Purdue University Contingency Reserves & Project Cost Estimation Discussion topics must maintain integrity from each other
Topic 1: As you learned earlier, project managers are expected by customers and stakeholders to deliver a definitive and functional cost estimate in a timely manner. How do project managers do this? As you discover in your reading, there are three levels of estimation in a project: the WAG, the SWAG, and the “you bet your job on this figure” estimates. Actually, they are referred to in industry as, the “Order of Magnitude” the “Budget,” and the “Definitive” cost estimates. The PMBOK addresses them under Analogous, Parametric, and Bottom-up estimates respectively (PMBOK section 6.5.2). Explain which of the three is used where in the project lifecycle.
Topic 2: To check whether you have established your cost baseline correctly, you can ask yourself the following questions: Were the costs correctly aggregated at the work package, subproject, and project levels? Were the contingency reserves included? Were the correct dates assigned to each cost estimate based on the project schedule?
Outline how contingency reserves are determined, and support your answer with an example.