Estimating seems to be a lost art, it is one of the most important skills you can learn as it is one of the key factors in job profitability. If you do not get your estimate right and you have a fixed quote, you can literally end up out of pocket. If there is a big overrun then it can affect your reputation.
Estimating improves with experience and I am always calibrating my estimations at the project debrief. Also the more estimates you do the more you can see patterns and be able to increase the tolerance in your estimating.
Methods of estimating
There are many different methods of estimating, I have outlined a few that I have come across in different organisations. There is no right and wrong method, and the method used will depend on the project’s size and scope.
1. Top down estimating
This is used when there is limited amount of detailed information about the project, for example in the early phase of a project. Top down takes the whole view of the project. generally working by analogy with other similar projects that have accurate historical information.
2. Bottom up estimating
This works by breaking the project up into small pieces and estimating each individual piece. The people who provide the bottom up estimates are usually the ones that will perform the work. It is usually driven by the work breakdown schedule or task list. Bottom up estimating tends to underestimate as the inter-task elements or glue tasks, such as project management tend to get forgotten.
3. Comparative or analogous estimating
This is another method where estimates are driven by analogy with the details of previous projects. It is frequently used to estimate project costs when there is little detailed information about a project (early phases).
4. Delphi Method
Uses a number of different estimates from project staff and then uses a weighted average. It uses expert opinion of a group to arrive at a consensus. The process is iterative and anonymous. After each person has estimated the coordinator gathers the estimates and re-distributes them. Each person then re-estimates based on these new guidelines and the process stops when a consensus has been reached.
5. Parametric estimates
Uses statistical models obtained from historical analyses of cost, effort or material data. This is mostly used in life cycle costing to see the costs over the lifetime of the product. These costs look accurate so can be dangerous.
6. Three point estimate method
Uses an optimistic (O), most likely (ML) and pessimistic (P) value of time and cost. To get the planning value (PV) from the three point estimate with the following formula: PV = (O + 4ML + P) / 6. The multiple of 4 acts to weight the figure in favour of the most likely.
Remember that estimates should be reviewed regularly throughout the project.
4 thoughts on “Estimating – The Lost Art”
7. Ask the customer what his budget is…
It would be great if the customer would tell you their budget, 99% of the time they usually are tight lipped.
A lot of these techniques are usually used to estimate the time of the project. You can then assign a price to a unit of time to arrive at a project cost.
This depends on how clever you are with the relationship ;o)
…it is not difficult to find out the ballpark figure – the problem lies in the budget normally being too low and the impending proposal being far too expensive for them.
Yes you are right in this market it is all about compromise on budgets.
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