Project Management

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12MCOM03: Project Management
SESSION – 6 & 7 j , y Project: Time, Cost & Quality

Estimating Projects
• Estimating
– The process of forecasting or approximating the time and cost of completing project deliverables. – The task of balancing the expectations of stakeholders and the need for control while the project is implemented

• Types of Estimates
– Top-down (macro) estimates: analogy, group consensus, or mathematical relationships – Bottom-up (micro) estimates: estimates of elements of the work breakdown structure

Why Estimating Time and Cost Are Important
• Estimates are needed to support good decisions. • Estimates are needed to schedule work. • Estimates are needed to determine how long the project should take and its cost. • Estimates are needed to determine whether the project is worth doing. • Estimates are needed to develop cash flow needs. • Estimates are needed to determine how well the project is progressing. • Estimates are needed to develop time-phased budgets and establish the project baseline.



Factors Influencing the Quality of Estimates
Planning Horizon
Other (Nonproject) Factors Project Duration

Organization Culture

Quality of Estimates


Padding Estimates

Project Structure and Organization

Estimating Guidelines for Times, Costs, and Resources
1. Have people familiar with the tasks make the estimate. 2. Use several people to make estimates. 3. Base estimates on normal conditions, efficient methods, and a normal level of resources. 4. Use consistent time units in estimating task times. 5. Treat each task as independent, don’t aggregate. 6. Don’t make allowances for contingencies. 7. Adding a risk assessment helps avoid surprises to stakeholders.

Macro versus Micro Estimating
Conditions for Preferring Top-Down or Bottom-up Time and Cost Estimates Condition Strategic decision making Cost and time important High uncertainty Internal, small project Fixed-price contract Customer wants details Unstable scope Macro Estimates X X X X X X Micro Estimates X



Estimating Projects: Preferred Approach
• Make rough top-down estimates. • Develop the WBS/OBS. • Make bottom-up estimates. • Develop schedules and budgets. • Reconcile differences between top-down and bottom-up estimates

Methods for Estimating Project Times and Costs
• Macro (Top-down) Approaches
– Consensus methods – R ti methods Ratio th d – Apportion method – Function point methods for software and system projects – Learning curves Project Estimate Times Costs

Apportion Method of Allocating Project Costs Using the Work Breakdown Structure



Simplified Basic Function Point Count Process for a Prospective Project or Deliverable

Example: Function Point Count Method

Methods for Estimating Project Times and Costs (cont’d)
• Micro (Bottom-up) Approaches
– Template method – Parametric Procedures Applied to Specific Tasks – Detailed Estimates for the WBS Work Packages – Phase Estimating: A Hybrid



SB45 Support Cost Estimate Worksheet

Phase Estimating over Product Life Cycle

Level of Detail
• Level of detail is different for different levels of management. • Level of detail in the WBS varies with the complexity of the project. • E Excessive d t il i costly. i detail is tl – Fosters a focus on departmental outcomes – Creates unproductive paperwork

• Insufficient detail is costly.
– Lack of focus on goals – Wasted effort on nonessential activities



Developing Budgets
• Time-Phased Budgets
– A cost estimate is not a budget unless it is time-phased. • Time phasing begins with the time estimate for a project. • Time-phased budgets mirror how the project’s cash needs (costs) will occur or when cash flows from the project can be expected. • Budget variances occur when actual and forecast events do not coincide.

Work Package Estimates

Three Views of Cost



Types of...
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