Question

In: Operations Management

If one estimator generated cost estimates on the same day for two projects that were the...

  1. If one estimator generated cost estimates on the same day for two projects that were the same (like a super-sized Wal-Mart) type of facility, what are the most important reasons why the estimates could be different (4)?

Solutions

Expert Solution

Here, one estimator generated cost estimates on the same day for two projects that were the same type of facility, however, estimates could be different, let me point out the reasons:

  • Whenever we prepared an estimate, the accuracy of such estimate will get increase over the situation when project will pass through project life cycle.
  • Both projects could be same; however, cost estimate needs to consider various external factors. For example: if construct super-sized Wal-Mart in a place A and construct almost similar/same design in a place B, there will be adding of several external factors like economic situation of that locality, pricing of input resources, political situation in such locality, legal compliances and hurdles, availability of labors and necessary manpower, talents to perform for such project, etc. we need to consider all such factors due to which even there could be same two projects with different cost estimates value.
  • For big project, if we prepare definitive estimates, we can achieve higher accuracy, however, this cost estimates only can be done much later in the project, when we have got many information about the project.

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