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. Estimating Project costs with Duration
and Effort
• Before the start of a project three things must be estimated:
• Duration: time the project will take
• Effort: the amount of work
• Cost: how much the project will cost financially
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. 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. 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. 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. 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. 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
where
• 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. 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. 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. 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. Nature, Role and Accuracy of Estimate
Types
Name
Nature
Role
Accuracy
Rough/Ballpark
Much uncertainty as to
what is involved
Early check on feasibility
of brief
As-buts
As was carried out
With an appropriate
previously but with some contingency factor, can
amendments
be used for proposals
Moderate
Detailed Estimates
Some initial work is
carried out to determine
what the likely problems
are going to be
Proposals
Moderate
To Finish
Much of the Project is
completed and
additional funding is
needed to complete the
tasks
Additional fund requests
High
Source: Maylor. 2010. Project Management
Very low
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. Techniques for Accuracy
1.
2.
3.
4.
5.
6.
Clarify the project priorities, understand the scope of the project
Incorporate time to generate estimates in the project plan
Break the project down into detailed tasks
Use learning from previous projects
Avoid making estimates to please management
Refine the project scope throughout the duration of the project to
improve accuracy
7. Use multiple estimating techniques
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. 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. 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-haveestimated-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]
