Estimation Tools and Techniques Part- II

In part I, of this article, we learnt what are the various tools and techniques used in various estimation processes and how to remember them.  We have also identified that there are 11 Unique Estimation tools and techniques used across Estimate Activity Resources, Estimate Activity Durations and Estimate Costs processes. In this part of the article we will try to learn in more details about those 11 unique tools and techniques, one by one.

  1. Alternatives analysis: It is a technique where you look at various ways to assign resources by varying the number of resources as well as the kind of resources and then decides upon the best one.
  2. Analogous Estimating: It is a technique where you refer to those previous projects which were having, scope or activities, similar to your current project. Then you figure out how much time and/or these activities have taken earlier, during that project, to make estimation for duration and/or cost of similar activities in your project. This information of past projects comes from OPA (Organizational Process Assets) This technique, sometimes, also called as “Top Down Estimating” because you try to estimate the duration or cost for whole of the activity, with reference to previous project activities, without breaking it to Work Package level, as it will be hard to map similarities, between previous project and current project, till that much lower level.
  3. Bottom-up Estimating: Using this technique you estimate resources or costs by breaking down complex activities into smaller pieces and working out resource or cost assignments for these smaller activities using other resource / cost estimating tools and techniques. It is based on detailed WBS (Work Breakdown Structure). Here you estimate each piece and add them up. When individual estimates are added up it becomes the project estimates.
  4. Cost of Quality: Cost of Quality estimation is used for determining overall cost estimates. It includes Cost of Conformance ( i.e money spend on Quality training, studies, surveys, inspection, validation & audits) and Cost of Non Conformance ( i.e money spent on  rework , scrap, inventory and warranty costs ).
  5. Expert Judgment: This technique is used in all three estimation processes. Experts, with expertise appropriate to the concerned activity, are asked to estimate the resources and/or duration and/or cost. Experts may be available within the organization or may be provided from outside the organization.
  6. Parametric Estimating: This estimation, like analogous estimation technique, requires historical information gathered from previous projects. This technique is used for both cost and time estimates calculations. But, unlike analogous estimation technique, parametric estimation requires plugging the historical data into a formula, spreadsheet, database, or computer program to come up with an estimate. Here you enter your parameters on the historical database which is designed specially as a system for parametric estimation. It is sometime also referred as Quantitative based estimating. E.g When you need to determine what would be the total cost of construction when you have cost per square foot or the units of work multiplied by productivity unit rate to estimate activity duration.
  7. Project Management Software Estimation These are specialized software programs or software tools for doing estimation for project resources and various costs.
  8. Published Estimating Data: This technique is used only for estimating activity resources.  This published data can include articles, books, journals and periodicals from various industries that have proven data with similar projects. Using the Published Estimating Data Project Managers can make a rough estimation of how many resources they need.
  9. Reserve Analysis: Used for estimating activity duration and cost, reserve analysis includes estimation of additional time to the project schedule (to allow time for unexpected delay) and additional cost to the project budget (in case of activity cost overruns). It is more of like analysis for the contingency or adding buffers to the estimations.
  10. Three point Estimates: It takes average of three estimated durations or estimated costs - The Optimistic (O), The Most Likely (M) and the Pessimistic (P). These estimate values are usually taken from subject matter experts in respective activity area. PERT (Project Evaluation Review Technique) is another common form of three point estimation; it gives a weighted average of these three to arrive at a more realistic estimate. Using Simple Mean Estimated Duration or Cost = (O + M + P) / 3 Using PERT Estimated Duration or Cost = (O+ 4M + P) / 6
  11. Vendor Bid Analysis: This technique is usually used when you need to work with external vendor or contractor to get your project activities done. This technique helps you to analysis what the project cost should be based on the bids from vendors and estimate the price of individual deliverables.

References :-
Achieve PMP Exam Success, Margaret Chu, Diane Altwies, Edward Walker,
JRoss Publishing, 3rd Edition Head First PMP, Jennifer Greene and Andrew Stellman,
O’Reilly, 2nd Edition

About the Author

Manish SharmaManish Sharma

Manish is a PMP certified professional with more than 7 years of IT industry experience in various technical and cross functional roles. He holds an M.B.A (International Business and Finance) and B.E. (Hon’s in Electronics and Communication Engineering) degrees.

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