Estimating Projects Time & Cost

What is estimating?

Estimating is the process of forecasting, predicting or approximating the cost and time of completing project deliverables. It is the task and responsibility of balancing the expectations of stakeholders and the need for control while the project is implemented. 

There are two types of estimates:

1. Top-down (macro) estimates: analogy, group consensus, or mathematical relationships.
2. Bottom-up (micro) estimates: estimates of elements of the work breakdown structure.

Accurate estimates:

How project managers ensure that estimates are accurate:

Below are a number of points for boosting and achieving the accuracy of estimates:

• Use several people who are familiar and experienced with the tasks to make the estimate e.g. goal is to launch new colour laser printer - depts such as production, design and marketing should estimate.
• Create and use planning documents e.g. specifications and project plans.
• Perform a detailed task analysis of the work to be performed and ensure to treat each task as independent i.e. don’t aggregate.
• Use more than one method to arrive at an estimate and look for a midpoint among all of them.
• Base estimates on normal conditions, efficient methods, and a normal level of resources.
• Use consistent time units in estimating task times by maintain an ongoing “actual hours” database of the recorded time spent one each aspect of the project. This data can then be used to help estimate future projects and to identify the historically accurate buffer time needed to realistically perform the work.
• Use a “complexity factor” as a multiplier to determine whether a pending project is more or less complex than a previous one.
• Identify a set of limitations, constraints and assumptions to accompany your calculations, which would bound the conditions under which your estimates would be meaningful.
• Don’t make allowances for contingencies.
• Add risk assessment to help avoid surprises to stakeholders.

Conditions for preferring Top-Down or Bottom-Up estimates are illustrated in the figure below.

Bad estimates:

How bad estimates can lead to good projects failing:

• False analogies - When project estimates are developed using methods such as expert judgement, one rarely knows what is relevant and what isn’t. 
• False precision - Project estimates are often quoted as single numbers rather than ranges and these estimates are incorrect because they ignore the fact that uncertain quantities should be quantified by a range of numbers.
• Estimation by decree - The people actually performing the work are excluded from the estimating process.
• Subjectivity - Estimates are based on insufficient information or analysis and are “justified” based on gut-feel and other subjective notions.
• Coordination neglect - Projects consist of complex tasks that need to be coordinated and integrated carefully. Unfortunately, the time and effort needed for coordination and integration is often underestimated or even completely overlooked.
• Estimates are cut in order to secure a contract or to make a project more attractive.
• Estimates are provided without a corresponding statement of scope.
• The assumptions used for estimating are never documented, discussed or validated.