ABSTRACT
This chapter outlines some of the terms with which the cost estimators and project manager should be acquainted. An accurate estimate of project costs is necessary for subsequent management decisions and control. Cost estimates are usually needed for all commercial projects, including in-house projects and those sold without fixed prices. A collective name for the various allowances that are added once a total basic cost estimate has been made. These can include allowances for cost escalation, exchange rate fluctuation and other contingency allowances. There are considerable differences between companies in the interpretation of direct and indirect costs. Most project costing systems work on the basis of charging direct labour costs as time recorded on the job multiplied by the standard hourly cost applicable to the grade. Variances are particularly useful in project management because they highlight errors and satisfy the principle of management by exception. Estimating must start from some form of project specification.
