Chapter 5 Outline - Chapter 5 Outline Project estimation is...

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Chapter 5 Outline Project estimation is indeed a yardstick for project cost control. And if the yardstick is faulty, you srate on the “wrong foot.”… we exhort you not to underestimate the estimate.* - Estimating is the process of forecasting or approximating the time and cost of completing project deliverables - Top-down estimates are usually done by senior management o Estimates are derived from analogy, group consensus, or mathematical relationships - Bottom-up estimates are typically performed by the people who are doing the work o Generally based on elements found in the work breakdown structure (WBS) - Why Estimating Time and Cost Are Important o Estimates are needed to support good decisions o Estimates are needed to schedule work o Estimates are needed to determine how long the project should take and its cost o Estimates are needed to determine whether the project is worth doing o Estimates are needed to develop cash flow needs o Estimates are needed to determine how well the project is progressing o Estimates are needed to develop time-phased budgets and establish the project baseline Factors Influencing the Quality of Estimates: - Desire is to have a 95% probability of meeting time and cost estimates o Past experience is a good starting point for developing time and cost estimates Other factors are uniqueness of the project, people, and external factors o Planning Horizon: Estimates of current events are close to 100% accurate but are reduced for more distant events The accuracy of time and cost estimates should improve as you move from conceptual phase to the point where individual work packages are defined Long-duration projects increase the uncertainty in estimates o Project Duration: Time to implement new technology has a habit of expanding in an increasing, nonlinear fashion. Sometimes poorly written scope specifications for new technology results in errors in estimating time and cost o People: People can influence the quality of time and cost estimates: how skilled are the people making the estimates??? o Project Structure and Organization: Which project structure is chosen to manage the project will influence time and cost estimates A major advantage of a dedicated project team is the speed gained from concentrated focus and localized project decisions This speed comes at an additional cost of tying up personnel full time Projects operating in a matrix environment may reduce costs by more efficiently sharing personnel across projects buy may take longer to complete since attention is divided and coordination demands are higher o Padding Estimates: In work situations where you are asked for time and cost estimates, most of us are inclined to add a little padding to increase the probability and reduce the risk of being late If everyone at all levels of the project adds a little padding to reduce risk, the project duration and cost are seriously overstated Realistic estimates are needed to be competitive o Organization Culture:
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