4. Cost Estimating Fundamentals

Cost engineering arises from need for engineering managers to act as stewards of organizational and project resources. Professional Certified Cost Engineers are often required for organizations to bid on US government or military contracts. Cost engineering is generally recognized as the application of engineering principles, techniques, judgment, and experience to cost estimation, engineering function or project planning and scheduling, and cost control for the purposes of contributing to organizational profitability or the measurement and management of project costs throughout project life cycles. This chapter provides an introduction to engineering cost estimating fundamentals. First, the chapter will set forth a definition of cost estimating and the reasons for cost estimates. Next, the chapter will provide an overview of cost models in the design maturity process. The cost estimating process will be described as a general level of detail. The fundamentals of product and operations costing will be presented. Finally, widely used cost estimating models will be defined with example calculations.