Resource Estimating and Budgeting

Budgets are important management tools for the project selection, planning, and control. This chapter emphasizes the importance of resource estimating and budgeting for a project using Google as an example. Cost estimates are key components to the project budgeting process. Cost estimating methods are categorized into five classes, ranging from very low accuracy (class‐5) to very high accuracy (class‐1). The seven popular cost estimating methods are expert judgment, rule of thumb, past performance, three‐point, parametric, roll‐up, and deterministic. Regardless of the project size and level of detail desired, the budgeting process goes through four steps: (1) project definition, (2) estimating method selection, (3) cost estimation, and (4) budgeting. Cost estimating is teamwork, led by a senior manager or skilled cost accounting professional, supported by task specialists and cost accounting analysts. It is very inefficient and unreliable when performed manually. Thus Computer support is strongly recommended.