There are several key estimating techniques you should know about. Table 7.1 lists these techniques and summarizes the key characteristics of each.
TABLE 7.1 Estimating Techniques
| Estimating Technique | Key Characteristics | Notes |
|---|---|---|
| Analogous (top-down) estimating | Used in early planning phases and project selection. Utilizes historical information (actual duration periods from previous projects) to form estimates. | Reliable if WBS from previous projects mirror the WBS needed for this project. |
| Bottom-up estimating | Used to develop detailed estimates. Provides estimate for lowest level of the WBS (work package). Provides the most accuracy. | Best technique for identifying risk factors. Takes most time and money to develop. |
| Effort distribution estimating | Uses project phase percentages to estimate.Example would beInitiation Phase—10%Plan Phase—10%Elaboration Phase—20%Construction Phase—40%Deploy Phase—20% | Used in organizations that use common methodology and/or that do similar projects. Can be used if enough information is known for one of the major project phases. |
| Heuristic estimating | Based on experiences. “Rule-of-thumb” estimating. Frequently used when no historical records are available. | Also known as Delphi technique and expert judgment. |
| Parametric estimating | Uses historical data and statistical relationships. Developed by identifying the number of work units and the duration/effort per work unit. Examples include the following:Lines of code for software development.Square footage for construction.Number of sites for network migration. | Also known as quantitative-based estimating. Can be used with other techniques and methods. |
| Phased estimating | Estimates the project phase by phase. Provides for a detailed, bottom-up estimate for the next phase and a higher level, top-down estimate for the other phases. Best technique to use on high-risk and agile projects. | Incorporates “re-estimating” as part of the management approach. Best use of estimating resources. Excellent risk management tool. |
For each estimating technique (approach), there are one or more methods that can be leveraged. Table 7.2 lists these methods and summarizes the key characteristics of each.
TABLE 7.2 Estimating Methods
| Estimating Method | Key Characteristics | Notes |
|---|---|---|
| Expert judgment | Relies on SME in targeted work area. | Used most effectively with bottom-up estimating. |
| Historical information | Relies on actual durations from past projects. The three types are project files, commercial databases, and project team members. | Many organizations do not accurately capture this information. Recollection of project team members is the least reliable source. Critical to improving estimate accuracy in an organization. |
| Weighted average (PERT) | Uses three estimates for each activity (weighted average): optimistic, most likely, pessimisticE = (O + 4M + P) / 6Each estimate is captured for each activity. | Used mainly on large-scale or high-risk projects. Excellent risk management technique. This technique is time consuming. PERT = Program Evaluation and Review Technique. |
| Risk factors | Adjusting an original estimate based on one or more risk factors. Used in conjunction with other methods. | Common risk factors affecting effort estimates include complexity (technical, process), organizational change impact, requirements (volatility, quality), and resources (skills, costs, and so on). |
| Team (consensus) estimating | Uses multiple SMEs to develop independent estimates. Facilitation meeting used to reconcile differences and develop consensus estimates. | Best for identifying assumptions and other risk factors. Avoids one person being accountable for estimate. Allows for multiple historical perspectives to be taken into account. Allows SMEs from different backgrounds to complement one another. |
Tip
There are two primary reasons estimating should be performed (or approved) by the person doing the work: more accurate estimates and higher commitment levels to the project.
As with all other planning activities, work estimates are refined and improved as more is learned about the project. At a minimum, each project (or project phase) should be estimated three times. Each estimate provides a greater degree of accuracy. To better understand this concept and to better educate others in your organization, see the three levels of estimate accuracy recognized by PMI in Table 7.3.
TABLE 7.3 Estimate Accuracy Levels
| Level | Accuracy Range | Generally Used During |
|---|---|---|
| Order of magnitude | –25% to +75% | Initiating (defining) phase |
| Budget | –10% to +25% | Planning phase |
| Definitive | –5% to +10% | Planning phase |
Note
I have no doubt that the use of buffers and historical information when developing work effort estimates is a common, everyday practice in your real-world experience…or maybe not.
They represent a clear example of why leadership, negotiation, and communication skills are so important for project managers.
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