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03 - Estimating Project Time and Costs

This document discusses project estimating and provides guidance on estimating time and costs for projects. It covers the types of estimates, why estimating is important, factors that influence estimate quality, and guidelines for developing estimates. Top-down and bottom-up estimating approaches are described as well as types of project costs and reasons for refining estimates.

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Aamir Chohan
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Download as PPTX, PDF, TXT or read online on Scribd
163 views

03 - Estimating Project Time and Costs

This document discusses project estimating and provides guidance on estimating time and costs for projects. It covers the types of estimates, why estimating is important, factors that influence estimate quality, and guidelines for developing estimates. Top-down and bottom-up estimating approaches are described as well as types of project costs and reasons for refining estimates.

Uploaded by

Aamir Chohan
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Estimating

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

5–1
Why
Why Estimating
Estimating Time
Time and
and Cost
CostAre
Are Important
Important

• To support good decisions.


• To schedule work.
• To determine how long the project should take and
its cost.
• To determine whether the project is worth doing.
• To develop cash flow needs.
• To determine how well the project is progressing.
• To develop time-phased budgets and establish the
project baseline.

EXHIBIT 5.1

5–2
Factors
Factors Influencing
Influencing the
the Quality
Quality of
of Estimates
Estimates

Planning
PlanningHorizon
Horizon

Other
Other Project
Project
(Nonproject)
(Nonproject) Duration
Duration
Factors
Factors

Quality
Qualityof
of
Organization
Organization Estimates
Culture
Estimates People
People
Culture

Padding
Padding Project
ProjectStructure
Structure
Estimates
Estimates and
andOrganization
Organization

5–3
Estimating
Estimating Guidelines
Guidelines for
for Times,
Times,
Costs,
Costs, and
and Resources
Resources

1. Have people familiar with the tasks make the estimate.


2. Use several people to make estimates.
3. Base estimates on normal conditions, efficient methods,
and a normal level of resources.
4. Use consistent time units in estimating task times.
5. Treat each task as independent, don’t aggregate.
6. Adding a risk assessment helps avoid surprises
to stakeholders.

5–4
Top-Down
Top-Down versus
versus Bottom-Up
Bottom-Up Estimating
Estimating
• Top-Down Estimates
– Are usually are derived from someone who uses
experience and/or information to determine the project
duration and total cost.
– Are made by top managers who have little knowledge
of the processes used to complete the project.
• Bottom-Up Approach
– Can serve as a check on cost elements in the WBS
by rolling up the work packages and associated cost
accounts to major deliverables at the work package
level.

5–5
Top-Down
Top-Down versus
versus Bottom-Up
Bottom-Up Estimating
Estimating
Conditions for Preferring Top-Down or Bottom-up
Time and Cost Estimates

Condition Macro Estimates Micro Estimates


• Strategic decision making X
• Cost and time important X
• High uncertainty X
• Internal, small project X
• Fixed-price contract X
• Customer wants details X
• Unstable scope X

TABLE 5.1

5–6
Types
Types of
of Costs
Costs
• Direct Costs
– Costs that are clearly chargeable
to a specific work package.
• Labor, materials, equipment, and other
• Direct (Project) Overhead Costs
– Costs incurred that are directly tied to an identifiable
project deliverable or work package.
• Salary, rents, supplies, specialized machinery
• General and Administrative Overhead Costs
– Organization costs indirectly linked to a specific
package that are apportioned to the project
• Group guesthouse, traveling, audit, advertisement

5–7
Refining
Refining Estimates
Estimates
• Reasons for Adjusting Estimates
– 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.

5–8

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