Improving Project Estimation Accuracy
•
1 like•203 views
This document discusses various techniques for improving the accuracy of project estimates, including: analoguous estimating using historical data from similar projects; parametric estimating using statistical models based on known rates; bottom-up estimating that breaks down each component; three-point estimating using best, worst, and most likely cases; vendor bid analysis of external supplier estimates; and accounting for uncertainty through contingency budgets. It recommends combining multiple techniques and using three-point estimating for each to provide the most accurate project estimates.
Improving Project Estimation Accuracy
- 1. ©2015StrikingGrouphttp://strikinggroup.com.au/ l Accurateprojectestimationisoneofthemostchallengingaspectsofaproject.Projectestimationbecomes increasinglydifficultastheproject’scomplexityanduncertaintyincreases.However,projectestimatescanbe accurate. Thepowerfulprojectestimationtechniquesthatareexplainedinthisarticlewillquicklyimprovetheaccuracyofproject estimates,evenifyouhavenoprojectestimationexperience. Itisthereforeimportanttoaligntheprojectestimationrequirementstotherequiredaccuracyandstageoftheproject. Beforeyoubeginprojectestimation,thereneedsto beanunderstandingofthescopeoftheproject.If youdon’tknowwhattheprojectistryingtoachieve, thenthereislittlechanceofbeingabletoaccurate estimatetheeffortrequired.The more detailed thescopeoftheproject,themoredetailed andaccuratetheprojectestimatewillbe.The size,size,complexityandstageoftheprojectwillimpact greatlyonthelevelofaccuracyrequired,theamount ofcostandtimethebusinesscancommittoproject estimationandthelevelofunderstandingandclarity ofthescopeoftheproject. ImprovingProject EstimationAccuracy BeforeEstimatingProjectCosts
- 5. ©2015StrikingGrouphttp://strikinggroup.com.au/ l Ifthereisaspecificelementoftheproject(oralloftheproject)tobeoutsourcedandprocuringanexternalvendorto delivertheprojectonyourbehalf,asimpleandeffectivewayindeterminingprojectestimatesistohavethese externalsuppliersconductitonyourbehalf. Thiswilllikelybethroughacompetitivebiddingprocess,wheremultiplevendorswillprovideaproposalincludinga fixedpriceandrequiredtimeframesforcompletion. OnceOnceallofthevendorbidshavebeenreturned,anevaluationcanbemadeoneachbidinordertodeterminethe rangeofcostsassociatedwitheachsolution,takingintoaccountanyqualityassumptionsanddocumented exclusions. Keyaspectstorememberinvendorbidanalysisprojectestimationare: Finally,oncetheprojectestimationhasbeencompletedandtheprojecthasadefinedbudget,itisimportantto provideforthelevelof“uncertainty”. Aswithanyestimate,itisjustthat,anestimate.Itshouldnotbeexpectedtobe100%accurateandonlyrequiredto beasaccurateastheroughorderofmagnitudethatwasused,i.e.±15%fortheknowncomponents. An estimate willinevitably include some elementof uncertaintyandduetotheuniquenessofaproject,willcarry certainrisks.Theprojectestimationprocessshouldaccount forthisuncertainty. UncertaintyUncertaintyisoftenmanagedwitha“contingency”budget, contingencyisused wherethereis20% ofuncertainty surroundingthescope,areasonableestimatemaybeto allow20%contingencyforthegreyareas. :-Bidqualityreliesonqualityofscopedocumentationprovided :-Requiresknowledgableandcapablevendors :-Pricemaybeinflatedduetounknownorrisktransference :-Maybedifficulttodetermineindividualcomponentcosts :-Doesnotimproveinternalknowledgeforfutureprojectestimation VendorBidAnalysis ReserveAnalysis
- 6. ©2015StrikingGrouphttp://strikinggroup.com.au/ l NosingleprojectestimationtechniquewillsuitallprojectsandforbestresultsIsuggestusingandcombiningallor manyoftheseestimatingtechniquestoprovideincreasedaccuracytoyourprojectestimates. Iliketotakeitonestepfurtheranduseathree-point(PERT)estimateforallprojectestimationtechniques,applyinga PERTweightedaverageforeverything!Thisisanotherkeyreasonthethree-pointismyfavouriteprojectestimation technique. CombineMultipleProjectEstimationTechniques ChrisO'HalloranisrecognisedasAustralia'sleadingprojectmanagement expertandtheAuthorof"DoneBetterFaster-TheManagerGuideTo Agile".HeisthefounderofStriking Group,a projectmanagement consultancywithofficesacrossAustraliaandAsiawhichfocusseson pragmaticprojectmanagementadviceandtoolsthatactuallywork.Heis aCertifiedPracticingProjectDirectorandCouncillorfortheAustralian InstituteofProjectManagement,amemberoftheInternationalProject ManagementManagementAssociation(IPMA)andtheProjectManagementInstitute (PMI). ChrisO'HalloranBIO