Retired course

This course has been retired and is no longer supported.

About this lesson

Project plans are built with an accumulation of estimates, each of which has a level of uncertainty associated with it.  The level of uncertainty is a major contributor to the accuracy of the plan and the amount of project risk.

Quick reference

Estimating Uncertainty

Project plans are built with an accumulation of estimates, each of which has a level of uncertainty associated with it.  The level of uncertainty is a major contributor to the accuracy of the plan and the amount of project risk.

When to use

When estimating any aspect of project tasks, determine what type of uncertainty exists and then apply the appropriate estimating strategy. 

When preparing or revising estimates to complete the project, determine what type of uncertainty exists and then apply the appropriate strategy.

The estimating strategy can be applied to cost estimates, time duration estimates, or level of work estimates.

Instructions

  1. For each task or task group, determine which category best describes the task effort on this project:
    1. Basic – A task that is a core competency of the organization, little uncertainty.
    2. Dependent – A task that is well understood but the estimate is based upon some factor that is not yet certain.
    3. Uncertain – A task that is not well understood, there is a high degree of uncertainty.
    4. Unknown – Aspects of the project for which the team has no information, there is total uncertainty.
  2. Depending upon the nature of the uncertainty, create the estimate.
    1. Basic – Use standard project estimating techniques.
    2. Dependent – Create an estimate of the task for each of the states of the dependent factor.  Select the state that is most likely, but show the factor as a risk and monitor it as such.  If the factor changes, the estimate needs to change.
    3. Uncertain – Estimate the best case, worst case, and most likely case for the task.  Normally, use the most likely in the project plan, but build project reserves based upon the best case and worst case.  Typically create a reserve that would cover about 75% to 80% of the worst case.  This task should be tracked as a risk regardless of the estimate used.
    4. Unknown – The estimate is a guess and the area should be tracked as a high risk aspect of the project.

Hints & tips

  • Ignoring uncertainty does not make it go away, so acknowledge it and manage it.
  • Uncertainty factors can often be managed so as to bias the actual time and money spent on a task to be close to the estimate.
  • The majority of the tasks, even on high risk projects, will be basic tasks.  Have your team use standard estimating techniques on these and focus your project management attention on the other tasks.
  • Uncertain tasks can often be decomposed into smaller tasks – many of which will likely be Basic tasks.
  • When working on project activities with unknown tasks, do frequent pulsing checks with the project team to learn factors that can help you create an estimate.
  • Definition of Estimate: “A quantitative assessment of the likely amount or outcome of a variable, such as project costs, resources, effort, or durations.”  PPMBOK®Guide

This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) – Sixth Edition, Project Management Institute, Inc., 2017.

Login to download
  • 00:04 Hi, I'm Ray Sheen.
  • 00:06 I'd like to talk about estimating on projects, and in particular,
  • 00:10 how to create estimates when there's a great deal of
  • 00:13 uncertainty concerning some of the project tasks.
  • 00:17 The Project Management Body of Knowledge, the PMBOK Guide,
  • 00:20 defines an estimate as a quantitative assessment of the likely amount or
  • 00:24 outcome of a variable such as project costs, resources, effort, or duration.
  • 00:29 So what does that mean?
  • 00:31 You need to have a number but with a project estimate that number is likely to
  • 00:35 have uncertainty.
  • 00:37 Often, you may qualify that estimate with terms such as, preliminary,
  • 00:40 feasibility, or order of magnitude estimate to convey that uncertainty.
  • 00:45 Sometimes, you qualify the estimate by putting tolerances on it, such as plus or
  • 00:49 minus 10%, or confidence intervals,
  • 00:51 such as a 70% confidence, or 80% confidence in the number.
  • 00:55 These are usually judgment calls and not precise calculations.
  • 00:58 The uncertainty normally depends upon the type of activity associated with that
  • 01:02 task.
  • 01:03 So let's take a look at starting our estimating approach for
  • 01:06 a product task based upon the task level of uncertainty.
  • 01:11 One type of task is a standard task.
  • 01:14 This is work that we do all the time.
  • 01:16 It may be very difficult, but it's work that we know how to do.
  • 01:20 There's little uncertainty because it is our core expertise.
  • 01:24 If you consider how much time it would take to accomplish one of these tasks,
  • 01:27 a distribution function of the effort needed to do the task would show a very
  • 01:31 narrow band of uncertainty.
  • 01:32 It will be somewhere between 50 and 60 hours.
  • 01:36 Exactly where you don't know.
  • 01:38 For this type of task, select the average value as the estimate.
  • 01:41 That's the most likely case and it's the best estimate to use.
  • 01:44 Fine-tuning this estimate will not be worth the extra effort.
  • 01:48 The next type of task, is the dependent task.
  • 01:52 Once again, the activity is clearly understood, but
  • 01:54 the actual value depends upon some factor that isn't yet known or
  • 01:59 that can't be controlled at this point in the project.
  • 02:02 For instance, it might be a task that requires the use of a supplier.
  • 02:04 Depending upon which supplier is used, the work associated with
  • 02:08 that activity will either be approximately 40 hours or approximately 80 hours.
  • 02:13 So which estimate should you use?
  • 02:16 The 40-hour estimate, the aggressive approach or the 80-hour estimate,
  • 02:19 the more conservative approach?
  • 02:21 Well I won't use something in the middle such as a 60-hour estimate,
  • 02:24 which I know is wrong.
  • 02:26 What I would do in this case, is to start with the 80-hour estimate,
  • 02:29 but if the total project plan exceeds the cost and
  • 02:32 schedule constraints, I need to find ways to reduce the estimates.
  • 02:36 If I need to change the estimates,
  • 02:38 this task is one place that I would choose to work with.
  • 02:41 I may be able to change to the 40-hour estimate by getting control of the factor
  • 02:45 now.
  • 02:46 That is immediately selecting the supplier.
  • 02:49 Even if I can't control the factor, I will switch to the aggressive estimate and
  • 02:53 then put this task in my risk register and follow it closely in my control plan.
  • 02:58 Even if I use the conservative approach in the project plan,
  • 03:00 this factor is a positive opportunity risk that should be tracked for that reason.
  • 03:06 The third type of task is the uncertain task.
  • 03:08 With this task, we have a general understanding of the scope, but
  • 03:12 we don't know exactly what's required.
  • 03:14 The actual effort isn't clear, and that's often because it depends on
  • 03:17 many factors that we don't know or that we can't control.
  • 03:21 The distribution would often look like this, a skewed distribution.
  • 03:24 The required amount of effort could be anywhere from 40 hours to 200 hours.
  • 03:29 There is so many unknowns, that an accurate estimate cannot be set.
  • 03:33 Now, I could use the best case estimate of 40 hours, but that's highly unlikely.
  • 03:38 The chances of that being correct are about the same as winning a lottery.
  • 03:41 I could use the worst case estimate of 200 hours.
  • 03:45 While that's the safest estimate, it's also unlikely.
  • 03:47 And if I use that approach and have many uncertain tasks,
  • 03:50 I will inflate the overall project timeline and budget.
  • 03:54 How about this one?
  • 03:56 I could use the most likely estimate.
  • 03:58 That is what I will normally put in the project plan that is developed
  • 04:01 with the core team members.
  • 04:03 However, when I put together the total plan,
  • 04:05 I'll use the 75% to 80% case in my totals.
  • 04:08 The difference between the most likely and the 80%, is my reserve.
  • 04:13 I don't give the team the 80% when the project starts.
  • 04:16 If I give it to them, their certainty is at all up.
  • 04:18 Instead, I give them the most likely estimate and
  • 04:21 tell them that if they have some problems, come see me.
  • 04:24 I've got a reserve to help with that activity.
  • 04:27 So use the most likely estimate with a team as a Stretch Goal.
  • 04:30 This is a high-risk task which needs to go on the Risk Register.
  • 04:34 I'll watch this task closely because I really don't know if it's going to be 40
  • 04:38 or 200, or somewhere in-between.
  • 04:40 The final type of uncertainty is the task that we don't even know about.
  • 04:45 They are sometimes referred to as the unknown unknowns.
  • 04:48 These are uncontrollable because we don't even know if the task exists in
  • 04:51 our project.
  • 04:53 On some projects, they'll be activities we have no experience with,
  • 04:56 such as a new technology.
  • 04:57 We're creating an application for a system we have never used before, or
  • 05:00 operating in a region in the world where we have no experience.
  • 05:04 How do we estimate these tasks with accuracy?
  • 05:07 You can't.
  • 05:07 I arbitrarily assigned a number to a reserve.
  • 05:10 If I think there may be a lot of them, I will assign a high reserve.
  • 05:13 If I think there's not much potential, I'll assign a low reserve.
  • 05:19 Uncertainty is a fact of life in project estimating.
  • 05:21 These are a few rules of thumb that you can use to help you with managing
  • 05:26 the uncertainty in your tasks.

Lesson notes are only available for subscribers.

PMI, PMP, CAPM and PMBOK are registered marks of the Project Management Institute, Inc.

Gift this course