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1、6EstimatingAllocationofcoststotheWBSorPBSrequiresofcoursethatthesecostsareknown.Unfortu-natelyinonlyafewsituationsarethesecostsavailableinaformforsimplyslottingintotheworkpackageboxes.Itisnecessarythereforetoproducerealisticestimatesofeachpackageandindeedtheentirepro
2、jectbeforeameaningfulcostallocationcanbecarriedout.Estimatingthecostsofaprojectrequiresastructuredapproach,butwhichevermethodisused,thefirstthingistodecidethelevelofaccuracyrequired.Thisdependsonthestatusoftheprojectandtheinformationavailable.Inmanycasesaclientorspon
3、sorrequiresonlyanapproximateor‘ballpark’figurebeforedecidingwhethertoproceedtothenextstage.Anestimateinsuchasituationdoesnothavetobeasaccurateasanestimateforthefinalcontractcosttowhichoneisthencommitted.Estimatingisanessentialpartofprojectmanagement,sinceitbecomesthe
4、baselineforsubsequentcostcontrol.Iftheestimateforaprojectistoolow,acompanymaywelllosemoneyintheexecutionofthework.Iftheestimateishigh,thecompanymaywelllosethecontractduetooverpricing.EstimatingThereareanumberofestimatingmethodsinuse,varyingfromtheveryapproximatetothe
5、veryaccurate.Mostorganizationshavetheirownestimatingnorms,developedovertheyearsandupdatedregularlytoreflectchangesinoperatingmethodsandsystems.Inadditionthevariationsinlabourrates,materialcostsandexchangerateswillhavetobebuiltintotheestimate.Thefourmaintypesofestimat
6、ingtechniques,eachgivingdifferentdegreesofaccuracy,are:1SubjectiveWiththismethodtheestimatorreliesonhisexperienceofsimilarprojectstogiveacostindicationbasedlargelyonverysubjective‘feel’or‘hunch’.Geographicalandpoliticalfactorshavetobetakenintoaccountaswellasthemoreob
7、viouslabourandmaterialcontent.Frequentlysuchestimatesarerequiredtobegivenwithlittlenoticesothattheaccuracymaywellbeintheorderof±40%.Suchanapproximatemethodofestimatingisthereforeoftencalled‘guesstimating’.2ParametricByusingwell-knownempiricalformulaeorratiosinwhichco
8、stscanberelatedtospecificcharacteristicsofknownsectionsorareasoftheproject,itispossibletoproduceagoodestimateonwhichfirmdecisionsca