CEP Cost Estimation Techniques & Methods 2 — Questions and Answers
Question 1: Which estimating technique uses the cost of a completed similar project as the primary basis for a new estimate?
- Parametric estimating
- Analogous estimating (Correct answer)
- Bottom-up estimating
- Three-point estimating
Correct answer: Analogous estimating
Analogous estimating relies on historical data from similar past projects to develop a new cost estimate.
Question 2: In a Rough Order of Magnitude (ROM) estimate, what is the typical accuracy range per AACE International?
- -10% to +15%
- -20% to +30%
- -50% to +100% (Correct answer)
- -5% to +5%
Correct answer: -50% to +100%
ROM estimates (Class 5) typically carry an accuracy range of -50% to +100% due to limited project definition.
Question 3: What does the term 'should-cost' estimating primarily focus on?
- The contractor's bid price
- What a product or service ought to cost based on analysis of labor, material, and overhead (Correct answer)
- Government budget allocations
- Insurance replacement value
Correct answer: What a product or service ought to cost based on analysis of labor, material, and overhead
Should-cost estimating independently analyzes the elements of cost to determine what a product or service should cost under efficient conditions.
Question 4: A cost estimator applies a cost index of 1.35 to update a 2015 estimate to 2025 dollars. This is an example of which technique?
- Escalation adjustment (Correct answer)
- Learning curve application
- Contingency factoring
- Risk quantification
Correct answer: Escalation adjustment
Escalation adjustment uses published cost indices (e.g., ENR, PPI) to update historical costs to current dollar values.
Question 5: Which method divides a project into its smallest components and estimates each individually before summing to a total?
- Parametric estimating
- Analogous estimating
- Bottom-up estimating (Correct answer)
- Expert judgment
Correct answer: Bottom-up estimating
Bottom-up estimating builds the total cost by aggregating detailed estimates for each individual work element.
Question 6: The 'phased gate' estimating approach is best characterized by which of the following?
- Preparing a single definitive estimate at project start
- Refining estimates progressively as project scope matures through defined stage gates (Correct answer)
- Using only parametric models throughout the project life cycle
- Eliminating contingency after each phase
Correct answer: Refining estimates progressively as project scope matures through defined stage gates
Phased gate estimating recognizes that estimate accuracy improves as scope definition matures, with formal reviews at each stage gate.
Question 7: When applying the 'six-tenths rule' (exponent factor method), what does an exponent of less than 1.0 indicate?
- Diseconomies of scale
- Economies of scale — larger capacity costs proportionally less per unit (Correct answer)
- Linear cost-capacity relationship
- Cost decreases with time
Correct answer: Economies of scale — larger capacity costs proportionally less per unit
An exponent below 1.0 indicates economies of scale, meaning doubling capacity costs less than double.
CEP Cost Estimation Techniques & Methods 2
Which estimating technique uses the cost of a completed similar project as the primary basis for a new estimate?