Standard Article

Project Management: Cost Forecasting

System Engineering

Project Management

  1. Philip G. Pugh1,4,
  2. David Faddy2,
  3. Ricky Curran3

Published Online: 15 DEC 2010

DOI: 10.1002/9780470686652.eae447

Encyclopedia of Aerospace Engineering

Encyclopedia of Aerospace Engineering

How to Cite

Pugh, P. G., Faddy, D. and Curran, R. 2010. Project Management: Cost Forecasting. Encyclopedia of Aerospace Engineering. .

Author Information

  1. 1

    Independent Consultant, Clapham, UK

  2. 2

    Decision Analysis Services Ltd., Basingstoke, UK

  3. 3

    Technical University of Delft, Department of Air Transport and Operations, Faculty of Aerospace Engineering, Delft, The Netherlands

  4. 4

    deceased January 2009

Publication History

  1. Published Online: 15 DEC 2010

Abstract

This article, recognising that a forecast of costs is an essential aid to decision-making at every stage of a project, discusses appropriate methodologies. It describes ‘bottom-up’, ‘top-down’ and intermediate approaches, together with their advantages and disadvantages. It also describes the assembly of a data base of past project costs and the need to express each of them at the same economic conditions by the use of inflation indices. Methods of deriving cost estimating relationships using regression analysis and the assessment of their predictive capability are described.

Keywords:

  • bottom-up;
  • top-down;
  • cost estimating relationships;
  • data;
  • inflation;
  • cost drivers;
  • regression;
  • dummy variables;
  • Bayes;
  • risk;
  • life-cycle