How to use cost data to increase the accuracy of estimates? 3 tips
In today’s business environment, organizations face increasing pressure to deliver superior project outcomes. Yet the resources are limited, which brings the need to use them efficiently. An important resource is the cost information you use as input for your cost estimation. But where do you find the right cost data?
1. Create historical cost database
Indeed, organizations have eyes in the back of their heads and it is good to use them to predict the future. What is meant here is to use your historical cost benchmarking database to establish realistic estimates.
During a project, a large amount of data is collected, analyzed and reported by the parties involved in planning and execution. You can think about all the phases that are needed for projects to be implemented: documentation about design and construction, as well as financial and contractual documentation, planning and risk analysis, quotations, etc. This information is valuable not only during execution but also after the execution when it can be incorporated in the decision-making of the next projects.
2. Use industry standards
A somewhat special type of historic knowledge that you can use are industry standards. It’s not company-specific, so you won’t find it in historic projects within your organization, but there are companies that develop those industry standards based on large databases of projects, up-to-date market prices, and other sources. One example is the DACE labor norms. The DACE has set the standard amount of time one needs to install a piece of equipment or to make a weld on a pipe of a particular size.
3. Use engineering knowledgebase and a cost estimating software
As mentioned before, using the historical cost database from completed projects strengthens the power of your estimating data and increases the accuracy of your estimates. The marketplace is constantly in motion, therefore it is important to keep your data up-to-date. Plus, you use the industry standards. But then how do you manage such a great amount of data?
The good news: A large amount of data from many different sources is bundled together in the Cost Engineering Standard Knowledgebases (CESK Data). Those databases can be used directly to create estimates of project costs.
The next thing: You need a dedicated cost estimating software in this case. As a cost estimation software enables standardization, it reduces the time spend merging and analyzing the individual outputs from different sources. Furthermore, multiple disciplines can make use of the same estimating tool. This allows the central estimate group to quickly and accurately check estimate data from multiple disciplines.