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A Strategy Paper

1252 words - 6 pages

Estimating Project Times and Costs

The process of forecasting or approximating the time
and cost of completing project deliverables

Types of Estimates
Top-down (macro) estimates: analogy, group
consensus, or mathematical relationships
Bottom-up (micro) estimates: estimates of elements
of the work breakdown structure

Estimates are needed to determine how long the project should
take and its cost.
Estimates are needed to schedule work.
Estimates are needed to develop cash flow needs
Estimates are needed to develop time-phased budgets and
establish the project baseline.
Estimates are ...view middle of the document...

-MANAGERS POINT OF VIEWRough order of magnitude is good enough. Spending time
on detailed estimating wastes money
Time is everything; our survival depends on getting there
first and time/cost is not an issue
The project is internal. We don’t need to worry about cost
The uncertainty is so great that spending time and money
on estimates is a wastes
Project is so small that we do not need to bother with
estimates. Just do it.
They used an initial estimate “for strategic decision” and
then we had to live with it.
We were burned once. I want a detailed estimate of every
task by the people responsible.

The Macro or Top-Down approach can provide a quick but rough
A Micro or Bottom-Up approach can provide a fairly accurate
estimate, but is time consuming and risk of overlooking tasks
Conditions for Preferring Top-Down/Bottom-Up Time and Cost Estimates
Strategic decision making
Cost and time important
High uncertainty
Internal, small project
Fixed-price contract
Customer wants details
Unstable scope

Macro Estimates

Micro Estimates


Make rough top-down estimates
Develop the WBS/OBS
Make bottom-up estimates
Develop schedules and budgets
Reconcile differences between top-down and
bottom-up estimates

Macro (Top-Down) Approaches


Consensus methods e.g. Delphi
Ratio methods: Given a cost for a previous project then an
estimate for a new project can be scaled from the known cost. e.g.
NASA, at times, uses spacecraft weight to estimate total cost.

Learning curves: If the same task is repeated a number of times
there will be a cost / time savings relative to the first time the task is

Apportion method: Given a similar previous project, costs for
major subunits of the new project would be proportional to similar
subunits in the previous project.

Function point methods for software & system projects


Y = aX

ln (Learning Rate)


where Y = Cumulative Average Time (CAT)
a = time/cost of the 1st unit or batch
X = cumulative production or batches produced
b = learning exponent (rate)

a = 50 hours, X = 128 batches,

learning rate = 80%

b = ln0.8/ln2 = -0.22314/0.69315= -0.32193

Y = aX = 50 * 128


= 10.48576

This means that at 128 batches, CAT = 10.48576
So total time = 10.48576 * 128 = 1,342.18

Allocating projects costs based on WBS


Total adjusted count provides the basis for estimating the labor
effort and cost for the project)

Micro (Bottom-Up) Approaches
Template method: Uses historical data to establish detailed costs
and schedules for project subunits. A...

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