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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.

Personally, I would look at the expense at question and use my judgement to generate the budget because some of expenses can be easily estimated because they are generally easy to verify, but some require proper research and inquiry. So i will combine the 3 approaches to ensure almost accurate estimates on the budget.

For me parametric approach is uses an algorithm or statistical relationship between historical data and other variable eg square footage in construction to calculate resources quantities needed for an activity based on historical data and project parameter

I believe that all the approaches to budgeting are important to consider. This is because they have their advantages and shortcomings. It is also dependent on several factors like type of project, governance structure and maybe donor requirements. I also see this as a methodology issue that can be included in the project proposal stage, design and planning stage as this allows key project stakeholders to deliberate on it. In my experience combining bottom - up and parametric methods have proved to be more effective.

I believe that you should use a combination of all three approaches. Use the parametric and bottom-up approaches first whenever possible because these approaches allow for more verifiable data to be included in the estimates. Top-down factors must be considered as well because the managers will know donor requirements and other costs such as the Human Resources costs that may not be known to workers at the implementation phase.

I agree with that because... They may require that you use a certain budget format, that you categorize your expenses in a certain way, or that you report on your budget a certain number of times per yea

Cost estimation is a crucial part of planning and executing any project, as it helps ensure that the project is completed within budget and in line with the client's expectations. Below are some key steps and considerations for conducting a cost estimation for a project:

Identify resources: Before starting to estimate project costs, it's necessary to identify the resources needed to complete it, such as personnel, equipment, materials, supplies, and others.

Establish unit costs: Once the necessary resources have been identified, it's important to establish the unit costs of each resource. For example, the cost per hour of a worker, the cost per unit of a material, or the cost per day of equipment.

Determine the quantity of resources needed: After establishing unit costs, it's necessary to determine the quantity of resources needed to complete each task or activity of the project.

Calculate total costs: With the quantity of necessary resources and unit costs established, the total costs for each task or activity of the project can be calculated.

Sum total costs: Once total costs have been calculated for each task or activity, they can be summed to obtain the total project cost.

Add a contingency margin: It's important to add a contingency margin to the total cost to cover any unforeseen events that may arise during project execution.

It's important to note that cost estimation is a task that requires experience and sound knowledge in the field, so it's recommended to seek the advice of a project management specialist. Additionally, it's important to keep in mind that cost estimation is a dynamic process that may require adjustments as the project progresses and more information is acquired.

In my opinion, the parametric approach is the most pragmatic and cost effective way of generating cost estimates. By listing out the costs this way the budget can become more transparent.

The parametric approach is so easy to understand. It means that once you know the unit price of a product then budgeting becomes easy because all you have to do is multiply. It also encourages honesty because it is so simple that anyone could understand what you are doing.

I believe there is a high chance of subjective and recall bias in the bottom-up approach.

in my opinion the parametric approach is good because it reduces the risks

In my Opinion i will apply the three approaches to Cost

1. The Top down
2. Bottom Up
3. Parametric

Combining this three methods leaves no gap in your Costing it enables you to fit into every mothod and make an actual cost from it.

I believe that the top-down approach will be better because it’s more coordinated and thereby easy to evaluate and the project manager is able to get views of other managers about the project budget

I believe that you should use the Parametric approach whenever possible because it gives the accurate calculation of items or materials and job needed to carry out.

Well, I think Parameters was best method

for me top down because it easy to use

I believe that you should use Top down because involving experts gives you a clue on the activity and generate cost estimates

I think the parametric method is the best method considering the level of transparency and accuracy it has. It is also an easy method to use once a person knows the cost per unit.

As a project manager i would prefer opting to parametric approach because it only require some one to have information on cost per unit then from there you just make calculation, its not time consuming process, no room for a lot of discussion with the team.

project break down is the main point of work

I believe that using top bottom is the best way because its a big team so it disqualifies dishonest.
Since it has a big team we can allocate each person with an item to research prices and cost involved in different items then compare them separately to see which will fit in the budget well.

Its better to use both top-down and bottom up approach. The managers could have an estimated budget allocation, but side by side, the manager should assign individual experts who will be closer to the budget to do an assessment and estimate cost for a more realistic and on the ground budget estimation.

I spend a lot of time trying to reconcile the budget that is handed down from the upper executive level. They rarely include our PMO group for guidance on costs, so they are often outdated, and do not align, and of course reduced to sell the project to the customer. So I break down what they give me, and fact check, and figure out what can be done to salvage it, based on scope and schedule. I create estimates in a hybrid way, all costs that can be anticipated from known projects are input, and other items and process are broken down to a smaller level so that they can be semi-accurately estimated and worked back up into their category for an overall cost/price.

I spend a lot of time trying to reconcile the budget that is handed down from the upper executive level. They rarely include our PMO group for guidance on costs, so they are often outdated, and do not align, and of course reduced to sell the project to the customer. So I break down what they give me, and fact check, and figure out what can be done to salvage it, based on scope and schedule. I create estimates in a hybrid way, all costs that can be anticipated from known projects are input, and other items and process are broken down to a smaller level so that they can be semi-accurately estimated and worked back up into their category for an overall cost/price.

I believe parametric estimating method is the best because it enables you the opportunity to know the cost of each unit of materials are equipment you are buying and as such, you will be able to put together an accurate estimate for your project

For me, the best way to estimate a budget is a mix of Buttum-up and parametric. With Buttum-up, you can see how estimation are made by employees and they are accountable of the estimations they give whatever we can have lost of time. So, if the price received by the project manager a raisonable, he can trust the employee and give his the budget he asking for doing a task.
Parametric estimation is also very useful because we have the unit cost of all the thing we need to implement the project, but we should remind of hidden cost like transport fee, transaction fees, workforce.

I believe that you should use the bottom up approach whenever possible because it will likely be the most accurate. In my experience, Donors often prioritise financial responsibility, and are willing to stretch the timeline to ensure this .

thank you for educating for on the three budgeting method of Top-down, button-up and parametric

Based on my experience, a combination of parametric and bottom-up approach works best. The bottom up approach provides a first hand experience from the direct implementers of the project while the parametric approach provides the detailed computation of the costs. When these two are combined, it is easier for the project manager to adjust the itemized costs done through the parametric approach whenever there are certain adjustments to be considered in the implementation of the project.

it depends on the situation and can change. Without knowing the situation it is difficult to say which one is best to use.

The best approach for estimating a budget depends on the project's complexity, available data, and available resources. A combination of different approaches may also be used to get a more accurate estimate.

Parametric Estimate will be preferable because of precision. Again, it will give the budget more sense of reasonability, accuracy and reality.