Estimating Techniques

Quick reference

• 00:04 Hi, I'm Ray Sheen.
• 00:05 I'd like to talk with you about project estimating and
• 00:08 some of the more commonly used project estimating techniques.
• 00:12 Project plans incorporate estimates for both the amount of effort or
• 00:17 cost on each task and the duration of each task.
• 00:20 Those are what we use to build the budget and schedule.
• 00:23 There are many techniques used for
• 00:25 determining the likely required amount of costs, resources, effort, and duration.
• 00:30 If your organization has a favorite, by all means use it.
• 00:33 In my experience, some of the more commonly used ones are Expert judgment,
• 00:38 Analogous, Bottom up, Three-point estimates, and Parametric Model.
• 00:43 Others that are occasionally used are Simulations, Vendor bid analysis,
• 00:47 Group decision-making techniques, Reserve analysis, and
• 00:51 even Cost of Quality analysis.
• 00:53 The most commonly used method is Expert judgment.
• 00:56 The project team relies on the person with the most experience, or
• 01:00 who is assigned responsibility for a task, to create the estimate.
• 01:03 Whatever that person says they need,
• 01:05 that is what they're going to get in the project plan.
• 01:08 However, when the project plan then takes too long or costs too much,
• 01:13 one of the other techniques is often used to refine the expert's estimate.
• 01:17 Let's go through some of the more commonly used techniques.
• 01:21 The Analogous estimate is often used, in fact,
• 01:24 is what most experts use, when providing their expert judgment.
• 01:29 It is an estimate that's based upon the actual cost from
• 01:32 a similar project or task.
• 01:34 The subject matter expert uses an example of a previous project to
• 01:38 explain why they have set the estimate at a particular level.
• 01:42 The more examples the subject matter expert uses,
• 01:45 the more confidence in the estimate.
• 01:47 This is often a very good approach if we haven't yet
• 01:50 done detailed project planning.
• 01:52 Even without the details,
• 01:53 we know that a certain type of activity will take this long and
• 01:57 cost this much because that's what has happened on the last few projects.
• 02:01 The caution with this approach, for an Analogous estimate to be accurate,
• 02:06 it is essential that the previous projects are truly similar to this project.
• 02:10 The next technique is the Bottom up estimate.
• 02:13 This technique is appropriate when you do have detailed planning.
• 02:16 In this technique, all the major deliverables are divided into smaller and
• 02:21 smaller tasks until they are at the lowest level of activity, micro tasks.
• 02:26 This is often done using the work breakdown structure tool.
• 02:29 On Agile/Scrum projects,
• 02:31 this is done in sprint planning as tasks are created for each of the stories.
• 02:35 Small tasks are normally much easier to estimate because the amount of work is
• 02:40 defined and limited.
• 02:42 All of the small task estimates are added to get a deliverable or story estimate,
• 02:47 and these are added to get a total project level estimate.
• 02:50 If the deliverables are deployed into micro tasks effectively, this approach
• 02:55 will give a very accurate estimate, but it can take a long time to develop.
• 02:59 However, many projects are not able to deploy
• 03:02 the deliverables into micro tasks because there's just too much uncertainty.
• 03:07 The next technique I want to discuss is called Parametric Model.
• 03:11 In this case, a formula has been created and adopted by the organization for
• 03:15 estimating certain types of activities.
• 03:18 The formula uses one or more of the project assumptions and
• 03:21 constraints, and provides an estimated value for effort, cost, or duration.
• 03:26 These models can be very simple or very complex.
• 03:29 They're normally developed over a long time for activity or
• 03:32 tasks that are conducted on most projects.
• 03:35 They're very common in some industries.
• 03:37 For instance, construction projects create estimates based upon the floor
• 03:42 plan area or the number of occupants for a building.
• 03:45 The accuracy of these estimates depends upon the amount of information that went
• 03:50 into the model, whether the parameters can be accurately estimated or
• 03:54 derived, and whether the model is scalable so
• 03:57 as to be applicable to the effort of the project being estimated.
• 04:01 The final technique is the Three-point estimate.
• 04:03 This estimate is often used in conjunction with one of the previously mentioned
• 04:08 techniques to create a risk mitigated estimate.
• 04:11 In this approach, three estimates are generated for each task,
• 04:15 a best case, worst case, and most likely.
• 04:18 For tasks and activities with a high degree of certainty,
• 04:21 these may all be the same.
• 04:23 But for those tasks and activities that have a high degree of uncertainty,
• 04:27 they can be very different.
• 04:29 These three estimates are combined in several ways depending upon how
• 04:33 the estimates will be used.
• 04:35 The standard approach is a triangular estimate which takes the average of
• 04:39 the three values.
• 04:40 So if the worst case is far higher than the best case and most likely,
• 04:45 the triangular estimate will be higher than the most likely.
• 04:48 The other method of combining these is the PERT estimate.
• 04:52 In this case, the most likely is heavily weighted as compared to the other two.
• 04:57 That means we add the best case, worst case, and
• 05:00 four times the most likely case, then divide that sum by 6.
• 05:04 A PERT analysis will then create three project plans,
• 05:08 one with all best case estimates, one with all worst case estimates, and
• 05:13 one with the PERT estimates.
• 05:15 This is used to inform the stakeholders about possible range and
• 05:19 results that they can expect.
• 05:21 Estimates are an important part of project planning.
• 05:23 And while we typically rely on the judgement of our subject matter experts,
• 05:27 there are other techniques that we can use to help create additional confidence in
• 05:32 the estimates.

Lesson notes are only available for subscribers.