Project Management Organization
A COMPANY ALWAYS ON THE MOVE

How to achieve a reliable and efficient estimate ?

15 January 2016

Estimate is a key element during the project planning phase. However, estimators do not usually have all data for an accurate estimate.

To work around this problem, there are several techniques whose aim is to facilitate the estimator’s work, and guarantee reliable and realistic results.

  1. Analogical method

This method is to compare between the current project and one or more similar projects already completed, then to use the results as an estimation basis.

For example: To estimate machine installation duration, it is possible to rely on lessons learned from the installation of the same machine, and affect the duration to the current project.

Note that estimator must take into account inflation and other context particularities.

  1. Parametric method

This method, also based on lessons learned, is to base the estimate on measurements and / or calculations.
Example: A team built a 20 km road in 10 days. So with the same team and the same work conditions, we can estimate that the construction of a 10 km section will require 5 days.

  1. Three points method

This method can be implemented in 4 steps :

. The estimator chooses participants who have a good knowledge of the topic

. He asks them to provide their estimates individually (by using post-its® for example)

. After collecting responses, the estimator determines the pessimistic “P”, optimistic one “O” and finally the most likely one “ML”

. The formula is then :

a

If pessimistic estimate is too far from the most likely value, the use of the three-point method is inappropriate.

Example: In order to estimate a building’s construction cost, you interviewed 10 building specialists and here are their responses:

2 participants estimated it at 700k€

7 participants estimated at 500k€

1 participant estimated at 280k€

By applying the three-point method, we can estimate the building’s construction cost:

b

 

Bottom-up method

This method consists in starting by estimating basic activities (e.g. work package level), and then combine these results to obtain an overall estimate of the project.

Compared to the previous methods, the bottom-up estimate requires a large workload. However, this method is intuitive and allows obtaining realistic and accurate results.

Note that the Bottom-up is generally combined with other methods such as analogic or parametric one.

Top-down method

This method is used, for example, when the project WBS is not yet built, or when the project must meet a cost or time constraint (e.g. to deal with competition, get aligned to the business strategy …).

In cost estimating, top-down method is to define the global project budget first, then break it down until having work packages budget. This can be performed using percentages or weights.

The top-down estimate requires less workload than the bottom-down, but it is less accurate and the estimator may omit certain activities while applying this method.

Delphi technique

Delphi technique is quite similar to brainstorming; it is a decision-making process that helps in consolidating expert opinions. It can therefore be used as an estimate method.

In order to apply Delphi, it is important to be accompanied by experts, and to appoint a « facilitator » who will ensure coordination between contributors. Thus the method can be applied as follows:

  • The context is introduced to experts
  • Experts perform their estimates individually and anonymously, then send them to the facilitator
  • The facilitator collects the responses. Note that experts who provided a very different estimate than the average should be asked by the facilitator to justify their results
  • He then shares the results with all participants
  • Experts carry out a second individual and anonymous estimate based on previous results.
  • The process is reiterated until a consensus is reached

Of course, if the facilitator cannot find a consensus, he can combine Delphi technique with another estimate method, e.g. the three-point one.

In general, Delphi method provides quite reliable results, as contributors are experts in their topic, and their answers are not influenced by the other participants.

 

Conclusion

This article is an introduction to the main estimate methods. However, there are other interesting techniques, such as those you can find in the “Planning” process of the PMBOK®, or in the PRINCE2® manual.

Hakim ZEJJARI

Share on LinkedIn79Tweet about this on Twitter
Hakim Zejjari

Leave a Reply

Your email address will not be published. Required fields are marked *