The use of cost data explained
Why use cost data?
To maximize the revenue of each euro spent on a project, a dependable method for forecasting costs is needed. Cost data helps you estimate the costs of resources such as personnel, supplies and equipment associated with implementing a project, product, service, or other activity.
Conducting cost analyses can greatly increase understanding of the factors that affect resource use, including staffing patterns, geography, design parameters, and procurement. This information helps managers consider different ways of construction and production in order to reduce costs, increase revenues, or both. Conducting a cost and revenue analysis is particularly useful to organizations that are trying to meet major management challenges, such as expanding existing services, integrating new services, or working toward financial sustainability.
A market analysis will help managers explore how changes in the level of supply and demand could increase costs, and how the devaluation of the national currency could affect costs as well. They could also examine the impact of changing their fee levels to look at how different fees could affect the demand for and cost of their products and to determine the point at which their fees will allow them to recover their costs, either with or without government subsidy.
With the availability of structured cost data, the estimator can develop new methods to quickly determine project cost in early conceptual phases and help managers explore “what if” scenarios. Finally, when construction or fabrication is underway, scope changes and project performance can be forecasted and controlled effectively on a detailed level.
How to use cost data?
A cost analysis is performed on a large amount of historical procurement data and current market values. This should not only include costs but technical information as well. By capturing this knowledge in a database it becomes globally available to all estimators. Another benefit is that the availability of cost data is not affected when employees leave the company.
Consistent use of structured and indexed cost data allows for comparison, benchmarking, and performance tracking throughout the project’s life cycle and between projects in your portfolio. An extra layer of intelligence can be added for faster estimating by using assemblies. Assemblies make use of design standards to derive typical quantities and combinations of resources for us to use in estimates.
Maintaining and adding cost data is a continuous process, but doing this for all possible locations around the world would be very time-consuming. Instead, a common basis should be chosen to which factors can be applied to make the data represent the actual project circumstances. This can work for the various locations where a company conducts business, but also for variations in project conditions in one area, product line or service.
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