1. Estimating Project Times and Costs
Chapter 5

2. Objectives
Methods of estimating times and costs
Using Learning curves
Types of costs

3. Methods for Estimating Project Times and Costs
Macro (Top-down) Approaches
Consensus methods
Ratio methods
Apportion method
Function point methods for software and system projects
Learning curves
Project Estimate Times Costs
Top Down estimating = use actual costs of previous similar project as basis for estimating
Used when do not have a lot of detailed information in early phases of project;
Less costly technique but not as accurate more a form of judgement expert like Ratio Method

4. Micro (Bottom-up) Approaches
Template method
Parametric Procedures Applied to Specific Tasks
Detailed Estimates for the WBS Work Packages
Phase Estimating: A Hybrid
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.
Parametric Procedures – uses project characteristics in a math model to predict costs.
Most likely reliable when– historical information is accurate; parameters are readily quantifiable; model is scalable works ok for small and large projects.
Detailed estimates – costs of individual work items then summarize or roll up to get total; accuracy and cost is drivent by size of each task.

5. Why are good Time and Cost estimates important?
schedule work.
needed to determine how long the project should take.
needed to determine project cash flow needs.
needed to determine how well the project is progressing.
needed to establish the project baseline.

6. Considerations to Estimates
Quality Estimate
Project Duration
People
Other
Planning Horizon
Padding Estimates

7. Direct (Project) Overhead Costs
Types of Costs
Direct Costs
Costs that are clearly chargeable to a specific work package.
Direct (Project) Overhead Costs
Costs incurred that are directly tied to an identifiable project deliverable or work package.
General and Administrative Overhead Costs
Organization costs indirectly linked to a specific package that are apportioned to the project
Direct Costs -- labor, materials, equipment, and other
Direct Overhead – Salary, rents, supplies, specialized machinery

8. Estimate duration times
Fairly certain if done before in other projects
derive average duration from historical data
Some projects books available containing mean tables for typical activities
Ask around

9. Four categories of resources
Estimate Resources
Four categories of resources
Money
Materials
Machines
People
Money – budgeted up front; important when you spend it as well as how you spend it
Materials – goes as far as budget goes; when run out go to your contingency plan
Machines – borrowed, schedule accordingly
People – assigned for the total project or borrowed for a short time. Plan for over-allocation of resources and set priorities

10. Learning Curves
A person engaged in a repetitive task will improve his/her performance over time.
Airline industry was first industry to use Learning curves

11. To determine Learning Curve rate:
Formulas
To determine Learning Curve rate:
T2/T1 = T4/T2=T6/T3=T8/T4
To determine time to produce nth or n units:

12. Any Questions?