The main purpose of the cost estimation is to predict the project cost. Main components like quantity, cost, and price of the resources used in the project to complete the work play a very important role in calculating the project cost.
It helps to bid for new business from prospective clients and inform them about the job and budget planning process.
Cost estimation is done by breaking the project into small tasks and calculating the cost of each task separately. Combining the cost of all tasks gives the final project cost.
BENEFITS OF COST ESTIMATION:
There are many advantages to having Cost Estimate before starting the project.
- Planning financial needs during different phases of the project is easy once the cost estimate is clear before starting the work.
- As project cost is given task wise it gives the opportunity to the owner to decide which task can be completed when. Some tasks can be removed from the project if there are any financial issues.
- It gives an idea of whether executing the project at this cost is worth it or not.
- Project execution will be smooth as the finance needed for project execution is arranged well in advance based on the project phase.
- Project execution will be on time as the chances for the delay is less due to financial constraints.
- It gives less scope for misunderstanding between the project owner and the project executing person as there is limited scope for price escalation.
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