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Estimating Project Project

Management
Times and Costs

Estimating Projects
• Estimating
• The process of forecasting or approximating the time and
cost of completing project deliverables.
• The task of balancing the expectations of stakeholders
and the need for control while the project is
implemented.
• Types of Estimates
• Top-down (macro) estimates: analogy, group consensus,
or mathematical relationships
• Bottom-up (micro) estimates: estimates of elements of
the work breakdown structure

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• Estimates are needed to support good

decisions.
• Estimates are needed to schedule work.
Why • Estimates are needed to determine how
long the project should take and its cost.
Estimating • Estimates are needed to determine
Time and whether the project is worth doing.
• Estimates are needed to develop cash
Cost Are flow needs.
• Estimates are needed to determine how
Important well the project is progressing.
• Estimates are needed to develop time-
phased budgets and establish the project
baseline.

Factors Influencing the Quality of

Estimates
Planning Horizon

Other (Nonproject) Project

Factors Duration

Quality of
Organization Estimates People
Culture

Padding Project Structure and

Estimates Organization

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• Planning Horizon
• Accuracy of the estimates decrease
with longer time:
Factors
• Estimates of current events are Influencing
more accurate than the distant
events. the Quality
• Accuracy of the estimates of
improve as the project
progresses from the Estimates
conceptual phase.

• Project Duration
• Long duration projects increase the Factors
uncertainty in estimates.
Influencing
• Estimating the time for the Quality
implementiation of new
technology is harder: of
• Pay more attention to the
scope statement.
Estimates

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• People
• People factor can introduce errors:
• Accuracy depends on skills
• Better skilled personnel Factors
will make better
assumptions Influencing
• Match of skills to tasks the Quality
• Familiar people in a project
team will take less time to of
become effective Estimates
• Staff turnover
• Pay attention to the productive
hours

Factors Influencing the Quality of

Estimates
• Project Structure and Organization
• Which organizational structure to choose from?
Structure Advantages Disadvantages

Project Speed Full time personnel

Functional No distruption to the Slowest, no dedication

functional hierarcy
Matrix Sharing personnel Longer completion time
of projects

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• Padding Estimates
• People are inclined to pad estimates:
• Increase of the estimates to avoid Factors
the risk of being late.
Influencing
• If every party involved adds a padding
to the estimates the total duration of
the Quality
the project will be overstated; of
• Keeping that in mind managers
tend to cut the time or cost by 10- Estimates
15 percent. What will the team
members do next time?

• Organization Culture
• Organizations differ in the
Factors
importance they give to accurate Influencing
estimates:
• Some organizations support the Quality
padding. of
• Some organizations discourage
inaccurate estimates. Estimates

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• Other Factors Factors

• Non-project factors:
• Equipment down-time Influencing
• National holidays the Quality
• Vacations
• Legal limits
of
• ... Estimates

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1. Have people familiar with the tasks make

the estimate.
Estimating 2. Use several people to make estimates.

Guidelines 3. Base estimates on normal conditions,

efficient methods, and a normal level of

for Times, resources.

4. Use consistent time units in estimating task
Costs, and times.
5. Treat each task as independent, don’t
Resources aggregate.
6. Adding a risk assessment helps avoid
surprises to stakeholders.

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Estimating Guidelines for Times,

Costs, and Resources
• Inaccurate estimates play an important role in
project failure therefore effort should be made to
see that initial estimates are as accurate as
possible:
• Responsibility
• Use several people to estimate
• Normal conditions
• Time units
• Independence
• Risk assessment

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• Responsibility
• At the work package level
estimates should be made by the
personnel most familiar with the Estimating
task.
• Technical tasks should be assigned
Guidelines
to technicians or first-line
supervisors who have more
for Times,
experience and knowledge. Costs, and
• What are the advantages of Resources
involving responsible personnel
while estimating?

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Estimating
• Use several people to estimate
Guidelines
• Use of qualitative techniques: for Times,
• Delphi method, Focus group, ...
Costs, and
Resources

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• Normal conditions
• Estimates should be based on
normal conditions, they should Estimating
involve resources normally
available: Guidelines
• Normal workday hours
• Normal workday shifts
for Times,
• Normal personnel number Costs, and
• ...
Resources

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• Time units
• All task time estimates need consistent
time units.
• Decide if normal time is represented Estimating
by:
• Calendar days Guidelines
• Workdays
• Workweeks
for Times,
• Person days Costs, and
• Single shift
• Hours Resources
• Minutes
• Etc...

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Estimating
• Independence Guidelines
• Estimators should treat each task
independent of each other. for Times,
• Go from micro to macro
Costs, and
Resources

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• Risk assessment
• Some activities or tasks are more
risky than others:
Estimating
• New technologies have a Guidelines
higher risk than proven
processes. for Times,
• How would you analyze the
risk and evaluate alternatives? Costs, and
Resources

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Top-down Estimates
• Decide the total, then divide that total into smaller
units.
• Usually are derived from someone who uses
knowledge and/or information.
• There is no assurance that these estimates
represent accurate, efficient methods.

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Bottom-up Estimates
• Estimates the process down to the work package
level.
• Represents more accurate, efficient methods.
• Estimates come from the personnel with the most
knowledge on the task.
• The costs and times are rolled up to the major
deliverable level.

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Methods for Estimating Project

Times and Costs
• Macro (Top-down) Approaches
• Consensus methods
• Ratio methods
• Apportion method
• Function point methods for software
and system projects
• Learning curves

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Consensus Methods
• Rough cut estimates of cost and duration.
• Happen during the conceptual stage of the project.
• In some cases the accuracy might be extremely low.
• Uses pooled experience of senior or middle
managers.
• Typically involves a meeting where experts discuss,
argue and ultimately reach a decision.
• Delphi Method

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Ratio Methods
• Using unit time or price to calculate the total.
• Unit area
• Unit capacity
• Etc...

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Apportion Methods
• Extension to the ratio method.
• Is used when projects are similar to past projects
in terms of features and costs.
• Common method for projects with a lot of
similarity.

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Example: Apportion Method

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Function Point Methods for

Software and System Projects
• Function point: weighted macro variables that represent major
parameters and are used for estimation in the software
industry.
• Number of inputs
• Number of outputs
• Number of data files
• Etc...

Copyright © 2006 The McGraw-Hill Companies. All rights reserved.

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Example: Function Point Count

Method

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Learning Curves
• Learning curve: decrease in the unit labor hours
with increase in output quantity.

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Bottom-up Approaches
• Template methods
• Parametric procedures applied to specific tasks
• Range estimating

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Template Methods
• Is used as a starting point when projects are similar
to past projects in terms of features and costs.
• Differences of the new project can be adjusted
using the values from the past project.

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Parametric Procedures Applied to

Specific Tasks
• Using unit time or price to calculate the specific
tasks.
• Unit area
• Unit capacity
• Etc...

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Range Estimating
• Used when there is high uncertainty associated
with work packages.
• Determine the low, average, high estimates.
• Group estimating gives the best results.

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Example: Range Estimating Template

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A Hybrid: Phase Estimating

• Used when the uncertainty for a project is high and it
makes little sense to make estimations for the entire
project.
• A detailed estimate is developed for the immediate phase
and a top-down estimate is developed for the remaining
phases  two-estimate system.

Copyright © 2006 The McGraw-Hill Companies. All rights reserved.

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Copyright © 2006 The McGraw-Hill Companies. All rights reserved.

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Refining Estimates
• Reasons for Adjusting Estimates
• Interaction costs are hidden in estimates.
• Normal conditions do not apply.
• Things go wrong on projects.
• Changes in project scope and plans.
• Adjusting Estimates
• Time and cost estimates of specific activities are adjusted
as the risks, resources, and situation particulars become
more clearly defined.

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