Estimating Project Times and Costs Chap 5 Estimating Project Times and Costs

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

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.

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

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

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

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

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

Estimating Example Task Percentage Excavation and framing complete 24% Chap 5 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 9% Plumbing Fixtures 4% Exterior Paint 10% Interior paint 4% Carpet 6% 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

Chap 5 Questions