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# Estimating

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### Estimating

1. 1. Estimating
2. 2. Introduction to Estimation ▪ Estimating is argued to be one of the most difficult tasks in Project Scheduling ▪ This is due to the lack of available specific data regarding product resources i.e. how much a product will cost, how long it will take etc. ▪ The lack of this data means that project managers can only provide estimates ▪ These estimates are usually wide ranging ▪ Wide ranging estimates are better than specific estimates which are likely to be wrong
3. 3. Estimating Project costs with Duration and Effort Before the start of a project three things must be estimated: 1. Duration: time the project will take 1. Effort: the amount of work 2. Cost: how much the project will cost financially
4. 4. Estimating Project Costs with Duration and Effort ▪ Effort must be estimated first ▪ Duration can be estimated from the amount of effort required and the resources which are available ▪ Once effort and duration have been establish project costs can be estimated using labour and non-labour items
5. 5. Techniques for Estimating ▪ Quantitatively based or Parametric Estimating ▪ Analogous Estimating or As-buts ▪ Bottom-up Estimating ▪ Using Learning Curve Effects ▪ Wishful thinking ▪ Expert judgement
6. 6. Parametric Estimating ▪ Works best when there is existing experience of similar projects ▪ Project is broken down into units which can then be estimated using independent variables ▪ These variables are often standard or previously known variables ▪ Costs can be estimated from knowledge of what work is being undertaken ▪ Relies on repetition in previous projects ▪ Similar to Analogous estimating but follows a more statistical approach ▪ The accuracy of the data/known variables effects the accuracy of this approach
7. 7. Analogues Estimating or As….Buts ▪ Useful for early project estimates ▪ The organisation uses previous experience which is similar to make an estimate ▪ Use costs from previous experience as a guideline for estimation ▪ If previous projects are not reviewed then the accuracy of previous estimates is unknown ▪ Therefore previous costs etc. might not provide valuable valid estimates ▪ This may cause mistakes to be repeated as no learning has occurred ▪ Previous estimates can be used if they are reviewed and augmented
8. 8. Bottom-up Estimating ▪ The project is broken down into estimated components ▪ Each component is broken down further to allow for greater understanding ▪ The costs of each work component is summed from the bottom up to provide an estimation for the whole project.
9. 9. Learning Curve Effects ▪ There will be areas of repetition in projects, repetition decreases the time required for tasks as they are known and learning has already occurred ▪ Subsequent improvements in speed are seen to become smaller over time ▪ This can be quantiﬁed using the following formula: Yx = Kxn X The number of times the task has been carried out Yx Time taken to carry out the task the xth time K Time taken to carry out the task the ﬁrst time n Log b/log 2 where b = learning rate
10. 10. Wishful Thinking Some causes of wishful thinking occurring are: ▪ Optimism Bias: being over-optimistic regarding timeframes and costs ▪ Politics: for examples when objectives are regarded as being more important than costs ▪ Failure to be systematic about planning: i.e. people making estimates can be complacent and/or unqualified
11. 11. Expert Judgement ▪ Estimation requires a degree of expert judgement ▪ There is a degree of expert judgement required in the project and of the business area. ▪ The project manager is assumed to have expert judgement
12. 12. Problems with Estimates ▪ Inappropriate use of estimates: i.e. rough estimates may be used as definitive estimates. ▪ Inappropriate data used to generate estimates: such as irrelevant past experience ▪ Estimates are taken out of context: for example initial estimates are used when changes have been made to the project
13. 13. Nature, Role and Accuracy of Estimate Types Name Nature Role Accuracy Rough/Ballpark Much uncertainty as to what is involved Early check on feasibility Very low of brief As-buts As was carried out previously but with some amendments With an appropriate contingency factor, can be used for proposals Detailed Estimates Some initial work is Proposals carried out to determine what the likely problems are going to be To Finish Much of the Project is completed and additional funding is needed to complete the tasks Moderate Moderate Additional fund requests High Source: Maylor. 2010. Project Management
14. 14. Parkinson’s Law ▪ An activity will expand to fill the time available ▪ A critical review of Parkinson’s Law and it’s implications can be found in the article below Genaro J. Gutierrez and Panagiotis Kouvelis, Parkinson's Law and Its Implications for Project Management. Management Science. Vol. 37, No. 8 (Aug., 1991), pp. 990-1001
15. 15. Techniques for Accuracy 1. Clarify the project priorities, understand the scope of the project 2. Incorporate time to generate estimates in the project plan 3. Break the project down into detailed tasks 4. Use learning from previous projects 5. Avoid making estimates to please management 6. Refine the project scope throughout the duration of the project to improve accuracy 7. Use multiple estimating techniques
16. 16. Techniques for Accuracy ▪ Bottom up estimating and Parametric estimating offer the highest levels of accuracy ▪ Bottom up estimating: provides the highest level of accuracy when there is suitable detail regarding the components ▪ Parametric Estimating: provides high levels of accuracy when the data is of good quality and due to the statistical nature of the approach
17. 17. Further Reading ▪ Maylor: Project Management, 4th ed, Chapter 6 & 8 ▪ Chapman., and Ward. 2003. Constructively Simple Estimating: a Project Management Example. Journal of the Operation Research Society. 54. 1050-1058.
18. 18. References ▪ Maylor, H., 2010. Project Management. 4th ed. Chester: Pearson ▪ Tom Mochal, 2006. Estimate project costs after you have estimated effort and duration. [Online] Available at: http://www.techrepublic.com/article/estimate/project-costs-after-you-have-estimated-effort-and-duration/ [Accessed: 07/11/13] ▪ CHRIS O'HALLORAN, 2013. Project Estimation Techniques and Templates. [Online] Available at: http://strikingprojectmanagement.com/project-estimation/ [Accessed 07/11/13] ▪ Adele Sommers, 2013. 12 Tips for Accurate Project Estimating. [Online] Availbale at: http://www.projectsmart.co.uk/12-tips-for-accurate-project-estimating.html [Accessed 07/11/13] ▪ MindTools, 2013. Estimating Time Accurately. [Online] Available at: http://www.mindtools.com/pages/article/newPPM_01.htm [Accessed 07/11/13]
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