Cost Estimation and Analysis

Introduction:

Cost estimation presents a range of formidable challenges, requiring specialized expertise and an in-depth knowledge of multiple estimating practices. Therefore, it is important to strike a balance between efficient cost control, safety, and production levels.

This Cost Estimation training course offers participants practical methods and tools for accurate cost estimation in addition to extensive techniques applicable across different industries and work settings. Moreover, the course introduces new tools and techniques tailored for the future of cost estimation engineering.

Participants will learn how to implement cost-saving measures while maintaining business performance standards and safety requirements. The course highlights innovative and practical approaches from leading organizations, demonstrating the benefits of cost estimation skills. Attendees will be equipped to identify savings areas while retaining performance, capability, strategy, and safety in their cost estimation processes.

Objectives:

By the end of this course on estimating costs, participants should be able to:

• Actively manage costs using advanced methods of costing
• Find opportunities for reducing costs through various means of estimating costs
• Apply costing tools and methods towards effective control over costs
• Better utilize budgeting plans and forecasts with respect to tools used in costing
• Conduct comprehensive project appraisals
• Manage investments grounded on cost estimates analysis

Training Methodology:

• Benchmarking Sessions
• Live Software Training
• Cost Estimation Software Simulations
• Industry Expert Interviews
• Methodology Deep-Dives
• Scenario-Based Learning
• Structured Group Discussions
• Cost Analysis Exercises
• Simulation of Cost Estimation Processes
• Field Visits (if applicable)
• Expert-Led Demonstrations

Course Outline:

Unit 1: Cost, Profit, Risk, and Cash Flow Analysis

1. Costs & Profit:
   • Objectives – Mission vs Vision – Profits Now or Later
   • Strategy Models and Costs Management
   • Cost vs Value / Profit Drivers Approach
2. Costs & Cash:
   • Cash vs Profit
   • Cost – Cash & Non-Cash
   • Managing Capital Cost vs Revenue Cost
3. Cost and Risk:
   • Introduction to Risk
   • Risk And Cost

Unit 2: Costs & Costing

• Understanding Costs and Working with Them
• Cost vs Value
• Value-Based Costing / Thought Leadership in Cost
• Planning for Cost Reduction and Profit Improvement
• Fixed vs Variable Costs
• Break-Even Analysis, Contribution Margin
• Costing Approaches – Full Absorption, Marginal, ABC
• New Ideas in Cost Management – Lean Principles / Big Data

Unit 3: Planning and Forecasting Costs / Risk

• OPEX Planning Approaches
• Forecasting Tools and Techniques
• What is Risk?
• Modeling Costs, Profit, and Risk
• OPEX Long-Term Forecast
• OPEX Planning and Performance Monitoring
• Software Used in OPEX Planning and Performance

Unit 4: Investment Appraisal and Projects - Capital Budgeting

• Building Cashflow Models for Decision-Making
• CAPEX Planning System
• Factors Used to Evaluate Efficiency of CAPEX Projects
• Annual Investment Program
• Time-Adjusted Measures; The Time Value of Money
• Net Present Value (NPV) and Internal Rate of Return (IRR)
• Sensitivity Analysis, Scenario Analysis, Monte Carlo Simulation
• Importance of Flexibility and Options
• Dealing with Risk and Changing Circumstances

Unit 5: Importance of Detailed Cost Estimation

• Estimation in a World of Scarce Resources
• Key to Increased Productivity
• Efficiency and Profitability
• Company’s Reputation at Stake
• Detailed Estimating of Costs

Unit 6: Estimating Basics

• Four Types of Work Output
• Pricing a Job
• Cost and Value Examined
• Recipe for Making the Estimate
• The Human Element—The Cost Estimator
• Anatomy of an Estimate
• Various Kinds of Costs
• Gathering Data

Unit 7: Defining the Job

• The First Questions You Should Ask (And Why)
• Work Breakdown Structure (WBS) Template for the Project
• Investigate the Tiered Relationship Among WBS Elements
• Functional Components
• Physical Components
• Nature of Recurrent and Non-Recurrent Actions
• Showing Linkages Between Work Packages
• Definition of Budget Elements
• Incentives on Being Economic

Unit 8: Tools Needed for Estimating

• Four Basic Instruments
• What One Needs to Know Before Starting Out
• Method Used in Preparing Cost Accounts
• Function of Technologies in Time Improvement
• Creating Timesheets for Building Parameters
• Needed Skills in Budget Making Process

Unit 9: Budget and Cost Control

• Tough Finance Period; Budgetary Responsibility
• Annual Budgeting Cycle
• Analysis of Variance Against Budget
• Types of Modern Budgets
• Hints for Planning Your Budget
• Variance Analysis
• Outside the Box Budgeting