). All such costs have their respective usage.
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IES-Social Business School (2013). The Process of Project Selection. Retrieved February 23, 2018, from https://www.slideshare.net/joaocotrim/the-process-of-project-selection
Inc. (2017). Costs. Retrieved February 23, 2018, from https://www.inc.com/encyclopedia/costs.html
Martinez, M. (2018). Project Cost Estimating Tools & Techniques. Retrieved February 23, 2018, from https://www.project-management-skills.com/project-cost-estimating.html
Mott, E. (2017). What Are the Differences Between Bottom-Up & Top-Down Estimating Approaches? Retrieved February 23, 2018, from https://bizfluent.com/info-8784461-differences-bottomup-topdown-estimating-approaches.html