Introduction on Estimation

Critical points to be remembered for estimating activity resources or estimating activity durations are:

• The accuracy of estimation improves if it is done basis WBS

• Accuracy is also improved if estimation is done by the same person who does the work

• The historical information provides critical insights into the process of estimation

• Estimation will be more accurate if there are minimal or no changes in schedule, cost and scope baselines

• The project manager should manage the project schedule without any deviations to the schedule baseline

• The project manager should manage the project budget without any deviations to the cost baseline

• Integrated Change Control is used to approve or reject all change requests

• Any issues related to schedule, cost, scope, quality, or resources can lead to change requests

• A project managers role is to analyze the project requirements, create new estimates basis inputs from team members and his experience with relevant projects, and resolve any differences to produce realistic objectives

• Periodic recalculation of Estimate to Complete (ETC) is required to ensure adequate time, funds, resources, etc are available for the project

• Project management plan should be revised as changes are approved and the necessary work is completed

• A non-acceptable project management practice is Padding

• Any agreed-upon estimates must be met by the project manager

• Estimates must be reviewed periodically to see if they are achievable and to check for padding and risks

• Reduction or elimination of risks can result in decreased estimates

• Providing accurate and feasible estimates is the responsibility of a project manager

ESTIMATE ACTIVITY DURATIONS

The Estimate Activity Duration's process is to estimate how much time each activity will take. It is completed after defining and sequencing the activities and the type and quantity of resources for each activity are identified. Who should play a role in estimating these durations? Ideally, the estimators should be those who will be doing the work. However, the estimators are more often project team members who are more familiar with the work that needs to be done. The estimators need to have access to:

• Activity resource requirements

• Resource calendars

• Historical data of the organization

• Lessons learned about activity duration's

• Past project calendars

• Defined scheduling methodology

• Company culture – Enterprise environmental factors

• Existing systems – Estimating softwares and productivity metrics Later in project planning, during the risk management efforts, the time estimates and any other information gathered during the estimating process are considered when creating a risk register.

PADDING

Many project managers estimate activity durations like this. Padding undermines a project manager’s ability to develop realistic schedules and budgets. A pad is an extra time and cost added to an estimate because the estimator does not have enough information. The potential need for time and cost arises when the project has many unknowns and information is not available to clarify the unknowns. This can be addressed with reserves through the risk management process. Risk management is an important process that converts uncertainties into identifiable opportunities and threats (risks). Estimators need to identify these risks and discuss with the project manager. These risks should not remain hidden. If any of the estimates are padded, the project will have an extravagant schedule. In this case, there is no need of creating a schedule or a budget. In actual real-world projects, the schedule and the budget are used as baselines against which the project manager’s measure project’s performance. Thus, these baselines should be as realistic and accurate as possible and the project manager’s need to adhere to them. Padding is a poor sign of project management and it damages the reputation of a project manager.

Padding will not be required if:

• A WBS is available with estimators

• A WBS dictionary is also available with the estimators

• Time and cost reserves on the project are identified through actual calculations

• Risks and unknowns are identified

HOW IS ESTIMATING DONE?

The three methods used for estimating include analogous estimating, parametric estimating, three-point estimating or reserve analysis. Estimation activity needs to be completed by individuals who are doing the work. A project manager plays a key role during the process of estimation.

Some of his activities are outlined:

• Enough information is provided to the team to properly estimate each activity

• Complete calibration should be made between the project manager and estimators to know how refined their estimates may b

• Validate the estimates

• Prevent padding

• Formulate a reserve

• Assumptions made during estimating are recorded for later review

ONE-POINT ESTIMATING

Based on this technique, an estimation is made per activity. For example, the person doing the estimating says that the activity will take one month. The estimator may estimate this time basis expert judgment, historical information, or it could just be a guess. The technique is thus problematic. The negative effects of one-point estimating on the project are:

• If an estimator estimates that it will take 15 days for an activity to be complete, and it takes only 10 days, it can make the person who provided the estimate look untruthful and untrustworthy

• It can hide critical information about risks and uncertainties from the project manager

• It can decrease the buy-in to the project management process as it results in a schedule that no one believes in

• It forces people into padding their estimates

• Does it result in estimators working against the project managers to protect their interest So, where could we use one-point estimates? For projects that do not require a detailed, highly reliable schedule, a one-point estimate can be used. A three-point estimate is preferable.

ANALOGOUS ESTIMATING

The last few projects similar to this one took nine months, so this one should also. Similarly, last three times this activity was completed, each took fifteen days, since we have no other information to use, we will use fifteen days as the estimate for this activity and review the estimate when more details are available. Expert judgment and historical information are used to estimate using the analogous estimating technique.

PARAMETRIC ESTIMATING

Parametric estimating looks at the relationships between the X’s (variables) on the Y’s (activity) to calculate estimates. The data primarily comes from historical records – such as previous projects, industry requirements, standard metrics, other sources. There are two ways the estimator might create parametric estimates:

THREE-POINT ESTIMATING (PERT ANALYSIS, PROGRAM EVALUATION & REVIEW TECHNIQUE)

Since there is a very low probability of meeting the project deadline on exactly one date, it is often best to state estimates in a range using three-point estimates. Analyzing what could go right and what could go wrong can help estimators determine an expected range of activity, and if they state this range using three-time (or cost) estimates, the project manager can better understand the potential variation of the activity estimates and the overall project estimate. With the three-point estimate, the estimators give an Optimistic (O), Pessimistic (P), and most likely (M) estimate for each activity. This ultimately provides a risk-based expected duration estimate by taking either the average or weighted average (using PERT analysis) of the three estimates.