Estimations: Basic Techniques

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Estimation Techniques

Historical data

Parametric estimating

  • Based on parameters, e.g. square meters, tons of steal, etc. This can vary in levels of detail, from 1 parameter to several
  • Projects are rarely totally unique, often repetition of activities at lower levels of WBS
  • Break down project into units that can be readily estimated based on considerable experience of a particular type of project
  • Can be used at different levels of the product breakdown

Expert judgement

People are asked to make rough estimates, but the estimate becomes the target time

  • One or more experts in the application area use their experience to predict costs or time. Process iterates until some consensus is reached. (Also called Delphi studies)
  • Advantages: Relatively cheap estimation method. Can be accurate if experts have direct experience of similar projects
  • Disadvantages: Very inaccurate if there are no experts!

Analogy or As… but…s

  • Experience of similar projects
  • Use previous cost as base line (assuming validity) and proportion up or down
  • The time or cost of an project is computed by comparing the project to a similar project in the same application domain
  • Advantages: May be accurate if project data available and people/tools the same
  • Disadvantages: Impossible if no comparable project has been tackled. Needs systematically maintained cost/time database
  • Note: make sure you use the real cost and not the budget of your reference project


  • A ‘best guess’ under uncertainty (e.g. exchange rates)
  • Use parametricsor proxies
  • Differentiate between fixed (firm/known) and variable costs (fluctuate, estimate)
  • Provide series of estimates to see impact on budget
  • Factor in element for risk

Synthetic estimating

  • Based on practices of work measurement
  • If large number of repetitive actions, work rate can be analysed to provide generic actions, timings and costs
  • Deconstruct new activities into similar actions and add timings

Using learning curve effects

  • Often repetitive elements at lowest level of WBS
  • Time taken for a task if repeated will decrease as the person becomes familiar with the method
  • Subsequent improvement is speed becomes smaller over time

"missing formulas"

Wishful thinking

  • Optimism bias –over-optimistic on how much can be achieved and how little it will cost
  • Politics –large figures likely to be unacceptable, the objective is placed above costs
  • Improper use of estimates –ball park figures become official without checking or further development
  • Failure to be systematic about planning –complacency, certainty will not have to do work, vagueness, unqualified estimate to ‘get the request off the desk’
  • The best techniques are still only estimates
  • Errors at this stage can be multiplied many times

Things to consider

  • Rapid, rough and right (roughly right over precisely wrong) –detail over time
  • Three point estimate, qualitative understanding, thinking of alternatives
  • The best techniques are still only estimates
  • One size does not fit all! Level of precision depends on the project

Bottom Up and Top Down Estimation

Any of these approaches may be used top-down or bottom-up.


  • Start at the system level and assess the overall system functionality and how this is delivered through sub-systems.
  • Usable without knowledge of the system architecture and the components that might be part of the system.
  • Takes into account costs such as integration, configuration management and documentation.
  • Can underestimate the cost of solving difficult low-level technical problems.


  • Start at the component level and estimate the effort required for each component. Add these efforts to reach a final estimate.
  • Usable when the architecture of the system is known and components identified.
  • This can be an accurate method if the system has been designed in detail.
  • It may underestimate the costs of system level activities such as integration and documentation.

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.
Bottom up estimation technique.jpg
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