Conceptual cost

Conceptual cost refers to an estimate of the total cost of a project. The estimate is made by the project owner based on the contract bids which have undergone evaluation. This is useful, regardless of the industry involved, as it helps keep the project within a controlled and realistic budget.

Coming up with a realistic conceptual cost is crucial in project planning. During the planning period, the project owner needs to establish the needs which will arise during the project.

Once the list has been produced, the items may be further divided into categories. For instance, it’s important note the elements that will generate profit, those that will provide non-monetary benefits, and those which will actually be eating up capital. This list has to be clear and accurate from the very start, in order to be sure that deficiencies are avoided. After all, it will be more difficult to request for additional funding in the future.

Costing for each of the items can be made more accurate over time, as plans start to become more detailed. It will, of course, be necessary to come up with a contingency plan for areas which are not yet very clear.

Collaboration among representatives from the different departments may help make conceptual costing more accurate, as well as facilitate faster completion of the total estimate. The project manager is tasked with overseeing the entire process, as well as determining costs and potential areas for costing. Members of the project team can then give immediate feedback in order to expedite the process.

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