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What are the tools and techniques for performing cost aggregation?

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Cost aggregation is the process of estimating the total cost of a project by combining the individual cost estimates of its activities, work packages, or deliverables. It is an essential tool and technique for cost management, as it helps to establish the project budget, monitor the cost performance, and control the cost variance. In this article, you will learn about the main tools and techniques for performing cost aggregation, and how they can help you prepare for the cost management certification exam.

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Dr. Saleh ASHRM

?? Certified LinkedIn creator | Ambassador| Ph.D in Accounting | iMBA Progress| Financial Manager| Accounts Manager|…
Oseghale Okohue BEngr. Msc. MBA. DBA. Prince2?Practitioner

Accredited NEC4 ECC Project Manager & Snr. P6 Planner | EPICM, Offshore Engineering,Renewable Energy (HVDC & HVAC Power…

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1 Bottom-up estimating

Bottom-up estimating is a technique that involves estimating the cost of each activity, work package, or deliverable in the project, and then adding them up to get the total project cost. This technique is more accurate and detailed than top-down estimating, but it also requires more time and resources. Bottom-up estimating is usually used when the project scope and requirements are well-defined, and the project team has sufficient expertise and data to make reliable estimates.

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T.S.Venkatesh-PMP .

Senior Project Planning Professional, PMP Certified, Expertise in Multi-Disciplinary Project Execution, Specialist in Primavera P6 & Construction Scheduling, Risk Management, Delivering On-Time, Every Time.
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In my experience, the tools and techniques performed in cost aggregations are cost estimation methods such as analog, parametric, bottom-up, and three-point estimation. Following the Cost Breakdown Structure (CBS), costs are divided into a hierarchical structure, typically aligned with the WBS, to facilitate cost aggregation. The CBS breaks down costs by cost categories or elements, such as labor, materials, equipment, and overhead. You can get valuable input, guidance, knowledge, and support for cost estimation and aggregations. Cost aggregation software tools can provide features such as Cost aggregation tools can provide features such as cost tracking, reporting, and analysis to support effective cost management.

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Vismay Dalwadi (VD)

LinkedIn Top Voice |Project Manager -EPC Projects Management Experienced Professional with expertise in Project Management, Stake Holder Management, Order Management and Engineering with Customer Centric focus.
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Tools and techniques for cost aggregation include: Expert judgment: Utilizing industry experts' insights. Analogous estimating: Referencing past projects for cost estimates. Parametric estimating: Using mathematical models based on project parameters. Bottom-up estimating: Breaking down project components for detailed cost estimation. Cost aggregation software: Specialized tools for automated calculations and reporting. Vendor bid analysis: Assessing bids from suppliers for procurement cost estimation. These methods ensure accurate budgeting and resource allocation.

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2 Expert judgment

Expert judgment is a technique that involves consulting with experts or experienced professionals who have knowledge and skills in cost estimation and aggregation. Experts can provide valuable insights, opinions, recommendations, or adjustments based on their previous experience, lessons learned, best practices, or industry standards. Expert judgment can be used to validate, refine, or improve the cost estimates and aggregations made by other techniques.

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3 Historical information

Historical information is a tool that involves using data and information from previous similar projects or activities to estimate and aggregate the cost of the current project. Historical information can include project documents, records, reports, databases, or benchmarks that can help to compare and adjust the cost estimates and aggregations based on the similarities and differences between the projects. Historical information can be used to increase the accuracy, consistency, and credibility of the cost estimates and aggregations.

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4 Reserve analysis

Reserve analysis is a technique that involves adding a contingency reserve or a management reserve to the total project cost to account for the uncertainties and risks that may affect the project cost. A contingency reserve is a portion of the project budget that is allocated for known or foreseeable risks that may cause cost overruns, such as scope changes, quality issues, or resource fluctuations. A management reserve is a portion of the project budget that is allocated for unknown or unforeseeable risks that may cause cost overruns, such as natural disasters, regulatory changes, or stakeholder conflicts. Reserve analysis can be used to increase the confidence and flexibility of the project cost.

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Dr. Saleh ASHRM

?? Certified LinkedIn creator | Ambassador| Ph.D in Accounting | iMBA Progress| Financial Manager| Accounts Manager| Lecturer| Data Analyst| foster Sustainability through Innovative Financial Strategies & Risk Management
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Reserve analysis is an essential technique used in project management to allocate budget for unforeseen events or risks, ensuring that projects stay within financial boundaries. It involves two types of reserves: Contingency reserves for known risks, such as scope changes. Management reserves for unknown risks, such as economic shifts or natural disasters. For example, in the construction industry, a project with an estimated cost of $10 million might allocate 5-10% as contingency reserves, resulting in $500,000 to $1 million for risks like material price increases. A PMI study revealed that 64% of projects using reserve analysis completed on budget compared to only 46% without it.

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5 Cost aggregation tools

Cost aggregation tools are software applications or systems that can help to perform cost aggregation more efficiently and effectively. Cost aggregation tools can provide features such as data collection, analysis, calculation, visualization, reporting, or integration that can help to automate, simplify, or enhance the cost aggregation process. Cost aggregation tools can be used to reduce the errors, inconsistencies, or delays in the cost aggregation process.

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6 Cost baseline

Cost baseline is the output of the cost aggregation process. It is the approved version of the total project cost that serves as a reference point for measuring and controlling the cost performance of the project. It includes the aggregated costs of all the project activities, work packages, or deliverables, as well as the contingency reserve and the management reserve. Cost baseline can be used to communicate, monitor, or adjust the project cost throughout the project life cycle.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Oseghale Okohue BEngr. Msc. MBA. DBA. Prince2?Practitioner

Accredited NEC4 ECC Project Manager & Snr. P6 Planner | EPICM, Offshore Engineering,Renewable Energy (HVDC & HVAC Power Cables, Wind, Solar, BESS, Grid Code Compliance (G99, G5/5, P28) & Integration, GIS/AIS Sub-Station)
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Cost aggregation in project management involves consolidating individual cost estimates into higher-level categories. Techniques include bottom-up estimating, where costs are aggregated from detailed work packages, and analogous estimating, using historical data or expert judgment. Tools like cost aggregation templates, spreadsheets, and specialized software aid in organizing and summarizing costs effectively. Regular reviews and adjustments ensure accuracy and alignment with project objectives in engineering and energy project management.

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What are the tools and techniques for performing cost aggregation?

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1 Bottom-up estimating

2 Expert judgment

3 Historical information

4 Reserve analysis

5 Cost aggregation tools

6 Cost baseline

7 Here’s what else to consider

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