1. Input from bid:-
- P&ID, line list, temperature, pressure.
- Overall plant layout and piping corridor plan.
- Scope of work and the specification for the job.
- Specifications for materials like PMS and VMS.
2. Value addition:-
- Itmes like valves, flanges, speciality items, reducers can be estimated from P&ID.
- Length of pipes, elbows, width of pipe rack can be estimated by referring P&ID and overall plot plan.
- No of tires (on rack ) can be estimated by referring the spacing required for pipes and also the space available.
- MTO for steam traps, valves (for vent and drain ) can be calculated by using thumb rules.
3. Loads:-
Hydro test loads :
Can be estimated by assuming all the pipes (on a grid ) empty except some bigger size lines filled with water.
Actual operating loads:
Gas lines to be considered as empty and rest of the lines to be considered as filled with the fluid (which they are suppose to carry in operating condition).
The loads which ever is higher from above two cases should be referred for structural loading.
The Importance of Estimation
Budgeting is the basis for developing plans that are related to projects. It also contains the information that helps in planning and organizing the resources, proper scheduling of the tasks, and assessment of viability of a project. Estimation results in planning, controlling and risk assessment, evaluation and reduction. On the other hand, there can be under estimation and this leads to negative impacts such as cost increase, time delay, and eventual failure.
There are the following benefits when estimation is done accurately:
- Resource Allocation: Estimation is useful in identifying the amount of resources required such as labour, material and tools. This way the resources that are needed are obtained and delivered at the most appropriate time and not at some later time when the need may have arisen.
- Budgeting: Bill estimation makes it possible for a construction to develop realistic and achievable budgets. It assists in fundraising, control spending and minimizing the occurrence of lack of funds all-round the project.
- Scheduling: Scheduling is significant to ensure that the project development time is accurate to give appropriate timeliness on deadlines and milestones. It provides the possibility to think through sequences of tasks and distribute appropriate time for completing the activity.
- Risk Management: Estimations play a role of making client aware of risks and uncertainties within a given business setting. Recognizing the extent and the level of difficulty of a project enables a manager to have effort plans and能够 to manage risks.
- Stakeholder Communication: Perceptions that are precise in estimating help the stakeholders to have a clear picture on what is expected of them within the given period, requirement, and financial implication of the project. Such transparency builds credibility and creates a fund for decision-making.
Types of Estimation
Various approaches of estimation are applied based on the characteristics of the project, and available data and the degree of refinement required. The three most common types of estimation are:The three most common types of estimation are:
1. Top-Down Estimation
This process of assessment is normally done through approximate figuring whereby the total project cost or time is determined from above. It begins with gross to detail starting with just giving the estimator the overall high figure and then going to the basic elements. This method is useful especially during system planning where more refined and comprehensive data is as yet unavailable.
- Advantages:
- Quick and easy to perform.
- Useful for projects with similar historical data.
- Provides a rough estimate that can be refined later.
- Disadvantages:
- Less accurate than bottom-up estimation.
- Relies heavily on expert judgment, which can introduce bias.
2. Bottom-Up Estimation
Bottom up estimation is done by arriving at an estimate of each of the tasks in the least complex subset of the project and then summing them up. This method is more detailed and accurate as compared to previous method but it is necessary that you have to understand all about the project.
- Advantages:
- Provides a detailed and accurate estimate.
- Helps in identifying specific resource requirements.
- Facilitates better tracking and monitoring of progress.
- Disadvantages:
- Time-consuming and requires detailed project knowledge.
- Can lead to underestimation if all tasks are not identified.
3. Analogous Estimation
Comparative estimation also known as analogous estimation processes involve actual accurate costs or time frame of past similar project as a basis of estimating the current project. This method can be used where past records are accessible and all the projects are of similar nature and size.
- Advantages:
- Relatively quick and easy to perform.
- Based on real data, which can enhance accuracy.
- Disadvantages:
- Less accurate if the projects differ significantly.
- Relies on the availability of relevant historical data.
Estimation Methods and Techniques
As pointed above there are several methods that can be adopted when undertaking the estimation depending on the project type in question and the degree of estimation required. Some of the most commonly used estimation methods include:As pointed out earlier, there are numerous estimation techniques used in estimating the cost of projects and some of them include the following;
1. Expert Judgment
Expert opinion also involves seeking the opinion from the people who have knowledge in the area of the project of the given project. All these experts provide their predictions based on what they understand, have witnessed or experienced on the same like a guess.
- Advantages:
- Quick and easy to obtain.
- Useful when little data is available.
- Disadvantages:
- Subject to bias and variability.
- May lack transparency and reproducibility.
2. Parametric Estimation
The other technique of estimation is called parametric estimation and this involves use of statistical formulas employing some known parameters in order to estimate the probable cost or length of a project. For instance in construction , how much does it cost to construct a building, cost per 1000, 2000 or 5000 square feet.
- Advantages:
- People may consider it as a small step from the previous step because it offers a systematized and datametric manner.
- It can be very accurate if for example the model is very well calibrated.
- Disadvantages:
- Requires reliable data and a well-defined model.
- May not account for unique project factors.
3. Three-Point Estimation
Three-point estimation involves calculating three estimates for each task or component: These are the optimistic estimate (O), the pessimistic estimate (P) and the most likely estimate (M).. The final estimate is typically calculated using the formula:
Estimate=O+4M+P6\text{Estimate} = \frac{O + 4M + P}{6}Estimate=6O+4M+P
This method accounts for uncertainty and variability in the estimation process.
- Advantages:
- Incorporates uncertainty into the estimation.
- Provides a more balanced and realistic estimate.
- Disadvantages:
- Requires additional effort to calculate three estimates.
- Can be challenging to determine the optimistic and pessimistic values accurately.
4. Analogous Estimation
As mentioned earlier, analogous estimation uses historical data from similar projects to estimate the current project. It is particularly useful when detailed information is not available, and the projects are comparable.
- Advantages:
- Based on real-world data, which can enhance accuracy.
- Relatively quick and easy to perform.
- Disadvantages:
- Less accurate if the projects differ significantly.
- Relies on the availability of relevant historical data.
5. Monte Carlo Simulation
Monte Carlo Simulation is a quantitative tool widely used in risk analysis and being a stochastic method in its nature, it utilizes probability distributions to address the variations and randomness relating to estimation. It is performed by the execution of several simulations where the model is altered to create a spectrum of results.
- Advantages:
- Provides a comprehensive view of potential outcomes.
- Helps in assessing the probability of different scenarios.
- Disadvantages:
- Relies on specific software, and it has to be managed by professionals with specific knowledge on it.
- Process may also take time to develop as compared to other models.
Procedure of Estimation
Estimation is a process that is subdivided into a number of steps right from defining the project and its scope to fine tuning the estimates. Following are the guidelines that need to be followed in order to conduct an effective estimation:
1. Define the Project Scope
Probably the first thing that needs to be done when developing an estimation is to understand what needs to be done. This covers the project scope that involves outlining of the goals, the things that are expected to realize the above goals, the activities to be accomplished in the realization of the above goals, and last but not the least; the constraints of the project. The scope definition helps to have all consideration on creating the estimate; it minimizes the occurrence of the scope creep that causes bad estimates.
- Key Activities:
- Develop a detailed project charter or scope statement.
- Break down the project into smaller tasks or work packages (WBS).
- Identify any assumptions, constraints, or exclusions.
2. Gather Historical Data
If available, historical data from similar projects can provide valuable insights for the estimation process. This data can be used in analogous or parametric estimation methods and helps in benchmarking the current project against past experiences.
- Key Activities:
- Get information regarding cost , time and various resources required from like projects that have been undertaken.
- We have to compare the similarities and the differences in the past projects and the current one.
- Use the data to establish baseline estimates.
3. Select the Estimation Method
Depending on the nature of the project, kind of data available and the degree of accuracy needed, it becomes possible to choose the right approach to estimation. Sometimes it is possible to combine two or more methods in order to increase the degree of accuracy identified.
- Key Considerations:
- The complexity and uniqueness of the project.
- The availability of data and expertise.
- The level of detail required by stakeholders.
4. Estimate Costs and Durations
The indication of costs and durations of tasks, as well as the resources needed to complete the projects or project’s components, must be estimated with the help of selected estimation methods. This can entail, for instance, the application of parametric models, three point estimate or even seeking the counsel of experts.
- Key Activities:
- Determine overheads such as the cost of materials used and the cost of labor to be incurred in the process.
- Make an assessment of the time needed to complete each of the activities or tasks involved.
- A proper estimation of the resource needs of the phases that the particular project is composed of must be made.
5. Aggregate the Estimates
Once individual estimates are calculated, aggregate them to obtain the overall project estimate. This includes summing the costs and durations of all tasks, accounting for any dependencies or overlaps.
- Key Activities:
- Compile the individual task estimates into a project budget and schedule.
- Account for any dependencies, overlaps, or contingencies.
- Adjust the estimates based on the level of uncertainty or risk.
6. Review and Validate the Estimates
Compare the results of the estimates with sponsors, project team, and other stakeholders. Validation makes sure that the cost estimates are quite reasonable, and achievable in regard to the project goal and objectives.
- Key Activities:
- Conduct peer reviews or expert assessments of the estimates.
- Compare the estimates against benchmarks or industry standards.
- Revise the estimates as necessary based on feedback.
7. Document the Estimation Process
There is no doubt documenting the estimation process is important to ensure that accountability and transparency are achieved. This should involve capturing other information such as the overall assumptions, methodologies applied for the estimation process as well as source of data among other vital issues.
- Key Activities:
- Prepare a detailed estimation report or log.
- All the calculations made, the assumptions made and the rationale for them MUST be presented.
- Make sure that the documentation is shared publicly for the concerned stakeholders and members in the team.
8. Check and Modify the Estimates
There should be a constant check of the actual observation against the estimated observation in the course of the project. This leads to the detection of differences from expected levels and the improvement of the estimates due to growth of knowledge.
- Key Activities:
- Track actual costs, durations, and resource usage.
- Compare the actual performance against the estimates.
- Update the estimates and project plan as necessary.
Challenges in Estimation
As much as it may sound easier and is in fact, with many methods and techniques available for use, estimation is not without its rear nemesis. Some of the common challenges faced in the estimation process include:Some of the common challenges faced in the estimation process include:
1. Uncertainty and Risk
It is always rather difficult to predict and make sure, especially when it comes to the initial stage of the work when there is still not much information to rely on. In estimating under conditions of risks or in conditions of uncertainty one has to be very cautious as well as have contingency plans in mind.
- Mitigation Strategies:
- Estimate it using three-point estimation or employ the Monte Carlo simulation for dealing with the uncertainty.
- This means that risks that might be inherent in the project ought to be evaluated right from the beginning of the project.
- Create ‘plan B’ and integrate shares in calculations.
2. Scope Creep
There is a lot of pressure on change control since the scope of the project keeps growing resulting in new activities, costs, and an increased amount of time to complete the project. This makes it extremely difficult to arrive at correct estimates and end up in delays of the project.
- Mitigation Strategies:
- Get the project scope well outlined and find out what the stakeholders are willing to bring to the table.
- ensure that you put in place Change Order Control System that will address issues to do with scope change.
- Periodically check and alter the project description as well as the cost plans.
3. Bias and Subjectivity
People’s estimates are subject to self-generated opinions or prejudices for example optimism bias where people underestimate the costs and duration of the project or anchoring bias where the estimates to are inclined to the first estimates of the project cost. Such biases can make the probabilities and estimations to be inaccurate.
- Mitigation Strategies:
- Use a combination of estimation methods to cross-validate estimates.
- Involve multiple experts or team members in the estimation process.
- Conduct reviews and assessments to identify and correct biases.
4. Lack of Historical Data
In the absence of historical data, estimation becomes more challenging, particularly for unique or innovative projects. Without reliable data, estimates may be based on assumptions or guesswork.
- Mitigation Strategies:
- Use expert judgment or analogous estimation based on similar projects.
- Conduct research or feasibility studies to gather additional data.
- Develop parametric models or use industry benchmarks where applicable.
Conclusion
E stimation is one of the most central elements of project management and planning and it is therefore important to get it right. The approach is a blend of art and science and falls midway between a precise mechanical process that relies solely on algorithms and mechanics and one that is dependent solely on the heuristics of consultants. Understanding various types of estimation, followed by the selection of the right methods and countering the common issues can help project managers and planners get better estimates and better chances of success.
In summary, successful estimation requires:
- A clear understanding of the project scope and objectives.
- The selection of appropriate estimation methods based on the available data and project requirements.
- The consideration of uncertainty, risk, and potential biases.
- Estimating and re estimating of the parameters during the different phases of the project.
By following the principles and practicing with the best practices stated above, you’ll be able to perform effective estimations to help make your projects as successful as possible – on-time, under the allocated financial resources, and to the satisfaction of key stakeholders.