Project Estimation techniques
What are Project Estimation techniques?
Accurately estimating the cost, time and resources needed on a project can be one of the Project Manager’s most the difficult tasks. This is because nearly all projects contain some degree of uncertainty — some more than others. Planning for these uncertainties, and estimating them, represents varying degrees of risk. And yet accurate estimates are critical a project’s ultimate success. They are the baselines against which progress is monitored. If they are not reliable, it makes it much harder for a Project Manager to efficiently control, and productively manage, a project.
Project Managers use a number of estimation techniques to help ensure that their estimates are accurate. These are discussed briefly below:
- Analogous estimating: This technique draws on data from earlier similar projects and adjusts in for the context of the current project. Clearly, this technique is only available if there are, in fact, previous comparable projects, and activities estimated have a low degree of uncertainty.
- Expert judgement estimation: This technique draws on the experience/advice of an expert in the field. This technique may produce accurate estimates and be done quickly. But it will add extra cost and time to the project to engage the services of such an expert. The Project Manager needs to exercise judgement in deciding which option is ultimately the best one for the project.
- 3-point estimating: This technique requires three estimates: an optimistic estimate, a pessimistic estimate and an estimate considered most likely. The most likely estimate is normally the one used for the project, with the optimistic and pessimistic estimates providing expectation ‘boundaries’. (See also the ‘Scheduling tools and techniques’ topic, which explains how a weighted estimate of these three estimates is sometimes used [as part of the PERT tool]). This technique is useful in managing risk.
Published data estimates: This technique involves drawing on data freely available in the public domain. For example, a manager might consult hourly rates suggested by professional associations (e.g. Institution of Civil Engineers) in deriving and estimating a suitable time for a professional task.
- Vendor bid estimates: This technique involves using estimates that are based on data provided by external contractors who may have a stake in the project. They advise how much their part of the project is likely to cost.
There are many other estimation techniques available. Estimation techniques are most commonly used during the planning phase of the project, and are used to help to create an accurate project schedule.
The above techniques are just some of those available to Project Managers. To find out more about them and their respective advantages and disadvantages, view: