Cost Estimation Techniques & Methods Flashcards
7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cost Estimation Techniques & Methods flashcards as text
Which type of estimate contingency is specifically set aside to cover known unknowns — identified risks that may or may not occur?
Answer: Contingency allowance
Contingency allowance covers identified risks and uncertainties within the defined project scope, as opposed to management reserve which covers unknown unknowns.
What is the primary objective of Monte Carlo simulation in cost estimating?
Answer: To model the probability distribution of total project cost by randomly sampling input variable ranges
Monte Carlo simulation runs thousands of iterations, sampling input cost ranges to generate a probability distribution of the total estimated cost.
In conceptual estimating for industrial facilities, what is the 'turnover ratio' method based on?
Answer: Ratio of annual sales revenue to total capital investment for similar plants
The turnover ratio method estimates capital cost as a fraction of projected annual revenue, using industry-specific ratios from comparable facilities.
Which of the following is a characteristic of a 'grass-roots' estimate versus a 'battery-limits' estimate?
Answer: Grass-roots includes all offsite facilities, utilities, and infrastructure; battery-limits covers only the process unit
A grass-roots estimate encompasses the complete facility including all offsites; a battery-limits estimate covers only the defined process equipment and its immediate connections.
What distinguishes 'quantity takeoff' (QTO) from other estimating methods?
Answer: QTO physically measures and counts materials and labor from engineering drawings to determine quantities
Quantity takeoff involves systematically measuring lengths, areas, volumes, and counts directly from design documents to establish precise material and labor quantities.
An estimator is preparing an estimate for a hazardous materials remediation project. Which unique cost element is most critical to include?
Answer: Special handling, disposal, and regulatory compliance costs specific to the hazardous material type
Hazardous materials work requires specialized disposal methods, regulatory compliance, personal protective equipment, and permitting costs that can dominate the estimate.
When using the 'Delphi method' for cost estimating, what is the defining procedural feature?
Answer: Structured rounds of anonymous expert input with controlled feedback until consensus is reached
The Delphi method uses iterative rounds of structured expert surveys with anonymous responses and statistical feedback to converge on a group consensus estimate.