30 Questions
What is the primary purpose of cost estimating in project management?
To establish the baseline of the project cost at different stages
What is the definition of cost engineering according to the American Association of Cost Engineers?
The utilization of engineering judgment and experience to cost estimation and control
What is the relationship between output and necessary resources referred to in microeconomics?
Production function
What is the production function in construction expressed by?
The relationship between the volume of construction and a factor of production
What is the output of a process represented by in the production function?
Q
What methods are used to derive the output of a process in the production function?
Mathematical and statistical methods
Why are cost estimates at the beginning stage of a project life cycle less accurate?
Because they are based on limited information
What is the primary purpose of a design estimate?
To establish the financing of a project
What is the primary function of a bid estimate?
To solicit bids from contractors
What is the main difference between screening estimates and detailed estimates?
The level of design information available
What is the purpose of an engineer's estimate?
Based on plans and specifications
How many major categories of cost estimates can be identified based on their functions?
Three
What is the primary objective of a cash flow statement?
To provide information about the historical changes in cash and cash equivalents
Why is cash flow considered the life line of a business?
Because it is the most important resource for a construction company
From whose perspectives is managing cash flow vital to a successful project?
From the perspectives of both the owner and contractor
What do cash flow projections developed from credible project execution plans become the basis of?
Project controls
Why do construction companies fail more often due to a lack of liquidity?
Due to a lack of liquidity for supporting their daily activities
Where does the project cost meet the schedule?
In the cash flow
What is the basis of Friedman's model for predicting the probability of winning a contract?
Probability of beating each individual competitor
What is the purpose of aggregating all competitors' bids into a distribution?
To deal with the bidding situation of known competitors
What is the criticism of Friedman's work by other writers?
Theoretical grounds
What is the basis of Gates' alternative model?
Collection of historical data and creation of a distribution of competitors' bids
What is the 'picture' represented by the distribution of all competitors' bids?
Historical behaviour of a 'typical bidder'
What is the formula suggested by Friedman to predict the probability of winning a contract against n unknown competitors?
Probability of beating one 'typical' competitor
What is the importance of cash flow forecasting in times of high interest rates?
To reduce the cash deficit in replacing old equipment
What does the projected Cash Flow Statement help management with?
Making a cash forecast for the near future
What does the Cash Flow Statement reveal?
The cash position of a company
Why is it essential to make provision for difficult times?
To avoid embarrassing cash deficit
What does the Cash Flow Statement help internal management with?
Determining the financial policy
Why is cash flow forecasting important for contractors?
To avoid cash deficit when replacing old equipment at new inflated cost
Learn about the importance of cost estimating in project management, including the different stages of project development and the role of cost engineers. Understand how cost estimates are used to establish a baseline for project costs. Explore the approaches to cost estimation and price analysis.
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