Cost estimation is the process of using historical data – in terms of productivity and unit costs – to aggregate the future cost of a given project. In other words, cost estimation is the process of determining the equivalency in monetary terms of materials, labor and equipment required to deliver a project.
Now comes the key question: How good are your cost estimates? And the fundamental concepts of (1) Fair value and (2) Cost classifications come into play.
The fair value sets the benchmark to compare cost estimates and the cost classifications set the expected accuracy and attributes of cost estimates.
These seem to be the cornerstone for cost efficiency and maturity in organizations.
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