Accuracy of estimates these accuracy of estimates actually tells us that where are we in the project what kind of information we have about the project? We have four levels purchaser order of magnitude It is used as a ballpark figure we say that, yeah, this project will gonna cost us like this. Could we initiate this project? If you want to initiate a five star hotel construct? If we go and check the market databases and the commercial databases, we will realize that it has it has an X cost and all the costs above and then below this x cost is based on the details of the photo. If you want to implement any RP application, there is an X amount already assigned for it.

But then, do you want more modules or less module less complexity or more complexity, then you go into the more information, the ballpark figure is basically a rough order of magnitude which is plus minus 15%. This quick easy expert judgment, you have done it before market databases are available. And this is what you do when you do a rough order of magnitude stays. Preliminary estimates, it is in the conceptual stage you have a better information of the project, you understand where it is going initiation phase has initiated or at least you have identified you have a pre bidding stage, you have had the procurement conferences, supplied conferences, contractor conferences and you have a fair idea of a project and that's where we are heading towards you have a product idea right now. And this is where it comes to preliminary estimates which is minus 52 plus 50 percentage fair idea of Project then you move into the budgeted estimator.

This is in the planning phase based on the top down approach again, but it is now you have a better understanding more understanding of a project, you have initiated you are in a planning phase you are starting in the budget estimation, you are looking towards making sure that your variances are as low as possible. And then obviously, by the end of the planning phase or By the mid of the planning phase or at the last stage of a planning phase and once you are committed this is a baseline when you are talking about definitive estimations, you are talking about a baseline that this it should not vary more than plus minus five minus five to 10%. This you can only achieve when you have a clear well Breakdown Structure bottom up three point estimates at the end of the planning phase and then throughout the project you will be using it because you don't want a variation at this point because you have a very fair and good understanding of the whole project.

And obviously it's set up consuming and costly, rough order of magnitude quick I have done this project before and how many times and you have the answers for it regularly is also quick but a little bit more into the cycle a little bit more into the project little bit more information about the project but definitely IV estimation is bottom up based on work breakdown structure, if your run breakdown structure is not good, you will face problems and it's time consuming and costly. And if you see that graph, if you move from the graph from conceptual to the start of a program and start over system integration, your cone of uncertainty is going down about the cost. So initially it is a cost estimate is too much. And then estimate become more certain as program progresses estimate tends to grow over time as risks are realized. So you are getting lower, closer and closer in terms of your estimate.

So this is a cone of uncertainty, your cost expectations are getting better your estimates are getting better when you are getting more and more information about the project. So, throughout the estimation we have seen that estimation is about the variance that you are okay with against the actual cost against the actual value, the actual value is 500 plus minus 50% you can imagine zero to 1000 plus minus 15 to 50% is 350 to 1000 minus 10 400 to 754 50 to 600. So, basically you your your confidence level is shown here that what kind of uncertainity you are okay with at what level this is your accuracy of estimates. Let us meet in our next session.