Before we review the key estimating techniques and methods that we need to know to best plan our projects and manage our risk, let's first take a deeper look at the common reasons for estimating woes on many troubled projects:
• Improper work definition The number one reason for inaccurate work estimates is inadequate definition of the work to be performed. This includes the following:
o Estimates based on incomplete work. Work elements (packages) not accounted for in the WBS.
o Estimates based on lack of detail work breakdown.
o Estimates made without understanding the standards, quality levels, and completion criteria for the work package.
• Wrong people estimating Another key reason for inaccurate work estimates is that the wrong people make the estimates. While it may be appropriate for management to make ballpark estimates during the early defining and planning stages, when firm commitments must be made, it is best to have the people who have experience doing the work make the estimates (or at least review and approve any proposed estimate made by someone else).
• Poor communications This reason hits on the process of facilitating estimate development. This category includes such events as o Not sharing all necessary information with the estimator.
o Not verifying with the estimator what resource assumptions and other factors the estimates are based on.
o Not capturing and communicating the estimate assumptions to all stakeholders.
• Wrong technique used We will cover this in greater detail in the next section, but this category includes events such as o Making firm budget commitments based on top-down or "ballpark" estimates rather than bottom-up estimates.
o Not asking for an estimate range or multiple estimates.
o Not leveraging the project team.
o Not basing estimates on similar experiences.
• Resource issues Related to the poor communications category, but this is a specific case where it's not really an estimate issue. This is when the person assigned to do the work is not producing at the targeted level or when there are performance quality issues with any of the materials, facilities, or tools. Without documented assumptions, these issues can appear as inaccurate estimates to stakeholders.
• Lack of contingency In many cases, especially on projects involving new technologies and new processes, the identified risk factors are not properly accounted for in the work estimates. The uncertainty level in specific work estimates needs to be identified and carried forward into the project schedule and budget as part of the contingency buffer or management reserve.
• Management decisions In many situations, senior management influence and decisions impact the estimating accuracy level. This category includes events such as o Senior management making firm budget commitments based on initial, high level estimates and not accounting for accuracy ranges.
o Senior management not willing to invest time or resources to get detailed, bottom-up estimates.
o Estimators factoring their estimates for senior management expectations rather than the actual work effort.
o Management requesting that estimates be reduced in order to make the work meet the budget or schedule goals.
o Management decisions to bid or accept work for less than estimated cost.
o No use of management reserve to account for risk/uncertainty.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.