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Estimating Project: Times and Costs

This document discusses estimating project times and costs. It explains that estimating involves forecasting the time and cost to complete deliverables while balancing stakeholder expectations and control. There are top-down and bottom-up estimating approaches. Top-down uses experience to determine overall duration and cost, while bottom-up builds up estimates from work packages. The document provides guidelines for estimating and discusses factors that influence estimate quality like planning, people, and culture. It also covers estimating methodology, types of costs, and refining estimates over time.

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M Umair Mani
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125 views15 pages

Estimating Project: Times and Costs

This document discusses estimating project times and costs. It explains that estimating involves forecasting the time and cost to complete deliverables while balancing stakeholder expectations and control. There are top-down and bottom-up estimating approaches. Top-down uses experience to determine overall duration and cost, while bottom-up builds up estimates from work packages. The document provides guidelines for estimating and discusses factors that influence estimate quality like planning, people, and culture. It also covers estimating methodology, types of costs, and refining estimates over time.

Uploaded by

M Umair Mani
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 15

Chapter No.

ESTIMATING PROJECT TIMES AND COSTS

51

Where We Are Now

52

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

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

53

Why Estimating Time and Cost Are Important


To support good decisions. To schedule work. To determine how long the project should take and its cost. To determine whether the project is worth doing.

To develop cash flow needs.


To determine how well the project is progressing. To develop time-phased budgets and establish the project baseline.
EXHIBIT 5.1
54

Factors Influencing the Quality of Estimates


Planning Horizon

Other (Nonproject) Factors

Project Duration

Organization Culture

Quality of Estimates

People

Padding Estimates

Project Structure and Organization

55

Estimating Guidelines for Times, Costs, and Resources


1. Have people familiar with the tasks make the estimate.
2. Use several people to make estimates. 3. Base estimates on normal conditions, efficient methods, and a normal level of resources. 4. Use consistent time units in estimating task times. 5. Treat each task as independent, dont aggregate. 6. Dont make allowances for contingencies. 7. Adding a risk assessment helps avoid surprises to stakeholders.
56

Top-Down versus Bottom-Up Estimating


Top-Down Estimates
Are usually are derived from someone who uses experience and/or information to determine the project duration and total cost. Are made by top managers who have little knowledge of the processes used to complete the project.

Bottom-Up Approach
Can serve as a check on cost elements in the WBS by rolling up the work packages and associated cost accounts to major deliverables at the work package level.
57

Top-Down versus Bottom-Up Estimating


Conditions for Preferring Top-Down or Bottom-up Time and Cost Estimates
Condition Strategic decision making Cost and time important Macro Estimates X X Micro Estimates

High uncertainty
Internal, small project Fixed-price contract Customer wants details

X
X X X

Unstable scope

TABLE 5.1
58

Estimating Projects: Preferred Approach


Make rough top-down estimates.

Develop the WBS/OBS.


Make bottom-up estimates.

Develop schedules and budgets.


Reconcile differences between top-down and bottom-up estimates

59

Top-Down Approaches for Estimating Project Times and Costs


Consensus methods Ratio methods Apportion method

Function point methods for software and system projects


Learning curves

Project Estimate Times Costs

510

Bottom-Up Approaches for Estimating Project Times and Costs


Template methods
Parametric procedures applied to specific tasks

Range estimates for the WBS work packages


Phase estimating: A hybrid

511

Level of Detail
Level of detail is different for different levels of management. Level of detail in the WBS varies with the complexity of the project. Excessive detail is costly.
Fosters a focus on departmental outcomes Creates unproductive paperwork

Insufficient detail is costly.


Lack of focus on goals Wasted effort on nonessential activities
512

Types of Costs
Direct Costs
Costs that are clearly chargeable to a specific work package.
Labor, materials, equipment, and other

Direct (Project) Overhead Costs


Costs incurred that are directly tied to an identifiable project deliverable or work package.
Salary, rents, supplies, specialized machinery

General and Administrative Overhead Costs


Organization costs indirectly linked to a specific package that are apportioned to the project
513

Refining Estimates
Reasons for Adjusting Estimates
Interaction costs are hidden in estimates. Normal conditions do not apply. Things go wrong on projects. Changes in project scope and plans.

Adjusting Estimates
Time and cost estimates of specific activities are adjusted as the risks, resources, and situation particulars become more clearly defined.

514

Key Terms
Apportionment methods Bottom-up estimates Contingency funds Delphi method Direct costs Function points Learning curves Overhead costs Padding estimates Phase estimating Range estimating Ratio methods Template method Time and cost databases

515

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