Since you are also asking for the tools rather than for "does it work", I'll share some of my experiences gathered at a big (a few thousand people) company:
It depends: internal/external contractor, just a work package, etc.
In the "big company" cost estimates are quite waterfall-ish: you go from the top down to the departments with the most experience in "what the customer wants" and let them do their numbers (the actual methodology will vary here). After that, you ask your QA, Management, Procurement, etc. for their input, add risk & opportunities and you will surely look at your competitors (i.e. adjust your price to the market situation if applicable and possible). In big companies, there usually is not just a "software development effort".
For Work Packages
This varies widely from case to case. I'm sure there are companies forcing their employees to do their estimates in a specific way. Though, in that specific example it's totally individual.
And it can't be THAT bad, since we deliver on time (mostly).