1. Estimating Project Times and Costs
Chap 5
Estimating Project Times and Costs

2. Factors Influencing the Quality of Estimates
Chap 5
Planning Horizon
Project Duration
People
Project Structure and Organization
Padding Estimates
Organization Culture
Others
Planning horizon
unexpected factors
Project duration
assumptions become less accurate due to an unstable environment
People
accuracy of estimate depends on the skills and experience of the estimator
In addition, staff turnover can contribute to instability in labor and estimates
Anticipated level of productivity vs actual can create variation in estimate
Project structure
dedicated teams can improve accuracy of estimates as control is centralized
Cost is improved in a matrix due to the sharing of resources. Allows resources to be paid from alternatives sources when your project time for that skill is less.
Padding Estimates
based on level of comfort with the project. Less familiarity the more likely to pad
Organizational Culture
some organizational expect padding while others not. If you know they will try to negotiate your estimates you will then pad to ensure adequate resources
padding may occur when the fear of failure is high. The cultural implication of failure will determine if degree of padding.
Others
Unanticipated events such as floods, economy, strikes, holidays, downtime, international

3. Creating Accurate Estimates
Chap 5
Assign Task Estimating Responsibility to the Right Person
Use Several People to Estimate
Assume Normal Conditions
Use Relevant Time Units
Each Task should be estimated Independently of Other Tasks
Assume Initial Plan will go as planned
Develop a Risk Assessment
The person responsible for Estimating depends on the purpose of the estimate.
A detailed estimate should have tasks estimated by the person responsible for completing the Work Plan.
A high level estimate should be completed by the project manager or functional head.
It is wise to use several people in the estimate to remove bias.
Assume the project will complete under a normal set of conditions. Assume no unexpected delays. Not assume an optimal but realistic.
Use relevant time units. Select hours or days or months which allows the project to be tracked so that correction can be made before it is critical.
Interdependency between tasks means that determine the time to complete based on the factors of this task and not to accommodate likely impact of other tasks. Do not pad to accommodate likely events from an external task.
Assume initial plan will go as planned means to develop a most likely plan not one loaded with contingency padding.
One a likely plan is developed then go back and identify risk and develop contingency plans.

4. Top Down vs Bottoms Up Estimating Internal Small Project
Chap 5
Top Down
Strategic Decision
High Uncertainty
Internal Small Project
Unstable Scope
Bottoms UP
Cost & Time important
Fixed Price contract
Customer Wants Detail
Top – Down approach can result in a Max price
Not based on true numbers
may result in an unprofitable job

5. Top – Down Approaches Consensus Method (Delphi) Ratio Methods
Chap 5
Consensus Method (Delphi)
Ratio Methods
Appropriation Methods
Function Point Method
Databases
Learning Curves
Ratio Method
- based on multiples of a specific project critical feature
- sqft, ft-lbs of thrust, mpg, passenger miles
Appropriation
- like a % of total project: can estimate each area if top level costs is defined
- Can estimate top level cost if a valid lower cost is defined.
- engine costs
- electical
- hydraulic
- frame
Function Point is used for software and system projects. Based on design requirements
- inputs, outputs, data transfer, size of data package
Databases are used based on complexity

6. Bottoms – Up Approaches
Chap 5
Template Method
Parametrics for Specific Tasks
Detailed Estimate for WBS Work Plan
Hybrid
Template method is used for typical project such as car repair.
- uses computerize planning software.
Parametrics is similar to ratios but for specific tasks.
- used when project is unique and need a quick response.
Hybrid relates to phased estimating

7. Types of Costs Direct Costs Labor, material, equipment and other
Chap 5
Direct Costs
Labor, material, equipment and other
Direct Overhead
Salary of project manager
rental space
General Administrative
office equipment rental

8. Refining Estimates Interaction costs are hidden in estimates
Chap 5
Interaction costs are hidden in estimates
Normal Costs do not apply
Things can go wrong
Changes in Project Scope and Plan

9. Estimating Example Task Percentage Excavation and framing complete 24%
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Task Percentage
Excavation and framing complete 24%
Roof and fireplace complete 8%
Wiring roughed in 3%
Plumbing roughed in 6%
Siding on 5%
Windows and garage 17%
Heating %
Plumbing Fixtures 4%
Exterior Paint 10%
Interior paint 4%
Carpet %
Floors installed 4%
What is cost
per task?
What is the cost of house?
Simple but is necessary to determine if on budget.
Get these numbers from past experience or experts. Dubai engineer asking on a blog.
Why would you want to know the cost by task?
House size = 2900 sqft
Average cost per sqft = $120

10. Chap 5
Questions