Cost estimation in project management is the process of forecasting the cost and other resources needed to complete a project within a defined scope. Cost estimation accounts for each element required for the project and calculates a total amount that determines a project’s budget.

Principles of cost estimation are as follows:

• Integrity: This principle allows avoiding false precision and rash decisions by integrating all people involved in the process into a team which works as a single mechanism and uses the same sources of information.

• Information Accuracy and Relevance: Cost estimation should be done based on a proper information available. While planning cost estimation, advice from technicians,engineers and people related to the project should be taken for better understanding of cot estimation. From this principle all information used for developing estimates can be thoroughly considered, filtered and refined in order to get the most accurate and relevant pieces of that information.

• Uncertainty and Risk: All the uncertainty and risks are examined before starting the project. For this purpose an exhaustive method of assessing and re-assessing project risks and uncertainties should be employed. A software can be used to figure out various uncertainty and risks surrounding the project. It will further be helpful in developing risk management plan.

• Expert Team: From this principle only expert team should make proper calculations and make proper cost estimation. The expert team should use some methodological tools and approaches to develop their expenditure forecasts. Technical, managerial, and communication skills are required for proper expert team.