Chapter 5 - Estimating Project Times and Costs.docx - Chapter 5 \u2013 Estimating Project Times and Costs Estimating \u2013 the process of forecasting or

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Chapter 5 – Estimating Project Times and Costs Estimating – the process of forecasting or approximating the time and cost of completing project deliverables - Top-down (macro) estimates – usually done by senior management o Management will often derive estimate from analogy, group consensus, or mathematical relationships - Bottom-up (micro) estimates – typically performed by the people doing the work o Estimates are based on estimates of elements found in the WBS Why Estimating Time and Cost Is Important - Estimates are needed to: o Support good decisions o Schedule work o Determine how long the project should take and its cost o Determine whether the project is worth doing o Develop cash flow needs o Determine how well the project is progressing A typical statement in the field is the desire to “have a 95 percent probability of meeting time and cost estimates” Factors Influencing the Quality of Estimates - Planning Horizon o Estimates of current event are close to 100 percent accurate but are reduced for more distant events o The accuracy of time and cost estimates should improve as you move from the conceptual phase to the point where individual work packages are defined o Long-duration projects increase the uncertainty in estimates - Project Complexity o Time to implement new technology has a habit of expanding in an increasing, nonlinear fashion o Sometimes poorly written scope specifications for new technology result in errors in estimating times and costs - People o The people factor can influence the quality of time and cost estimate Accuracy of estimates depends on the skills of the people making the estimates - Project Structure and Organization o Which project structure is chosen to manage the project will influence time and cost estimates One of the major advantages 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
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Projects operating in a matrix environment may reduce costs by more efficiently sharing personnel across projects but may take longer to complete since attention is divided and coordination demands are higher - Padding Estimates o In work situations, people 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 - Organization Culture o Organization culture can significantly influence project estimates In some organizations, padding estimates is tolerated and even privately encouraged Other organizations may place a premium on accuracy and strongly discourage estimating gamesmanship - Other Factors o Non-project factors can impact time and cost estimates Examples include: Equipment down-time Nation holidays Vacations -
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  • Fall '16
  • Phill Jones

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