CCC CCC Cost Estimating & Budgeting 2 — Questions and Answers
Question 1: Which estimating technique best suits a project where scope is well-defined and detailed material take-offs are available?
- Order-of-magnitude estimating
- Analogous estimating
- Bottom-up estimating (Correct answer)
- Rough-order-of-magnitude estimating
Correct answer: Bottom-up estimating
Bottom-up estimating builds the total cost from detailed work package estimates, making it the most accurate method when scope is fully defined.
Question 2: What is escalation in the context of cost estimating?
- An increase in project scope
- The adjustment of costs to account for anticipated price changes over time (Correct answer)
- A penalty for late delivery
- Overhead applied to direct costs
Correct answer: The adjustment of costs to account for anticipated price changes over time
Escalation adjusts estimated costs to reflect anticipated inflation or market price changes between the estimate date and when costs will actually be incurred.
Question 3: In the AACE Recommended Practice, what does 'expected accuracy range' describe?
- The allowable budget overrun percentage approved by the owner
- The range within which the final cost is expected to fall relative to the estimate (Correct answer)
- The acceptable variance in contractor bids
- The precision of the scheduling tool used
Correct answer: The range within which the final cost is expected to fall relative to the estimate
Expected accuracy range expresses the statistical confidence interval around an estimate, indicating how much the final cost may deviate from the estimated value.
Question 4: Which cost is NOT typically included in a project's direct costs?
- Labor for on-site construction
- Permanent equipment
- Materials incorporated into the work
- Home office overhead (Correct answer)
Correct answer: Home office overhead
Home office overhead is an indirect cost applied as a burden rate, not a direct cost attributable to specific project work.
Question 5: What is the purpose of a 'should-cost' estimate prepared by an owner's cost consultant?
- To predict contractor overhead rates
- To provide an independent benchmark for evaluating bids or proposals (Correct answer)
- To set the project contingency level
- To determine insurance premiums
Correct answer: To provide an independent benchmark for evaluating bids or proposals
A should-cost estimate is an owner's independent assessment of what a project ought to cost, used to evaluate contractor bids for reasonableness.
Question 6: Which factor most directly increases the accuracy of a parametric cost model?
- Larger contingency reserves
- A robust and relevant historical cost database (Correct answer)
- Higher contractor markups
- Detailed scheduling software
Correct answer: A robust and relevant historical cost database
Parametric models derive their reliability from the quality and relevance of the historical data used to develop the cost-per-unit relationships.
CCC CCC Cost Estimating & Budgeting 2
Which estimating technique best suits a project where scope is well-defined and detailed material take-offs are available?