Project Contracts and Cost Management

Name: Project Contracts and Cost Management
Author: Danny Howell

Learn how to produce accurate cost estimates for your project so things stay within your budget

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Course: On-Demand

The pricing and estimating process is an essential part of the project planning process. When bidding on a project, it should be clear that information available to one bidder is likely available to all bidders. Never assume that you have a piece of information that others do not. This process will set the basis for creating standards for the project budget, the associated human resource working hours, costs of the materials to be used in the project, contingencies, and other items too. It should also be noted that various situations will call for specific pricing and estimating strategies that are different from others. Each situation is unique, and all considerations should be made for each estimate. There are two main types of contract acquisitions. Type one is a single, unique contract with no likely follow-on potential. The goals for this type of contract are to win over the contract and execute it profitably to satisfy the customer and your stakeholders. Type two is a contract that may be one of many possible contracts. This type of contract is usually an entry point for larger, follow-on project contracts. The goals for this type of contract are to win over the contract and perform with excellence. The reason the performance is stressed for this type of contract is that the follow-on work is most likely pending on the performance of the existing project. And this will be true for all projects within this grouping of projects. There are several types of estimates that can be executed to determine the cost of conducting a project. These methods can be radically different but will result in an estimate to complete the contract. The type of estimate you use may be based on the type of contract you are estimating. It is said that pricing and estimating is much more of an art than it is a science, and this may be somewhat true. But there are a few methods for handling this process, so let's take a look at a few of the various estimating types. Rough order of magnitude estimate. The rough order of magnitude, or ROM, estimate is usually conducted without any detailed engineering data. This is most likely based on previous experience only and would likely be estimated by someone who has done this type of estimate with a similar size and scope many times previously. The accuracy of this type of estimate is plus or minus 35 percent within the scope of the project. The approximate estimate. The approximate estimate, sometimes called the rule of thumb estimate, is also performed without any detailed engineering data. This type of estimate is usually a best-guess type of estimate and may use previous data or can be estimated by someone with previous experience on this type of project. The accuracy of this type of estimate is plus or minus 15 percent. Definitive estimate. The definitive estimate, sometimes referred to as the detailed estimate, is prepared using well-defined engineering data, quotes from vendors, unit pricing, and other specific, detailed information. The accuracy of this type of estimate is plus or minus 5 percent. Estimating manual. The estimating manual is developed over time and documents specific historical information on costs and estimating procedures. This manual would likely be used for pricing and estimating the efforts on projects. The accuracy of using this information for estimating is plus or minus 10 percent. There is a good chance that you might use a combination of methods in order to price or estimate the cost of a project. Nonetheless, you want to be sure that your estimate is not only competitive but also one that your organization can afford and still make a profit in the end.

Intermediate Provider : Danny Howell 9 Lessons · 34m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

Proper and accurate pricing and estimating is an essential part of project planning. Without an accurate idea of your project’s expenses, you cannot know if your project will stay within budget. In this course, you’ll gain an understanding of the pitfalls in estimating and the potential risks you may face when pricing a project. You’ll learn how to handle procurement, hone your contract negotiations skills, and review the various types of contracts and their associated risks. You’ll also understand when it may be appropriate to terminate a contract and when it’s time to close a project.

What You'll Learn

Apply methods for estimating the costs of a project
Identify the potential dangers and risks associated with pricing a project
Navigate the procurement process, including its stages and acquisition types
Define procurement specifications and decision types
Conduct contract negotiations and compare contract types and their relative risks
Determine appropriate situations to terminate a contract or close a project

Key Takeaways

Proper and accurate pricing and estimating is an essential part of project planning, since you cannot know whether a project will stay within budget without an accurate idea of its expenses.
The course covers two types of contract acquisitions and three types of procurement specifications.
Different contract types carry different levels of relative risk, which the course reviews alongside best practices for contract negotiations.
Knowing when to terminate a contract and when to close a project are distinct decisions the course helps learners recognize.
Pricing a project involves potential dangers and risks that learners are taught to anticipate.

Frequently Asked Questions

What does this course cover?

It covers estimating methods, pricing a project and its potential dangers, procurement handling, defining specifications and decision types, contract negotiations, contract types and relative risk, and when to terminate or close a project.

Will I learn about different types of contracts?

Yes. The course reviews various contract types and their associated risks, and includes lessons on contract negotiations overview, contract types and relative risk, and contract negotiation tips.

Does the course address procurement?

Yes. It teaches how to handle procurement, covering the procurement process stage and two strategies to consider, as well as three types of procurement specifications.

Does the course explain when to end a contract or a project?

Yes. It helps you understand when it may be appropriate to terminate a contract and when it is time to close a project, including a lesson on terminating or closing the project.

Professional Certifications and Continuing Education Units (CEUs)

Project Management Institute (PMI®)

Professional Development Units (PDUs): 0.75

Certification Program Categories:

Ways of WorkingPower SkillsBusiness Acumen

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