The Art of Estimating - Andy Nolan

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Welcome from the APM Midlands Branch
Derby, May 2023

The Art of Estimating
24 May 2023
Derby
apm.org.uk/event

Agenda
© 2023 Association for Project Management 3
17.30 Registration, Networking
& Heritage Centre
18.30 Welcome & Introd...

Housekeeping
© 2022 Association for Project Management 4
HSE
- Fire Points
- Smoking
- Toilets
- Phones to Silent
Feedback

The Art of Estimating
Issue 10.00
The Art of Estimating
Andy Nolan, Sophie Osborne

APM / ACostE
Estimating Guide
Available from
the APM
Bookshop
MG

Section 1
Introduction
SO

Benefits
Business
Cases
Estimating Risk
Schedule
Cost
Resource
When is estimating used?
✓Project Launch
✓Then throughout t...

Business and project
requirements
Project closeout
checklist
Step 3
Develop Estimate
Step 1
Establish Estimating
Capabilit...

Section 2
Why Estimates Fail
AN

Roads Defence
Bridges
and
Tunnels
Energy Rail Dams IT
Cost
overrun
20% 28% 34% 36% 45% 90% 107%
Schedule
Overrun
38% 49% 2...

Question?
Why do estimates fail
for you?
SO

Requirements, scope, and assumptions
Risk, Uncertainties and 3-point estimates
Data and Calibrated Parametric tools
Estima...

Root cause
analysis
Over 120 root causes
assessed and
summarised into the
following 4 groups Culture &
Behaviours
50%
Risk...

15
Can you see
blue circles
or spirals?
SO

Do the 2
squares
marked
square-A &
Square-B
look the
same shade
of grey?
SO

Optimism
According to
research 80% of
people are
optimistic.
Usual about
their own
abilities.
AN

Question?
How might you
reduce the effects of
biases?
AN

Section 3
Techniques
AN

Techniques
There are a wide
variety of estimating
techniques. Their use
depends on (1) how
much data you have
(2) how much...

ROM +/-40% +/-20% +/-10% +/-5%
% of total project
effort to produce
the estimate
0.01% -
0.05%
0.05% -
0.15%
0.15%-
0.25%
...

Section 4
Judgement Based
Techniques
SO

Judgement
Judgment is one of the most popular Techniques we use, but how reliable is it? In the
hands of experts, Judgment...

How many
people live in
the UK?
MG
AN

How tall is the
tallest pyramid
of Giza
(Egypt)?
MG
AN

How many $M’s of
sweets are sold
each year in the
USA in the 2 weeks
leading up to
Halloween?
MG
AN

0%
100%
200%
300%
400%
500%
600%
0 20 40 60 80 100
Mean
%
Error
Estimator Confidence
Mean %Error vs Confidence
Be Confiden...

-78%
-75% -74%
-70%
-66% -65% -66%
-69%
-62% -62%
-55%
22%
25% 26%
30%
34% 35% 34%
31%
38% 38%
45%
-80%
-60%
-40%
-20%
0%
...

Wisdom of the Crowd
Where
Low – middle maturity estimates
Need
Many people
with experience
Good For
Minimising the
effects...

History
Sir Francis Galton (1822 –1911) was an English
Victorian statistician. At a 1906 country fair in
Plymouth, 800 peo...

Why does it work?
Many heads are better than one, but why?
It is about errors cancelling out. Assuming
there is no general...

You can improve your estimate score by adding
more people, or by increasing the teams
confidence e.g. adding experts
SO

Decision Conferencing
When
There is no data
or tool or the
time to develop a
robust estimate
Good For
Team learning
and re...

History
Decision conferencing goes by several names,
Planning Poker and Wideband Delphi.
The Wideband Delphi Estimating me...

Process
As with the Wisdom of the Crowd, everyone makes
a guess, then reveal their results. The people with
the lowest and...

Section 5
Monte-Carlo
AN

The History of Monte-Carlo
Enrico Fermi (physicist), Stanislaw Ulam (mathematician) and Jon
Von Neumann (Computer speciali...

Jon Von
Neumann
He headed the development
of the first computers in the
1940’s. ENIAC (Electronic
Numerical Integrator and...

Private | © 2022 Rolls-Royce | Not
Subject to Export Control
With Schedule Risk Analysis, we
allocate “Roulette Wheels” to...

Fact
Assumption
Risk
Uncertainty
I need to take a flight.
I assume I will fly from London.
There is a 10% risk I have to s...

Fact
Assumption
Risk
Uncertainty
I am going to the Maldives.
Assume my “mother-in-law-to-be”
coming with us!
There is a 10...

Risk
Uncertainty
Assumptions
Monte Carlo
Reserve
Confidence
3-Point
Estimate
Sensitivity
Analysis
Monte-Carlo
You build up...

Frequency
Estimate
Max based on 90%
confidence
Min based on 10%
confidence
Most Likely (Mid
Point) based on
50% confidence...

Facts
Assumptions
Your
estimate
Facts
Assumptions
Facts
Assumptions
Facts
Assumptions
Facts
Assumptions
Facts
Project
Clos...

Section 6
We only know what we
know
AN

The Assumptions about a cup of tea
What could be
simpler then making
a cup of tea? So if
you were to make
some tea, what
a...

1. Assume people will want tea
2. Assume tea is for 2
3. Assume I have a kettle
4. Assume the kettle works
5. Assume I hav...

Question
What are some of
the risks and
uncertainties
when estimating a
car journey?
AN

1. Poor Traffic
2. Poor Weather
3. Car reliability
4. Getting lost
5. Road works
6. Accidents
7. Breakdowns
8. Inexperienc...

Question?
How could you
improve the success
of identifying
assumptions, risks etc
AN

Section 7
Reserve for Unknowns
AN

We estimate when there
are consequences.
And, the greater the
consequences, the
“harder” we estimate
Why do we estimate?
SO

Known Unknown
Known
Known-Knowns
Things we know that we
know. Based on Facts
and Assumptions.
Known-Unknowns
Things we kno...

Monte-Carlo only considers the risks and
uncertainties you know about, not the ones you don’t
Frequency
Estimate
Max based...

Minutes
Time
Minutes
Time
Max
Mid
Min
Minutes
Time
Max
Mid
Min
Imagine tracking the time it takes
you to drive home each d...

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentile
Frequency
%Error = (Estimate / Actual) - 1
Historic Data Percentile...

Technique 3: Models Improving on Technique 2, create a
parametric model to predict
uncertainty based on key uncertainty
dr...

Section 8
Conclusions
AN

Conclusions
✓ Use Data/History
✓ Don’t Work Alone
✓ Use Cross Checks
✓ Add Reserve for Unknowns
SO

Any questions?
MG

© 2022 Association for Project Management 61
Thank you

The Art of Estimating - Andy Nolan

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