In project management, estimation is a critical process for predicting the time, cost, resources, and effort required to complete a project. Different estimation techniques are used depending on the project’s complexity, available data, and the stage of the project lifecycle. Below are the key estimation techniques used in project management:
1. Analogous Estimation (Top-Down Estimation)
Description: Uses historical data from similar past projects to estimate the current project.
When to Use: Early in the project when detailed information is limited.
Advantages:
Quick and easy to perform.
Requires minimal details.
Disadvantages:
Less accurate, as it relies on assumptions.
Not suitable for unique or complex projects.
2. Parametric Estimation
Description: Uses statistical relationships between historical data and project variables (e.g., cost per square foot, time per unit).
When to Use: When historical data is available and the project is well-defined.
Advantages:
More accurate than analogous estimation.
Scalable for large projects.
Disadvantages:
Requires reliable data and a clear understanding of variables.
May not account for unique project factors.
3. Bottom-Up Estimation
Description: Breaks the project into smaller tasks, estimates each task individually, and then aggregates the estimates.
When to Use: When detailed project information is available.
Beta Distribution (PERT): Estimate=O+4M+P6Estimate=6O+4M+P
When to Use: When there is uncertainty in task durations or costs.
Advantages:
Accounts for risks and uncertainties.
Provides a range of possible outcomes.
Disadvantages:
Requires more effort to calculate.
Relies on subjective judgment.
5. Expert Judgment
Description: Relies on the experience and intuition of experts to estimate project parameters.
When to Use: When historical data is unavailable or the project is unique.
Advantages:
Quick and flexible.
Useful for complex or innovative projects.
Disadvantages:
Subjective and prone to bias.
Accuracy depends on the expert’s experience.
6. Delphi Technique
Description: A structured method where experts provide estimates anonymously, and the results are aggregated and refined through multiple rounds of feedback.
When to Use: When consensus is needed among experts.
Advantages:
Reduces bias and groupthink.
Provides reliable estimates.
Disadvantages:
Time-consuming.
Requires coordination and facilitation.
7. Reserve Analysis
Description: Adds contingency reserves (time or cost) to the project estimate to account for uncertainties and risks.
When to Use: When the project has high uncertainty or risk.
Advantages:
Improves project resilience.
Accounts for unforeseen events.
Disadvantages:
Can lead to overestimation if not managed properly.
8. Comparative Estimation
Description: Compares the current project with similar past projects to estimate effort, cost, or duration.
When to Use: When historical data from comparable projects is available.
Advantages:
Simple and quick.
Useful for repetitive projects.
Disadvantages:
Less accurate for unique projects.
Relies on the availability of comparable data.
9. Function Point Analysis (FPA)
Description: Estimates the size and complexity of software projects based on the number of functions or features.
When to Use: For software development projects.
Advantages:
Standardized and objective.
Useful for measuring productivity.
Disadvantages:
Requires expertise in FPA.
Not suitable for non-software projects.
10. Monte Carlo Simulation
Description: Uses probability distributions and random sampling to simulate thousands of possible project outcomes.
When to Use: For complex projects with high uncertainty.
Advantages:
Provides a range of possible outcomes and probabilities.
Accounts for risks and uncertainties.
Disadvantages:
Requires specialized software and expertise.
Time-consuming to set up and run.
Choosing the Right Estimation Technique
Early Project Stages: Use analogous estimation or expert judgment when details are limited.
Detailed Planning: Use bottom-up estimation or parametric estimation when more information is available.
High Uncertainty: Use three-point estimation, Monte Carlo simulation, or reserve analysis.
Software Projects: Use function point analysis or story points (in Agile).
By selecting the appropriate estimation technique(s), project managers can improve the accuracy of their estimates and set realistic expectations for stakeholders.
Project definition refers to the process of clearly outlining the purpose, objectives, deliverables, and boundaries of a project. It serves as the foundation for planning, execution, and monitoring. A well-defined project includes the following elements:
Objectives: Clear, measurable goals that the project aims to achieve.
Scope: The specific tasks, activities, and deliverables that the project will include.
Constraints: Limits on time, budget, and resources.
Stakeholders: Identification of those impacted by or involved in the project.
Risks: Potential challenges or issues that might arise.
Success Criteria: Benchmarks to measure project success.
Requirements: are gathered from all stakeholders ,
• Requirements gathering can take a long time • While project is completed, only the work in PM plan should be done
Project Management Terms (Gold Plating, Scope Creep) of Project Definition
Gold Plating in Project Definition
Gold plating refers to delivering more than what is required or adding extra features or functionality that were not initially part of the project’s agreed-upon scope. It is done without formal approval and often stems from an overzealous desire to exceed expectations.
Examples of Gold Plating:
Adding extra software features to a product beyond what the client requested.
Delivering additional marketing materials that were not in the original plan.
Risks of Gold Plating:
Increases project costs and time.
May lead to dissatisfaction if the additional features create complications or deviate from the client’s needs.
Diverts resources from critical tasks.
How to Avoid Gold Plating:
Stick to the defined project scope.
Obtain formal approval for any scope changes.
Regularly communicate with stakeholders about deliverables.
Scope Creep in Project Definition
Scope creep refers to uncontrolled or unauthorized changes and continuous expansion of a project’s scope without adjustments to time, cost, or resources. Unlike gold plating, scope creep often arises from external factors, such as changing client demands or poorly defined project boundaries.
Examples of Scope Creep:
Adding additional deliverables because the client requests them midway through the project without formally adjusting the project scope.
Extending deadlines to accommodate newly introduced tasks.
Risks of Scope Creep:
Delays project completion.
Leads to budget overruns.
Causes team burnout due to unforeseen workload.
Risks project failure due to loss of focus.
How to Prevent Scope Creep:
Clearly Define the Scope: Develop detailed project requirements in the planning phase.
Establish Change Control Processes: Require formal approvals for scope changes.
Communicate Boundaries: Ensure stakeholders understand the agreed-upon scope.
Regularly Monitor Progress: Use project management tools to identify deviations early.
There are two basic types of project selection models, numeric and non-numeric. Both are widely used. Many organization use both at the same time or they use models that are combinations of the two
1. Numerical Models
Numerical models are quantitative methods that use numerical data and calculations to evaluate and compare projects.
Characteristics:
Relies on measurable data (e.g., costs, revenues, time).
Objective and data-driven.
Focuses on financial or quantifiable outcomes.
Types of Numerical Models:
Profitability Models:
Evaluate financial viability.
Examples:
Net Present Value (NPV): Measures the present value of cash flows against investment costs.
Internal Rate of Return (IRR): Calculates the discount rate where NPV equals zero.
Payback Period: Time required to recover the project investment.
Benefit-Cost Ratio (BCR): Ratio of benefits to costs; a higher BCR is preferred.
Scoring Models:
Assigns weights to criteria based on importance and scores projects accordingly.
Example:
Weighted Scoring Model: Combines scores across criteria (e.g., risk, ROI, alignment with strategy).
Advantages:
Provides clear, comparable metrics.
Helps assess financial feasibility and return on investment.
Disadvantages:
May overlook non-quantifiable benefits (e.g., reputation, employee satisfaction).
2. Non-Numerical Models
Non-numerical models are qualitative approaches that rely on subjective assessments and strategic considerations.
Characteristics:
Focuses on alignment with organizational goals and priorities.
Emphasizes qualitative factors like innovation, market trends, or social impact.
Less dependent on numerical data.
Types of Non-Numerical Models:
Checklist Model:
Projects are evaluated using a checklist of criteria (e.g., “Does it align with organizational goals?”).
Simple “yes” or “no” answers determine project viability.
Strategic Alignment Model:
Assesses how well a project aligns with the organization’s strategic objectives.
Profile Model:
Compares projects based on risk and return profiles.
Helps visualize trade-offs between risk and potential benefits.
Sacred Cow Model:
Projects are selected based on leadership preferences or strategic directives, regardless of other factors.
Organization: The highest level of the hierarchy. Defines strategic goals, vision, and mission.
“Allocates resources to portfolios, programs, and projects to achieve business objectives”
Portfolio: Portfolio is collection of Programs & Projects
Portfolio is A collection of programs, projects, and operations grouped together to align with organizational strategy.
Program: Program is collection of Projects.
Program is a group of related projects managed in a coordinated way to achieve benefits not achievable individually.
Project: Project is collection of Products.
A project is a temporary endeavor undertaken to create a unique product, service, or result. It is defined by specific goals, a start and end date, and constraints such as time, cost, and resources.
Products are often managed over their lifecycle to provide ongoing value to the organization.
Product: Product is The final deliverable or result of one or more projects, it’s both services or goods.
Products are often managed over their lifecycle to provide ongoing value to the organization.
