PCC Cost Estimation & Budgeting 2 — Questions and Answers
Question 1: A project manager uses historical data from three similar past projects to estimate the cost of a new facility. This technique is best described as:
- Parametric estimating
- Analogous estimating (Correct answer)
- Bottom-up estimating
- Three-point estimating
Correct answer: Analogous estimating
Analogous estimating uses actual values from previous similar projects as the basis for estimating the current project.
Question 2: Which cost estimating technique multiplies a measured unit (e.g., cost per square foot or cost per labor hour) by the quantity of units required?
- Analogous estimating
- Bottom-up estimating
- Parametric estimating (Correct answer)
- Expert judgment
Correct answer: Parametric estimating
Parametric estimating uses statistical relationships between historical data and project variables such as cost per unit.
Question 3: During the planning phase, a contingency reserve of 15% is added to the cost baseline. What risk type does this reserve primarily address?
- Unknown-unknown risks
- Management reserves
- Known-unknown risks (Correct answer)
- Residual risks after mitigation
Correct answer: Known-unknown risks
Contingency reserves address known-unknown risks — identified risks for which the probability and impact have been assessed.
Question 4: A project's cost performance index (CPI) is 0.85. What does this indicate?
- The project is 15% over budget
- The project is 15% under budget
- For every dollar spent, $0.85 of work is being accomplished (Correct answer)
- The project is ahead of schedule
Correct answer: For every dollar spent, $0.85 of work is being accomplished
A CPI of 0.85 means only $0.85 of budgeted work value is being delivered for each $1.00 actually spent.
Question 5: Which budgeting document represents the time-phased authorized cost plan used to measure, monitor, and control project costs?
- Cost management plan
- Cost baseline (Correct answer)
- Project charter
- Funding requirement schedule
Correct answer: Cost baseline
The cost baseline is the approved, time-phased budget against which project cost performance is measured and controlled.
Question 6: A definitive estimate for a construction project is typically prepared at what level of project scope definition?
- 5–15% complete
- 30–50% complete
- 65–100% complete (Correct answer)
- 100% complete only after procurement
Correct answer: 65–100% complete
Definitive estimates require 65–100% scope definition and carry an accuracy range of approximately -5% to +10%.
Question 7: What term describes the practice of setting the project budget equal to the sum of all control account budgets plus management reserve?
- Budget at completion (BAC)
- Project budget baseline
- Control account plan total
- Authorized project budget (Correct answer)
Correct answer: Authorized project budget
The authorized project budget equals the performance measurement baseline (cost baseline) plus management reserve.
PCC Cost Estimation & Budgeting 2
A project manager uses historical data from three similar past projects to estimate the cost of a new facility.
This technique is best described as: