Estimating Lessons Learned in Project Management - Traditional

January 9, 2009 | Author: PM Hut | Filed under: Activity Duration Estimate, Cost Estimating, Cost Management, Project Management Best Practices, Time Management

Estimating Lessons Learned in Project Management - Traditional (#2 in the series Estimating Lessons Learned in Project Management)
By Thomas Cutting

Estimating is probably the hardest part of any project. My wife will attest that my ability to estimate when I will leave work is inversely proportional to the importance of me getting home at a specific time. The plan will be for me to only work until noon the day we leave for vacation. At 2:00 I will still need to finish my status report, change my voice message and set my out-of-office email. Maybe I just need a better estimating technique.

There are many different ways to come up with an estimate. In this article we will take a look at the more traditional methods: Analogous / Top Down, Parametric, Bottom Up and Work Distribution. Next time we will discuss a some of the newer methods like Time Boxing and Wideband Delphi.

Analogous (Top Down). When a project is first considered, the quickest ways to develop an estimate is to compare it with one from your past. The question then becomes: Is it half as big or 5 times bigger? The focus is on what is different from the previous project. This technique requires the least amount of detail and gives the widest margin of uncertainty. This typically regulates it to Rough Order of Magnitude estimates.

Parametric. Normally associated with construction, Parametric estimates are based on historical data. For building a house a contractor may price it at $103 dollars per square foot. The calculation is built from years of completing similar jobs and calibrated with the current cost of materials. This is similar to the use of Function Point analysis in software development. A Function Point is a single unit of business functionality. The cost (in dollars or hours) of a single unit is calculated from past projects. New projects are defined by the number of function points and the math is done to create an overall estimate. This can be effective for features of similar sizes like reports or system interfaces. If historically it takes 40 hours to design, create, build and implement a report, 10 reports is going to take 400 hours.

Bottom Up. This form of estimate requires a more detailed analysis of the project. The Work Breakdown Structure (WBS) is defined further to identify the tasks associated with the work products. Each task is estimated and the cost for all of the individual pieces is combined to create the overall total. Using scheduling software like Primavera and Microsoft Project helps to define, record and plan the estimate. This is the most accurate type of estimate, but it requires a level of detail usually only known after the requirements are fully defined.

Work Distribution. Somewhere between Bottom Up and Parametric is the Work Distribution method. Usually the development phase of the project is estimated at some level of detail and the time for the other phases is based on a percentage of the project. The percentages are specific to the organization and project team performing the work based on their past performance. Generic numbers could be:

Phase %
Initiation 5
Requirements 15
Design 10
Construction 30
Testing 20
Implementation 5
Project Management 15

The development team estimates the construction effort and the other hours are calculated based on that amount.

Thomas Cutting, PMP is the owner of Cutting’s Edge (http://www.cuttingsedge.com/) and is a speaker, writer, trainer and mentor. He offers nearly random Project Management insights from a very diverse background that covers entertainment, retail, insurance, banking, healthcare and automotive verticals. He delivers real world, practical lessons learned with a twist of humor. Thomas has spoken at PMI and PSQT Conferences and is a regular contributor to several Project Management sites. He has a blog at (http://cuttingsedgepm.blogspot.com).

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2 people have left comments

Good points. I think any estimate must be paired with a confidence factor of some sort. It’s way too easy for people to misread accuracy in estimates.

Roger wrote on January 13, 2009 - 7:21 pm | Visit Link

Estimate is always given as a range. Beware of single digit estimates. The wider the range the bigger the uncertainty.

JOhny Bravissimo wrote on June 12, 2013 - 9:21 am | Visit Link

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