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Piba Imba 3 2.1

This document outlines the process of estimating project time and costs, emphasizing the importance of accurate estimates for decision-making and project management. It discusses various estimation methods, including top-down and bottom-up approaches, and factors influencing the quality of estimates. Additionally, it covers types of costs associated with projects and introduces tools like Gantt charts for tracking project progress.

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agarwalnaman445
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12 views31 pages

Piba Imba 3 2.1

This document outlines the process of estimating project time and costs, emphasizing the importance of accurate estimates for decision-making and project management. It discusses various estimation methods, including top-down and bottom-up approaches, and factors influencing the quality of estimates. Additionally, it covers types of costs associated with projects and introduces tools like Gantt charts for tracking project progress.

Uploaded by

agarwalnaman445
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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You are on page 1/ 31

Unit: 2

Chapter 1: Estimating Project


Time and Costs
Chapter outline

• Factors Influencing Quality of Estimates, Estimation


Guidelines for Time Costs and resources
• Methods for Estimating Project Times and Costs - Micro
V/s Macro
• Level of detail,

• Developing Budgets

• Types of Costs, Refining estimates and contingency funds


Project Process…
Estimating Projects…???

• Estimating:
– The process of forecasting or approximating the
Time & Cost of completing project deliverables.
– The task of balancing the expectations of
stakeholders and the need for control while the
project is implemented
– Types of Costs, Refining estimates and contingency
funds
Why to estimate?
• 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.
What is Estimating Time and Cost

• Project estimation is the process of


forecasting the time, cost, and resources
needed to deliver a project. It typically
happens during project initiation and/or
planning and takes the project's scope,
deadlines, and potential risks into account.

In this chapter author describes that a good


estimation of project’s time and costs is very
essential as you cannot start with a blurred
approach.
What is quality of estimates???

• A typical statement in the field is the desire to


“have a 95 percent probability of meeting time
and cost estimates”

• Past Experience is a good starting point for


developing time and cost estimates.
• Factors related to the uniqueness of the project
will have a strong influence on the accuracy of
estimates.
• Project, people, and external factors all need
to be considered to improve quality of
estimates for project times and costs.
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, don’t aggregate.
6. Do not make allowances for contingencies.
7. Adding a risk assessment to avoid surprises to
stakeholders.
Types of Estimates

Bottom-up
approach: Analogy, Group consensus,
or Mathematical relationship
Micro
Estimates

Top-Down
approach: Estimates of elements of the
work breakdown structure.
Macro
Estimates
Top-Down versus Bottom-Up
Estimating
• Top-Down Estimates
– Are usually 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.
Top-Down Approaches

1. Consensus Methods : uses the pooled experience of senior and/or middle


managers to estimate the total durations and cost.
• only a rough cut and normally occur in the “conceptual” stage of the project.
• Project Manager should make sure that these estimates are not dictated to
lower-level managers.

2. Ratio Methods: used in the “concept or need” phase of the project to get an
initial duration and cost.
• E.g. a house is 2,700 sq. ft. at a cost of Rs.160 per sq. ft., Therefore, the
parametric cost is approximately Rs. 432,000. Based on prior experience, a
house of this size normally takes 100 days to complete.
• 3. Apportion Methods: is used when projects are very similar to previous
projects in terms of features and cost.
• These are used for standard projects having small variations or very law
level of customizations.
•
Factors Influencing the
Quality of Estimates

Planning
Other – horizon
non
Project
project
Duration
factors

Quality
of
Organizat estimat
ion es
culture People

Project
Padding structure
estimate and
s organizat
ion
• 4. Function Point Method for Software & System Projects: software
development projects are frequently estimated using weighted variables
called “function points.”
• These function points are identified as number of inputs, number of outputs,
number of inquiries, number of data files, and number of interfaces.
• The total adjusted count provides the basis for estimating labor effort and
cost for a project and may use factors derived from historical data.
• accuracy depends on adequate historical data and the relevancy of the
current project deliverables when lined up with the past project averages.
Bottom – Up Approach
1. Template Method : is the use of similar previous
projects as a good starting point
2. Parametric Procedure Applied to Specific Tasks :
such as cost per sq. ft. can be the source of top-down
estimates as well as estimating work package tasks. E.g.
What if you add 2 more desktop technicians?
3. Range Estimating is used when a work package has
significant uncertainty about the total time and cost in
which to complete. This gets back to PERT estimating
Macro Micro
Hybrid: Phase Estimating

• Hybrid begins with a top-down estimate. It is then


refined as the each phase of the project is implemented.
• •Phase estimating is used when there is great
uncertainty and impractical to estimate time and cost for
the entire project.
• •Phase estimating uses a two-estimate system over the
life of a project. A detailed estimate is developed during
the current phase and a macro estimate is determined
for the remaining phases.
Conclusion about estimation…

• Unfortunately, your customer will want an accurate estimate of the project


schedule and cost the moment the decision is made to move forward with
the project.
• the only possible estimate at that time is the Top-Down Consensus method.
• Involves a meeting where experts discuss, disagree, then ultimately reach a
decision as to their best guess estimates
• Organizations seeking greater rigor will use the Delphi Method to
determine macro estimates. It removes “group think” and neutralizes
influence from strongly opinionated participants
Top management may center on the total
Top project and major project milestones.
Level
Middle management may center more on
one segment of the project or a limited
Middle number of milestones as they have a
reflection on their area of the organization.
level

First-line (or functional) managers may only


First – line be interested in the individual work package
(Functional) tasks that must be performed in their down
line.

The beauty of the WBS is the ability to aggregate information so that each
level of management can obtain the kind of information they want and need
in order to make decisions.
Type of costs
• Direct Costs are clearly chargeable to a specific work package and
include labor, materials, equipment, and any other resources defined
by the project.
• Direct Project Overhead Costs are those incurred costs that are
directly tied to a specific project deliverable or work package. These
include salary, rents, supplies, specialized machinery, etc. Using
certain direct overhead costs provides a more accurate project cost
rather than using a blanket overhead rate (sometime called a “loaded
labor rate”) for the entire project.
• General and Administrative Overhead Costs represent costs not
directly linked to the project but are carried for the duration of the
project. These include organization costs across all products and
projects such as advertising, accounting, and management above the
project level. A specific percentage of these costs are allocated to the
project.
Gantt Chart
• A Gantt chart is a project
management tool that illustrates
work completed over a period of time
in relation to the time planned for the
work.
• It typically includes two sections: the
left side outlines a list of tasks, while
the right side has a timeline with
schedule bars that visualize work.
• The Gantt chart was created by
Henry Gantt in the early 20th century
to improve project planning,
scheduling and tracking by
illustrating completed work
compared to planned work.
Thank you !!!

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