Accurate estimates of project costs, duration, and resources can help in the ongoing development of an organisation’s project. Project estimation can bring an organisation closer to its desired deliverables. Unfortunately, there are organisations that make very optimistic estimates to win the support of the Board and the project sponsor. The accuracy of estimates should never take a back seat to the inherent desire to get the project its much-needed funding.

Estimation and the Project Life Cycle

Even before an organisation decides to embark on a project, individuals tasked to determine the feasibility of the project already make accurate estimates as to the merits of the proposed project. No organisation will want to venture into an endeavour that it is not prepared for. This is the principal essence of estimation.

  • Estimation throughout the Life Cycle of the Project

The organisation needs to make very careful estimates at each stage of the project. These estimates reflect the organisation’s understanding of the current circumstances upon which the project is in. As a rule, the project management team must prepare, create, refine, improve, and manage their estimates at each project life stage.

  • The Nature of Estimation Accuracy

Organisations strive to make estimates that are as accurate as possible. However, in the initial stages of the project life cycle, there are many uncertainties that the project may have not yet accounted for. These uncertainties become less pronounced and less frequent as the project progresses. Project estimation accuracy increases with project progression.

  • The Estimating Funnel

If one were to plot the number of uncertainties throughout the project life cycle, one will observe that the initial stages will have sufficiently more uncertainties. The more uncertainties there are, the less accurate are the results of estimation. The number of these uncertainties decreases over time. This creates a funnel shape in the uncertainty-time continuum.

Methods of Project Estimation

There are many techniques or methods of project estimation. The most common techniques are the following.

  • Bottom-up

This method is ideal for organisations that must work with many smaller and finer details. They create an aggregate of these small pieces to produce an estimate of the bigger picture.

  • Comparative

Organisations that already have a completed project of similar characteristics can use the information on that project to make an accurate estimate of the ongoing project. Some organisations call this analogous estimation.

  • Parametric

Project managers who want to produce very accurate estimates should always use parametric estimation. This technique considers the impact of measurable independent variables.

  • Three-point Estimating

Another scientific method of estimation, three-point estimating involves the application of a mathematical process that derives the best possible average among the different estimates of a given project. It considers the best guess, optimistic, and pessimistic estimates for the project deliverables. Many project management gurus refer to this technique as the Programme Evaluation and Review Technique, or PERT.

Elements of Project Estimation

The process of estimation in projects requires focusing on three essential elements or components. These elements are major factors in the success of the project relative to its deliverables.

  • Duration

Each phase of the project has a certain time frame of completion. All the different activities within each project phase will also require the allotment of time. This is where good estimation techniques can help ensure project deliverables on time.

  • Resources

The main goal of estimating resources is to eliminate wastage, while facilitating the effective implementation of the different aspects of the project. Resource estimation can have an impact on the overall cost of the project. Insufficient resources can lead to delays in the project as well as a reduction in the quality and quantity of the project deliverables. Excesses in available resources translate to higher project costs.

  • Costs

Cost estimation requires the use of more systematic approaches. This is to minimise, if not eliminate wastage. It also improves the overall efficiency of the project. Accurate cost estimates allow the project to proceed as planned, while managing different factors that may affect the project’s success.

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Project Estimation: Importance and Practical Difficulties

Estimation is an important and integral process at each stage of the project life cycle. It gives the organisation an idea of the boundaries of their endeavour. At the same time, the project estimates can serve as baseline information for the ongoing evaluation of the project.

Unfortunately, there will always be practical difficulties related to the process of estimation. These issues can include the following.

  • Poor and unscalable design of the estimation process that can lead to unnecessary pressures on the project schedules.
  • Failure to factor the different dependencies in the correct manner, which can lead to coordination neglect.
  • Coming up with an inappropriate buffer, which can put additional strain on the already-complex project activities.
  • Overreliance on past projects without taking into consideration the unique attributes and components of both the past and current projects.
  • Unnecessary padding or doubling of the estimates to avoid problems in resource availability.
  • Putting too much emphasis on optimistic estimates, which can lead to the underestimation of project duration, resources, and cost.
  • Failure to consider the risks that can undermine the different activities of the project.

Accuracy and Project Estimation Issues

The accuracy of estimates is a function of an organisation’s objectivity. In general, the use of statistical programmes and other scientific tools can help eliminate observer bias or data subjectivity. Some of the major concerns about estimates include the following.

  • Tendency of the data to be subjective because of potentially biased input from a member of the project management team.
  • Assumptions stem from the often-subjective nature of the information necessary to create an estimate.
  • The estimate does not specify the exact person who will perform the required work to produce an outcome that is commensurate to the estimate.
  • Risks that are not accounted for can lead to issues with the validity and accuracy of the estimates.
  • Insufficient prior data, or the lack thereof, can lead to questions of estimate accuracy.
  • Some estimators may refuse to accept the estimation results of statistical analyses, factoring their preconceived notions of what a ‘good’ estimate should be.

Every stage of the project life cycle requires the creation of an estimate of the stage’s cost, duration, efforts, and resources. The estimates need to be reviewed and improved on to make it more accurate as the project progresses.

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