Four Budget Estimation Techniques in Project Development

A resident of California, Donald Graham has spent several years working with businesses in Calimesa and around the state. As the owner and CFO of Green Energy Solutions, Donald Graham is tasked with various responsibilities, including operational monitoring, contract procurement, and contract management. Also an experienced project leader, he has supervised and directed multiple successful projects.

Estimating the size and expense of a project may be challenging since each project is unique. The larger and more intricate the project, the more difficult it will be to complete project budget estimation effectively.

Although project budget estimating is a difficult task, there are ways to increase the accuracy and efficiency of the process considerably. These include:

1. Bottom-up estimation
Bottom-up estimating is a suggested strategy for producing a statement of work and is one of the finest and failsafe ways to build a project budget. It anticipates calculating specific project components, such as tasks or milestones, and adding them to arrive at a final project cost.

2. Top-down estimation
Unlike bottom-up estimation, top-down estimating starts with the overall project budget and breaks it down into smaller parts. When teams have a fixed-price project with a specified budget, a top-down estimate is often employed.

3. Parametric estimation
To help project leaders make better data-driven decisions, parametric estimation takes cost variables or data points from particular areas of prior projects. It puts them to use on the current project. This method makes use of many data sets and the statistical link between historical data and variables.

4. Three-point estimation
This method considers a weighted average of the best, worst, and most likely budget situations, enabling project leaders to consider numerous options. This method may be used by project leaders and managers to see if they are over their budget.