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Project Estimating Techniques
You will definitely see project estimating techniques mentioned as part of the PMP exam, so it’s good to know the four main different types and the differences between them.
Throughout your project you’ll be asked to make those estimations of future performance, and that could be in your Schedule, it could be in the Cost of the project, it could even be in the quality of your project. The four main methods that you will come across as part of the PMBOK guide are:
- Parametric estimating
- Bottom up estimating
- Analogous estimating, and;
- 3-point estimating.
They might sound a little bit funny at first, so let’s go into them in more detail.
First of all we’ve got parametric estimating. This is where we’re actually using a parameter to estimate per item. So it’s a simple parameter, for example 55 meters or $55 per square meter or square foot. We might have a thousand dollars per roll of metal, or twenty days per delivery in our schedule for example, where it might take to get something to another country. We might be looking at two-week sprints per each feature that we’re delivering in a software project, or a team might take an eight-hour workshop to complete a risk assessment. All of these are parameters that we might assign to the activities so that we can estimate for those activities.
Next up we’ve got bottom up estimating. This is where we’re estimating project resources by assigning a value to the lower-level components of the Work Breakdown Structure. We’re starting from the bottom and we’re working our way up. And when we say the bottom we mean the the lower level tasks that have been assigned to our teams. Now these of course go up in the work breakdown structure to the larger tasks or features, and then to an overall delivered feature (and this is where we start getting into Agile potentially or Feature Driven Development) but the idea of that is that this team can estimate on their piece of work, this team can estimate on their piece of work or their single task or one or two tasks, and that might be say $10,000, this one might be $20,000, this one might be $5,000, and then we take all of those items and we bring them up into the feature so the total there could be $50,000 and then the total for the overall feature could be $100,000 for example. But the key is that we’re starting at the very lowest level of the activity, we’re starting from the bottom.
Next up we have Analogous estimating. This is where we’re finding an analogy, something similar to what we’re currently doing. We’re estimating the duration or cost of an activity or a project using historical data from a similar activity or a similar project. Of course this is frequently used to estimate project duration when there is a limited amount of detailed information, so we haven’t gotten down into the Work Breakdown Structure yet at the team level, we only have a really high-level idea. Using Analogous Estimating we can get a rough idea of how much it will cost, or how long it will take by looking at another similar project. It’s like an analogy, it’s similar to what we’re currently doing. Generally it’s less costly and less time-consuming than our other techniques, but also it is less accurate because we’re not really delving into the detail.
Last but not least there is 3-point estimating. This uses an average of three points – we might have the Optimistic estimate, the Pessimistic estimate, and the Most Likely estimate. The way that we end up working it out is: Let’s say our Optimistic schedule (O) is five days, our Most Likely (M) is seven days and then our Pessimistic (P) is ten days. We add each of them together and then we divide that by three, and that gives us the answer.
In fact here’s a better version that doesn’t take as much math or any decimals – let’s say we’ve got five, nine and ten divided by three – because 24 is a nice round number – we divide that by three and we get eight. And that’s how we do three-point estimating.
You might see a variation of this which is “Beta” or “PERT” (Program Evaluation Review Technique), where we’ve got Optimistic, then four times the most likely, and then our pessimistic as well, all divided by six instead.
And those are the project estimating techniques we will come across in the PMP Exam.
– David McLachlan