Effort Estimation

Best Practices Methodology

Effort Estimation
Estimating
The

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

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Project Estimates - Best Pracices Methodology

Which view is correct?

Rough order of magnitude is good enough. Spending time on

detailed estimating wastes money
Time is everything; our survival depends on getting there first!
Time and cost accuracy is not an issue.
The project is internal. We dont need to worry about cost.
The uncertainty is so great, spending time and money on
estimates is a waste.
The project is so small, we dont need to bother with
estimates. Just do it.
They used an internal estimate for strategic decisions and
then we had to live with it.
We were burned once. I want a detailed estimate of every
task by the people responsible.

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Project Estimates - Best Pracices Methodology

Bad Estimation?

Complexity

Uniqueness

Managers tend to think of resources and their availability first.

Actually, duration should be estimated solely on the basis of task.

Goals not estimates

Each project is unique. Templates and estimates of one may not be

useful for other

Resource Driven Estimates

Projects are complex. Creating WBS and estimating durations, more so.

Many a times, managers start with a goal (for estimate) in mind and work
towards getting there

Added Buffers for Contingency

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No buffer should be added as task level. If added, it will get piled up and stages of
aggregation.

Project Estimates - Best Pracices Methodology

Effort Estimation
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
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Project Estimates - Best Pracices Methodology

Macro versus Micro Estimating

Conditions for Preferring Top-Down or Bottom-up Time
and Cost Estimates
Condition

Macro Estimate

Strategic decision making

Micro Estimate

Cost and time important

High uncertainty

Internal, small project

Fixed-price contract

Customer wants details

Unstable scope

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Project Estimates - Best Pracices Methodology

Macro versus Micro Estimating

Small (<4
Weeks)
Internal

Strategic
Decision

Large (>4
Weeks)

Estimation For

Stable Scope

Non-Strategic

Fixed Cost
Unstable Scope
External
Time & Material

Client
Requested
Details
No Details
Requested

Detailed Estimate
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High Level Estimate

Project Estimates - Best Pracices Methodology

Estimations: Preferred Approach

Make

rough top-down estimate

Develop the WBS
Make bottom-up estimate
Develop schedules and budgets
Reconcile differences between top-down and
bottom-up estimates

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Project Estimates - Best Pracices Methodology

PMI Approach to Estimation

PMBOK

clearly states following sequence

for Project Estimate

Tasks (WBS)
Sequence
Dependencies
Duration Recommended to use PERT method of 3 point
estimate (discussed further)

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Resources
Resource Levelling
Fast Tracking and/or Crashing to match end date
Project Estimates - Best Pracices Methodology

Estimating Guidelines
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.

8.

Estimate ONLY on the basis of task (not considering a specific

resource, his availability etc.)

9.

Use 3 Point estimates (PERT Method)

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3 Point Estimate (PERT Method)

When asked for estimate, a typical response is

You know, it is difficult. It depends on many uncertainties.

So, let us assume you come across all the difficulties,

issues you can think of. Whats your estimation? (EP)

Now, let us presume, everything goes well. No issues,

no difficulties. How fast can you do this? (EO)

Now, let us say you get usual portion of problems not

all but zero either. What do you think will be estimation?
(EML)

PERT Method says

E=

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Project Estimates - Best Pracices Methodology

Microsoft Excel
97-2003 Worksheet

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Refining Estimates (Project Level)

Reasons for Adjusting Estimates

Interaction costs

When estimates are done by multiple departments, interaction costs

are inflated, underestimated or forgotten.

Normal conditions do not apply

Things go wrong on projects
Changes in project scope and plans
Oversight costs (Executive Management, PMO) are involved

Adjusting Estimates

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Time and cost estimates of specific activities are adjusted as the

risks, resources, and situation particulars become more clearly
defined.

Project Estimates - Best Pracices Methodology

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Refining Estimates (contd)

Contingency

Are created independently to offset uncertainty.

Reduce the likelihood of cost and completion time
overruns for a project
Can be added to the overall project or to specific
activities or work packages
Can be determined from previous similar projects

Changing

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Funds and Time Buffers

Baseline Schedule and Budget

Unforeseen events may dictate a reformulation of

the budget and schedule
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