Question

Choose one of the following projects:

• a project to build a hotel in Japan,
• a project to build a new prototype for an electric car, or
• an IT project to create a new internal accounting software system.

As a project manager, what are some of the specific cost estimation problems you might encounter? Considering those potential problems, what could you do to help ensure accurate cost estimation?

Please limit to 250 words.

Thank you!

Answer 1

Talking about the project to build in Japan, there could be many problems that could arise with the cost estimation problems in the same industry and domain which are as follows:

1. Large number of organisations: One main problem of the cost estimation is the large no. organisations and activities combined in the making of the building and project in Japan. A lot of organisations and activities would be indulged together like architectural, design, painting, structure etc which would make the cost estimations difficult has it would require many activities and networks to combined together to have an accurate estimation of the costs which is difficult. An effective coordination and communication is required to reach success.
2. Dependencies: Another problem is the underestimation of the effect of the dependencies. The project manager while estimating the costs of the manufacturing of the building cost have underestimated what effects could have been of one costs on another. For example, if the costs of bricks and cements are increasing and the builder is decreasing the same amount, then the costs of security and quality of the building also falls. Thus, the dependencies would make the estimation of the costs for the product manager difficult.
3. Historical Costing: At last, one more problem is the historical costing. Often while manufacturing the building you would consider the old list of suppliers, stocks and other networks of goods that would be required to make a building. Thus, you are not able to record the inflation/deflation rate, change in labour market, the economical aspect of the market etc. This would make your cost estimations go inaccurate.