1. Projmgmt-1/25 DePaul University Project Management I - Dynamics Of Estimation Instructor: David A. Lash

2. Projmgmt-2/25 What is Estimation? u Determine time and money required for tasks – Critical to success of schedule but extremely hard to do u R&D projects may be solving “new” problem u New technology may be involved with “unknown” productivity enhancements u Productivity of the individual is likely unknown to the project manager (what is an average worker?) u If 1 portion of project slips, coordination of resources may throw schedule off (e.g., equipment shows up and not ready for it.)

3. Projmgmt-3/25 Estimation Without Complete Specification u Almost always leads to trouble. – If pressed for a “ballpark” estimate, u List out all the specification questions needed to better estimate the project. – Ask what questions you have – Estimate as best as you can. – List the “known-unkowns” u E.g., How long to build the house? – What type of house? How many floors? What type of construction? Any “custom” features? Etc. – Estimate XXX days given: not known availability of contractors, type of construction, etc.

4. Projmgmt-4/25 Some Practical Estimation Advice u Padding estimates “just to be safe” can have a detrimental effect to: – Your reputation as a project manager – You company or organization u Suppose your organization has 1,000,000 for funding projects:

5. Projmgmt-5/25 Who Should Make The Estimate? u Estimators should be experienced with work they are estimating. Need to understand the work in order to estimate it. u People doing work should have role in estimation process. – The know own limitations (e.g., learning curve) – know their own schedule u Should have some exposure to techniques and goals of estimating – e.g., produce accurate estimate VS optimistic schedule. u Use experience! – Organizations can build DB of performance data of various tasks. u When confronted with challenges to schedule – refer to the WBS and project specification

6. Projmgmt-6/25 3 Estimation Terms u “Ballpark Estimate” - Used for some initial estimation. Can be off by as much as 90%. – Accuracy relies on knowledge of estimator who has some expertise in area – Only purpose of ballpark estimate is to determine if more detailed estimate is useful (e.g., continue?) u Rough order of magnitude (ROM) - still has wide variance but is based on extrapolations of similar projects. – For example, builder may know a house 20% smaller took 100 days to build. Therefore ROM estimate just add 20% to 100 days. – Purpose is only to decide to start a project or more accurate estimation process.

7. Projmgmt-7/25 3 Estimation Terms u Detailed Estimate - “Bottom Up” - includes WBS, schedule and budget. Look at each task to develop the estimate. – Actually used to manage the project. – Details the schedule, resource information and a forecast of project budget and cash flow

8. Projmgmt-8/25 3 Estimation Techniques u Phased Estimating u Parametric Estimating u Bottom-up Estimating

9. Projmgmt-9/25 Estimation Techniques u Phased Estimation - cost and schedule estimates on a per phase basis only – Phase gate developments - each phase gate is a decision point to determine if to continue – helps mitigate project risk, since u only estimate 1 phase at a time u re-estimate next phase when more info is known – Start with a detailed estimate of phase 1 and rough order of magnitude for entire project. u Team agrees to detailed estimate for phase. – At end of phase, a new ROM estimate developed for entire project & repeat detailed estimation.

10. Projmgmt-10/25 Phased Estimation Require DesignBuildOper ROM estimate (low confidence) Detail Est Req exec ROM estimate Detail Est exec ROM estimate Detail Est exec Decision Points

11. Projmgmt-11/25 Incremental Phased Estimation Phase ConstructionOper ROM Estimate (low confidence) For remaining phases Detail Est Req exec Design Build Test Decision Points User Experience

12. Projmgmt-12/25 Phased Estimation II u Project Members & managers - like phased estimation since: – Can be more accurate since not estimate all at once (and have to live with it) u Customers - may not like it since – not know when the entire project is complete – but get more and more accurate information as project progresses. u Examples - – Used for construction - Not estimate date for house until design and blueprint approved. – Suppose moving location for company u Phase 1 - build new facility - 12-15 months u Phase 2 - once new building done then did detailed plan for move

13. Projmgmt-13/25 Phased Estimation III u Examples - – Suppose building a D/R capability, u Wanted to acquire redundant machines (to ensure can continue business if disaster), get vital data reproduced, ensure daily production can continue seamlessly – phase 1 - be able to reproduce more vital products at remote site. Get vital data copied daily and sent over to remote site. – phase 2 - identify all data and applications needing D/R coverage and work out processes to reproduce in emergency.

14. Projmgmt-14/25 3 Estimation Techniques u Phased Estimating u Parametric Estimating u Bottom-up Estimating

15. Projmgmt-15/25 Parametric Estimation u Parametric - seeks a basic unit of work to use as a multiplier for entire project. u Always based on historical data as close to reality as possible u Examples – A cycling group cycled every Saturday for several miles. Planned a 3334 mile trip, – Based on experience felt they could expect to do 80 miles a day for 3334/80=42 days. – However, they are not accounting for wet weather (add 10%) or 200 miles of hilly miles. u Add 10% for poor weather and believe can only do 30 miles per day on hills. u (For calculation see next page)

16. Projmgmt-16/25 Parametric Estimation - Cycling Calculation u Parametric Calculation

17. Projmgmt-17/25 Parametric Estimation - Examples u Engineering company needed to design a new jet fighter. – Would require 1000s of engineering drawings – based on past experience, each drawing would require 200 engineering hours – Could use this to build some estimate, not complete but at least some basis for estimate u Manufacturing company needs to translate 340 page manual into several languages – on average 15 pages per day can be translated with 2 people working on each language – 15 pages per day with a new lang is optimistic but

18. Projmgmt-18/25 Parametric Estimation - Lessons u Better for lower level tasks than for estimating entire project u Good for ROM and even for project selection estimates u Usually need detail specifications of tasks. Need to know lots about tasks to be accurate. For example need to know amount of hilly terrain or different languages to translate to (and number of pages in manual). u Might use parametric for low level work package estimates. Then roll each of the packages up to get overall project estimates.

19. Projmgmt-19/25 3 Estimation Techniques u Phased Estimating u Parametric Estimating u Bottom-up Estimating

20. Projmgmt-20/25 Bottom-Up Estimation u All detailed tasks are estimated and then combined from lowest level to highest. – Use WBS for framework – Provides most accurate estimates u Since requires details of all work packages used more with phased estimation

21. Projmgmt-21/25 Overall Planning Steps -Provide bottom up estimating

22. Projmgmt-22/25 The Detailed budget estimate u The Detailed Estimate – Used to get a realistic as possible – Used for detailed cost-benefit – Used to manage the project u Categories include – Internal Labor Costs - figure 8.5 shows the labor hours summarized for each task – Burdened labor rate - an average cost of employee per category u For example THC rate or Admin HC rate u include wages, benefits, workplace costs. – Internal Equipment Costs - (Next Slide)

23. Projmgmt-23/25 The Detailed Budget Estimate u Categories include – Internal Labor Costs – Burdened labor rate – Internal Equipment Costs - equipment needed to do the job. u E.g., each person may need 1000 computer or a backhoe u Figure 8.6 (pg 177)shows resource usage plan. Need to identify which equipment will be used up entirely and which will be useful for several projects. – For example, if useful for 3 years and 5 projects can use then may spread equipment cost across three projects. – Project cash flow detail u Figure 8.6 shows the cash flow estimate for the project. It shows the week to week projections of costs

24. Projmgmt-24/25 Example Of Cash Flow Schedule u Cash Flow Estimates Important Examples: – A small housing development that will build 5 houses u Staggers the start data of each house to keep each crew busy (mv from house-house) u Need constant cash flow (sell house to fund next phase.)

25. Projmgmt-25/25 The Detailed Budget Summary u Detailed estimates take time and money. u Consistent usage of technique & experience brings better estimates. u Different estimation techniques are used at different times u Estimation takes cooperation of many people on team