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Cost Estimating: Definition

Part of the Decision Engineering book series (DECENGIN)

Summary

This chapter is just an introduction to the subject.

It starts by defining the words “cost” and “price”, as they cover different concepts, even if they are so often mixed.

It then adds a few comments about the definitions of cost, as this is the subject of this book.

Our attention is then turned to what we expect from a cost estimate, which requires to define what we mean by a “good” cost estimate. A good cost estimate depends on the phase of the project it is computed for: the purpose being that it is a cost which does not distort the decision which is made on its basis. Obviously it should be close to the reality; but one thing which is very important is that it should rank all the solutions (a project always has several technical solutions to offer) with no mistake: two things are especially important during what we will call the “decision phase”:
  • the relative costs of the projects alternatives should be correct,

  • their level should be realistic.

We rapidly then mention the three different project phases, from the cost analyst’s point of view. These phases have different objectives and require different tools.

The conclusion of this chapter is what can be called the “fundamental theorem about forecasting”. It will be our Ariane thread in this book.

A few comments are eventually made on the word “parametric”.

Keywords

Cost Estimate Cost Estimator Human Effort Cost Accounting Decision Phase 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag London Limited 2006

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