Estimations: Basic Techniques

Estimation Techniques

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.