Cost estimation models are mathematical
algorithm
In mathematics and computer science, an algorithm () is a finite sequence of rigorous instructions, typically used to solve a class of specific Computational problem, problems or to perform a computation. Algorithms are used as specificat ...
s or
parametric equations
Parametric may refer to:
Mathematics
* Parametric equation, a representation of a curve through equations, as functions of a variable
*Parametric statistics, a branch of statistics that assumes data has come from a type of probability distribu ...
used to estimate the costs of a product or project. The results of the models are typically necessary to obtain approval to proceed, and are factored into business plans, budgets, and other financial planning and tracking mechanisms.
These algorithms were originally performed manually but now are almost universally computerized. They may be standardized (available in published texts or purchased commercially) or proprietary, depending on the type of business, product, or project in question. Simple models may use standard
spreadsheet
A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in cel ...
products.
Models typically function through the input of
parameter
A parameter (), generally, is any characteristic that can help in defining or classifying a particular system (meaning an event, project, object, situation, etc.). That is, a parameter is an element of a system that is useful, or critical, when ...
s that describe the attributes of the product or project in question, and possibly physical resource requirements. The model then provides as output various resources requirements in cost and time. Some models concentrate only on estimating project costs (often a single monetary value). Little attention has been given to the development of models for estimating the amount of resources needed for the different elements that comprise a project.
[García de Soto Lastra, B. (2014). A methodology to make accurate preliminary estimates of construction material quantities for construction projects (Doctoral dissertation). Diss. ETH No. 22313, Zurich, Switzerland. https://dx.doi.org/10.3929/ethz-a-010361720]
Cost modeling practitioners often have the titles of cost estimators,
cost engineer Cost engineering is "the engineering practice devoted to the management of project cost, involving such activities as estimating, cost control, cost forecasting, investment appraisal and risk analysis". "Cost Engineers budget, plan and monitor inve ...
s, or parametric analysts.
Typical applications include:
*
Construction
Construction is a general term meaning the art and science to form objects, systems, or organizations,"Construction" def. 1.a. 1.b. and 1.c. ''Oxford English Dictionary'' Second Edition on CD-ROM (v. 4.0) Oxford University Press 2009 and com ...
*
Software Development
Software development is the process of conceiving, specifying, designing, programming, documenting, testing, and bug fixing involved in creating and maintaining applications, frameworks, or other software components. Software development invol ...
*
Manufacturing
Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to a r ...
*
New product development
In business and engineering, new product development (NPD) covers the complete process of bringing a new product (business), product to market, renewing an existing product or introducing a product in a new market. A central aspect of NPD is prod ...
See also
*
Software development effort estimation In software development, effort estimation is the process of predicting the most realistic amount of effort (expressed in terms of person-hours or money) required to develop or maintain software based on incomplete, uncertain and noisy input. Effort ...
*
Estimation in software engineering
Cost estimation in software engineering is typically concerned with the financial spend on the effort to develop and test the software, this can also include requirements review, maintenance, training, managing and buying extra equipment, servers ...
*
Parametric Estimating
Estimation theory is a branch of statistics that deals with estimating the values of parameters based on measured empirical data that has a random component. The parameters describe an underlying physical setting in such a way that their value ...
*
Estimation
Estimation (or estimating) is the process of finding an estimate or approximation, which is a value that is usable for some purpose even if input data may be incomplete, uncertain, or unstable. The value is nonetheless usable because it is der ...
*
Elemental cost planning Elemental cost planning is a system of Cost planning and Cost control, typically for buildings, which enables the cost of a scheme to be monitored during design development.
1951 saw the publication of the Ministry of Education Building Bulletin N ...
*
Cost overrun
A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred costs. When these costs are in excess of budgeted amounts due to a value engineering underestimation of the actual cost during budgeting, they are known ...
*
Parametric model
In statistics, a parametric model or parametric family or finite-dimensional model is a particular class of statistical models. Specifically, a parametric model is a family of probability distributions that has a finite number of parameters.
Def ...
*
Cost estimate A cost estimate is the approximation of the cost of a program, project, or operation. The cost estimate is the product of the cost estimating process. The cost estimate has a single total value and may have identifiable component values.
A problem ...
References
{{DEFAULTSORT:Cost Estimation Models
Business terms