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@ThaoTran said in Module 2 Discussion: Estimating Costs:

This is the module 2 discussion. You may participate in this discussion after beginning module 2.

In this module, you have learned about three approaches to estimating project costs: top-down, bottom-up, and parametric.

In your opinion, what is the most effective way to generate cost estimates? Make sure to explain your response.

Sample response: I believe that you should use the _______ approach whenever possible because _______________ .

bottom up approach- this is so because cost estimates are practically centred (given by people on the ground)

That is for sure youhave to check fro no parametric things with professional as time and professionalism play role in wages.

I think that using the Bottom-Up approach delivers a more realistic estimation of costs because the people creating the budget for the project know and understand all the ins and outs of a certain project in an area. Rather than relying on experts and research, it relies on first-hand knowledge of the employees/volunteers.

I believe using the three approaches together will yield better results, The top down has its biases since they get to estimate based on knowledge of how much it should cost while the bottom up is more realistic since the implementors are giving the estimate it can also be time consuming. the parametric estimates might not apply to all project activities. Incorporating all three will definitely give better cost estimates.

I think parametric is more efficient, having a unit price and multiplying it to exact quantity, i had prepare a budgets using this technique, but then, I did a market survey for each item.
Have also seen where bottom-up approach put a company to a standstill because of employees dishonesty.
Top-down approach sometimes takes time, especially when everyone wants to prove expertise in budgeting and they disagree to agree.

i prefer top down because there is expertise there

The parametric approach is the most effective way in estimating cost. This approach is usually hampered by the fact that not all estimates can be calculated per unit. The reason for picking out this approach is because the estimate is realistic and not dependent on individuals discretion.

The parametric seems ideal as it helps to give a highlight of the expected costs. Unlike the other approaches which have a number of loopholes, the parametric approach gives room for a more realistic picture of what the total budget would be like. However, it requires that one has a keen interest in the details regarding what would be required per each activity.

The best way to use is combined form. since each of them has there own advantage and disadvantage combining them in different degree based on the activity will give better bidget estimate than using one alone mechanism

Each of these three estimating techniques (Top-down, Bottom-Up and Parametric estimating may play a role in project planning and management. Uncertain time or budget estimations can affect every aspect of the project and leads to unsatisfied clients or stakeholders.

We can reduce the risk of inaccuracies by using estimating techniques.

Parametric estimating uses a formula or algorithm to calculate the cost or time needed to implement and finish a whole project or specific task. It uses historical and statistical data to make a calculation. But sometimes we don`t have historical data.

Top-down estimating budget is prepared by top manager. Most large corporations, companies use a top-down estimating metod , where management prepares a high-level budget across the entire organization with certain amounts allocated to each department. It looks at the previous year’s budget along with current business trends, and growth strategies. And they may not provide department managers with the details they need to create their budget. And it may create unrealistic expectations for department heads because they were not involved in the creation process, with many details overlooked or eliminated.

Bottom-up estimating is made department heads and other staff from the start. It is frequently seen as more accurate, because department heads know much more about their department than upper management does. It relies on individual departments or teams to create their budgets, which provide a level of detail. however it is always take so much time.

Every estimating techniques has advantages and disadvantages. I think, we can use each of them according to the conditions of the different project`s workpackage.

Application of the the two approaches seems practical depending on the complexity of the project and how it is implemented.

For me parametric approach of estimating the costs is a better approach because it brings about accountability and it is not time consuming , it is also one way of estimating costs professionally .Further , it is a very quick approach of estimating costs.

$3,000,000.00

Good job

I am of the opinion that the parametric approach should be adopted when drafting an estimate because it helps in reducing over-budgeting and/or under-budgeting.

I am of the opinion that the parametric approach should be adopted when drafting an estimate because it helps in reducing over-budgeting and/or under-budgeting.

I believe the best approach is combining the three. This works well and brings balance to timeliness and reality of projected costs. It also nurtures program ownership when other players are consulted on budget lines that need consultation of implementing teams.

Given the three approaches to choose from, I am sure I will tinker with the three in order for me to mitigate against the limitations of all three. because where the top-down method cannot capture the realistic estimation, the bottom-up approach would. where there might be delays in arriving at an estimate with the bottom-up approach, I can adopt the parametric approach especially on areas where it best fits.

I may choose Top down this method is important because you may advised with other stake holders on areas you face challenges, this will help the project to be implemented faster

Hello Dear friends
In my opinion the bottom up approach is the most effective way because we can estimate the exact costs by collecting and counselling to each individual as per their requirements.

The bottom-up approach to check your assumptions, BECAUSE Parametric estimates are easy to calculate but will not apply to every expense, so use this approach when it is possible.

Parametric seems to be the best approach.

Bottom up is way good since it encourages team work after all it gives you a rough estimate of the cost

I believe we should use a mixture of all approaches.For example to get the rough estimate, we can use the top-down approach to get the rough estimates of the budget then use the bottom -up approach to get more realistic figures.

I believe the parametric approach helps the budgeting system to be more accountable and using the bottom up approach helps to check the accuracy of the approach.

Top-Down

Parametric approach because it gives the exact cost.

I believe that you should use the parametric approach whenever possible because it provides a more often accurate picture of cost estimates.

I believe the parametric approach is the best approach because it wields analytical power; you can always make adjustments to the calculated results as and when it's needed.

Parametric, this approach allows you track every record and keep you guided about your expensive and all you need to know about what's ongoing in detail.

I believe that parametric approach is the best way because it is accurate and can save our time.

Though can not be applied to expenses, but parametric is the best because to me it sounds more accurate than the rest.

The top-down cost approach is ideal for projects because it includes all relevant costs in the decision-making process and avoids sunk costs. Additionally, it can help to identify any cost-saving opportunities that may be available. This allows managers to make informed decisions about whether or not to proceed with a project by taking into account all of the potential costs that could be incurred.

I believe the Parametic approach is the best as it entails looking at the historical and statistical data to come up with costs. The approach looks at the actual cost per unit to be used

In many construction projects, the parametric approach is used, as it provides reliable estimates of project cost without bias, and all expenses can be easily tracked and controlled

Using both methods i agree its worth it,,

Cost budgeting is an important part of planning a new project or business strategy. A cost budget may have the following benefits:

1. Increases efficiency
2. Improves profitability
3. Helps professionals meet business goals

Step 2: Estimating Activity Costs
To create an activity-based budget, you need to assign an estimated cost to every activity that you plan on doing. If you have never done some of these activities before, it can be very difficult to calculate realistic cost estimates. In general, however, there are three approaches:

Top-down Bottom-up Parametric
You, with the help of some experts, some research, and other managers, come up with cost estimates. The advantage of this approach is that it is relatively quick and simple. The disadvantage is that it may be out of touch with the real costs. The individuals who will actually be spending the money create cost estimates. This approach can produce more realistic cost estimates than top-down. However, it can be time-consuming and difficult to coordinate, and employees may occasionally be dishonest about their expected expenses. This is an approach that works when you have a cost-per-unit that can be reliably calculated. For example, if you are buying lumber for houses, you may know the cost of one pallet of lumber. Multiply that cost-per-unit times the number of pallets that you will need to buy, and you have generated a parametric cost estimate.
In reality, you will be served best by combining these three approaches. Generate realistic top-down estimates, and whenever possible use the bottom-up approach to check your assumptions. Parametric estimates are easy to calculate but will not apply to every expense, so use this approach when it is possible.

Step 2: Estimating Activity Costs
To create an activity-based budget, you need to assign an estimated cost to every activity that you plan on doing. If you have never done some of these activities before, it can be very difficult to calculate realistic cost estimates. In general, however, there are three approaches:

Top-down Bottom-up Parametric
You, with the help of some experts, some research, and other managers, come up with cost estimates. The advantage of this approach is that it is relatively quick and simple. The disadvantage is that it may be out of touch with the real costs. The individuals who will actually be spending the money create cost estimates. This approach can produce more realistic cost estimates than top-down. However, it can be time-consuming and difficult to coordinate, and employees may occasionally be dishonest about their expected expenses. This is an approach that works when you have a cost-per-unit that can be reliably calculated. For example, if you are buying lumber for houses, you may know the cost of one pallet of lumber. Multiply that cost-per-unit times the number of pallets that you will need to buy, and you have generated a parametric cost estimate.
In reality, you will be served best by combining these three approaches. Generate realistic top-down estimates, and whenever possible use the bottom-up approach to check your assumptions. Parametric estimates are easy to calculate but will not apply to every expense, so use this approach when it is possible.

I agree, parametric is the best approach as it eases things and you can actually know or have an idea of what your budget will be like.

I believe that you should use the bottom-up approach whenever possible because it is a more realistic cost estimate.

I believe that you should use the bottom-up approach whenever possible because it is a more realistic cost estimate.

i select will chose parametric approach because I will usually have a fair knowledge of the cost

A combination of top-down, bottom-up, and parametric approaches is ideal. This way you get an idea of the costs relatively quickly, and pretty accurately. I think if one is forced to select only one method, the type of situation is important and would determine which approach is best. In my profession, if I had to come up with cost estimates, I'd look at past invoices to get a good idea of parametric costs, though there are other factors involved.

I agree that it can certainly be the most accurate estimate, but as the lesson points out, employees may be dishonest. Years ago I sold IT and Business Skills training classes, and oftentimes businesses would call me to buy classes for their employees even if it wasn't needed, because "If we don't use a big budget, they'll give us less money next year." Do you think successful measures can usually be taken to ensure honesty? I'd like to think most employees would be honest in the first place, but you wouldn't believe how many times I experienced that anecdote....

Bottom-up approach not only creates most realistic estimations but also involve the first hand consumers and implementers specialy in projects which deliver services. Additionally bottom-up budgeting assist organization in acheiving the principle that each one should participate in designing and implementation of projects.

to estimate the cost of the project is very important key in project management life cycle.

For me the most effective is the parametric method,it saves time is easier to adjust though fewer times the procurement unit usually overestimates some figures.

I believe that you should use the three approaches together whenever possible because this allows a project manager to get the best results.

I agree with @JoeBlerk about parametric as the best option out of the three. In a third world setting like Nigeria where the number of experts available to pitch in on a top down cost estimate are limited, and where dishonesty is rampant enough to effectively tamper with the bottom up approach, where there is increasing price on daily basis, the parametric way seems to be the best logical option to take as long as unit prices are known, which is most often the case in our setting.

The best approach is the Bottom-up approach as it presents more realistic estimates though it is expensive.

I believe the use of parametric approach because you work with realistic costs hence more likely to prevent misuse of funds.

will use the bottom up

parametric approach because it is more actual and it is easy to avoid price exaggerations by dishonest employees

I believe that you should use the parametric approach whenever possible because it will allow you to provide a more detailed estimate of the cost.

As for me, I would prefer bottom-up approach because it provides realistic costs since various stakeholders are involved, thereby reducing cases of the budget being underestimated. With accurate cost estimates, the project completion is delivered within the scheduled time-frame.

To me Top Down Approach is the most appropriate because many top managers who have been at the helm of the budget know the costs and they also have a knowledge of how big the budget is and can make adjustments accordingly and since the prevailing market cost keep changing

I totally believe in using parametric cost estimation because in this method the cost per unit can be easily calculated. However, top-down and bottom-up cost estimations are not reliable to the actual cost and difficult to coordinate.

@assenyonga said in Module 2 Discussion: Estimating Costs:

To me Top Down Approach is the most appropriate because many top managers who have been at the helm of the budget know the costs and they also have a knowledge of how big the budget is and can make adjustments accordingly and since the prevailing market cost keep changing

Top-down approach is far away from the actual cost that leads to out of budget soon.

I totally agree with you. Parametric approach is reliable to the actual cost.

which of the cost estimation three approaches are preferable to you?

I think the most accurate way to project cost is the parametric method because it involves real time research which is reliable. However I do think think this will have to be reaccessed over the course of a longer term project in case prices go up. But over all, I think this can be easily be backed up by research.

For me, I think the parametric method is the right one, especially since we already have the idea of ​​unit cost and overall cost based on the activities planned in the project, since I took part in the management of projects as coordination staff, we have always applied it and it allows us to better manage project finances.

This module is really explanatory using simple relatable concepts and examples

Awesome insight

This is so true, although the cost (finance and time) will also be pretty high particularly for very large scale projects

I believe you should use the three approaches because you will get a better result when combining the three.

The generating cost estimate is depend on the organization perspective and I think Parametric is the easiest and effective way to apply for the project budgeting.

i believe using the three approaches is better because it will help eliminate all the disadvantages that each bring out there by allowing you to come up with a complete estimation but again all variables should be there eg experts etc

I would like to go with top down approach because the top-down approach analyzes the risk by aggregating the impact of internal operational failures. It measures the variances in the economic variables that are not explained by the external macro-economic factors.

I believe that the best way to calculate costs is the parametric method. This provides the opportunity to have a more accurate approximation and even facilitates cutting or increasing the budget from the calculation of the cost per unit in the project, simplifying the tasks and contributing to achieve the scope that was proposed without going over the budget.

In reality,combining these three approaches is what works better for example top-down with a bit of bottom-up. Parametric estimates are easy to calculate but will not apply to every expense, so use this approach when it is possible.

It depends which project you are going to start for my project Top-down budget practice is fine.

I've already read all your comments. And found it out very interesting... Thanks again

I believe that you should use the top-down approach whenever possible because you first of all consult with your director or experts that had done budgeting for similar activities, and when you seek vendors you can always consult with your budget to give them the range of your financial resource. However, you can apply all three approaches depending on the type of the activities.

Exactly my opinion too

Estimating cost is use to predict the quality cost and price of the resources require by the scope of the project . cost estimate is needed to provide decision making with the means to make investment decision.

Bottom up approach is the because it creates cost estimates that are realistic through individual involvement

The best approach would be careful planning and multiple sources.

On paper I think the best approach to ensure staying on budget would be the parametric approach. With knowing the cost of what you need, it helps eliminate the issues that can occur with the other approaches. However, we do not live in a perfect world and I do not think this approach would work for every type of project. For that reason, I think a combination of the three approaches to try to ensure an accurate budget would be best.

Creating a proper estimate involves detailing every expenditure you expect to make throughout the duration of a project. Compiling this information will help you charge the client enough to make a profit on the job, and will also guide you in keeping the project within budget.
I beleave that one of this approach we have to chose whenever we find is possible bottom-up and top-down. Each entails accounting for each item and labor cost, but there are particular projects and instances where one may be better than the other.

Hello ! For me i believe parameric approach is the best, because it may give average expenses where you may not spend more or less instead range btn loss and profit low risk of mis management

How do we estimate costs? does the project need financial analysis?

Based on my experience, it is best combining the (3) three approaches Top-down, Bottom-up and the parametric to get a more realistic or accurate estimates in the budgeting process.

I think top down is the best. Because for one to learn you need some kind of a mentor

For me, a combination or top-down and bottom up approaches is the best way to estimate costs. It caters for top level views and on the ground views. It also has an advantage of including even the most subjective costs that need to be factored into the budget, such as going rates for local labour or other services, which the parametric approach may not cover.

In my opinion, the top-down approach to cost estimation is the most effective approach since it is relatively quick and simple. This therefore saves time which is key in scheduling projects and is a constraint to project management.

I believe that you should use the top down approach whenever possible because the project can be execute as soon as possible

I believe that you can vary the approach to take to generate cost estimates based on your familiarity with the project and previous experience. Ideally, a bottom-up approach can often provide most realistic estimates, however.

I believe that you should use the Bottom-up approach as much as possible because it is the most holistic approach in my opinion. who better to say the cost of an activity or a product than those directly involved with its procurement or use? I understand that there might be inflation of costs but that can be checkmated by mixing this approach up with all the other approaches.

For me, the parametric approach is the best option because it is more simplified and relatively accurate, and sincere. And because the cost is generated per unit it gives additional room for the product quality assessment

I feel it is important to first look at the project and see which estimate works better. Even a combination can be okay but then you have to be smart about it because, combining can be costly.

I believe that parametric estimates is the best means because once one is able to ascertain the current prevailing market cost of it the items on the list of activities, it will go a long way in ensuring that a realistic budget.

I think parametric is a good approach. It is realist, sincein the end one gets the exact price and will know exactly how much will be spent for a particular item, which cumulatively will provide cost of the entire project.

I would align my thoughts with the Course's submission that any or all of the three approaches to estimating costs should be used, should the specific context require such.

Parametric is the most realistic approach. It makes you do real some research to estimate the budget. It will get you more familiar with real situation.

All approaches have advantage and disadvantage.So they must be used combinedly. When one approache is difficult to apply easyly,it has to be skipped and the other must be applied.

for me, the most effective method for generating cost estimates is the top-down method. although it is not 100% reliable, it allows you to have a clearer idea of the costs and to save time

Bottom-up approach is best option for estimating the cost of activities because it give opportunity to person that implement the project. Lower people have better understanding of the market and it will be easy for them to estimate the cost of each activities in the WBS.