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Estimating Project Times and Costs

The document discusses estimating project times and costs. It describes estimating as forecasting the time and cost to complete deliverables, balancing stakeholder expectations with project control. There are top-down and bottom-up estimating methods. Estimates are needed for scheduling, determining feasibility, cash flow, progress, budgets, and baselines. Factors like culture, padding, and structure influence estimate quality. Guidelines include involving familiar people, multiple estimates, normal conditions, consistent units, and risk assessments. Top-down is preferred for strategic decisions and uncertainty while bottom-up uses for details. Methods include consensus, ratios, templates, and learning curves. Budgets are time-phased and include direct, overhead, and administrative costs. Estimating

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436 views

Estimating Project Times and Costs

The document discusses estimating project times and costs. It describes estimating as forecasting the time and cost to complete deliverables, balancing stakeholder expectations with project control. There are top-down and bottom-up estimating methods. Estimates are needed for scheduling, determining feasibility, cash flow, progress, budgets, and baselines. Factors like culture, padding, and structure influence estimate quality. Guidelines include involving familiar people, multiple estimates, normal conditions, consistent units, and risk assessments. Top-down is preferred for strategic decisions and uncertainty while bottom-up uses for details. Methods include consensus, ratios, templates, and learning curves. Budgets are time-phased and include direct, overhead, and administrative costs. Estimating

Uploaded by

eva sharma
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Estimating Project Times and Costs

Estimating Projects
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

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

Why Estimating Time and Cost Are Important


Estimates are needed to support good decisions. Estimates are needed to schedule work. Estimates are needed to determine how long the project should take and its cost. Estimates are needed to determine whether the project is worth doing. Estimates are needed to develop cash flow needs. Estimates are needed to determine how well the project is progressing. Estimates are needed to develop time-phased budgets and establish the project baseline.
EXHIBIT 5.1

Factors Influencing the Quality of Estimates


Planning Horizon
Other (Nonproject) Factors Project Duration

Organization Culture

Quality of Estimates

People

Padding Estimates

Project Structure and Organization

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, dont aggregate. 6. Dont make allowances for contingencies. 7. Adding a risk assessment helps avoid surprises to stakeholders.

Macro versus Micro Estimating


Conditions for Preferring Top-Down or Bottom-up Time and Cost Estimates
Condition Strategic decision making Cost and time important High uncertainty Internal, small project Fixed-price contract Customer wants details Unstable scope Macro Estimates X X X X X X Micro Estimates X

TABLE 5.1

Estimating Projects: Preferred Approach


Make rough top-down estimates. Develop the WBS/OBS. Make bottom-up estimates. Develop schedules and budgets. Reconcile differences between top-down and bottom-up estimates

Methods for Estimating Project Times and Costs


Macro (Top-down) Approaches
Consensus methods Ratio methods Apportion method Function point methods for software and system projects Learning curves
Project Estimate Times Costs

Methods for Estimating Project Times and Costs (contd)


Micro (Bottom-up) Approaches
Template method

Parametric Procedures Applied to Specific Tasks


Detailed Estimates for the WBS Work Packages Phase Estimating: A Hybrid

Developing Budgets
Time-Phased Budgets
A cost estimate is not a budget unless it is timephased.
Time phasing begins with the time estimate for a project. Time-phased budgets mirror how the projects cash needs (costs) will occur or when cash flows from the project can be expected. Budget variances occur when actual and forecast events do not coincide.

Types of Costs
Direct Costs
Costs that are clearly chargeable to a specific work package.
Labor, materials, equipment, and other

Direct (Project) Overhead Costs


Costs incurred that are directly tied to an identifiable project deliverable or work package.
Salary, rents, supplies, specialized machinery

General and Administrative Overhead Costs


Organization costs indirectly linked to a specific package that are apportioned to the project

Creating a Database for Estimating

Estimating Database Templates


FIGURE 5.7

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