ABSTRACT
This chapter examines a variety of estimation techniques such as process-based and bottom-up estimation. It addresses use of historical data and estimation of external resources. The chapter also examines various budgeting methodologies such as top-down, bottom-up, iterative, and overburden. It analyses budget analysis techniques such as cost –benefit analysis, breakeven analysis, return on investment, and Net present value. Project managers use a wide variety of techniques to perform the project cost estimation effort. It is customary, in fact, for the estimator to use at least two techniques and then triangulate the two. Often, the best estimate is the average of the results of the various estimation methods used. Process-based estimation bases the estimate on the project to be used. This is accomplished by breaking down the project into a relatively small set of tasks. The project manager might need to reduce or increase this figure depending on political, administrative, or other constraints.
