View source for Estimations: Basic Techniques

=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

==Forecasts==

*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.

==Top-Down==

*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.

==Bottom-Up==

*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.

[[File:Bottom up estimation technique.jpg|frameless|center|500px]]