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How do you effectively estimate your project?

ROMEstimating is a tough task in projects specially when uncertainties are higher.  The first thing that needs to be done for effective estimating is take subjectivity and speculation out of projects.

Estimating can be a tedious task, and the final numbers are influenced by a daunting number of factors: scope, type of project, resources involved in estimating, type of client, unknown variables, potential risks and more. But estimating is critical to your project’s—and your organization’s—success. These tips can help practitioners arrive at an estimate that’s both useful and accurate.

  1. Always include contingency. A contingency is something that’s expected to be spent. Therefore, project managers shouldn’t remove it from an estimate simply to make the project look less expensive. In addition to a monetary contingency, also include the time and resources needed to handle the work the contingency implies.If the contingency is not needed, the project will simply be done earlier and the organization can keep the funds for another time.
  2. Avoid making numbers fit the budget. When working on an estimate, a project manager might be tempted to pressure the team to keep the numbers optimistically low. But this creates an estimate that is only good on paper; when the time comes to justify an overage, the team members will simply reveal that they were asked to estimate low numbers and overage should be expected. If the budget and scope are at odds, practitioners should instead adjust the scope: Ask the team to provide what can be done within the budget.
  3. Communicate team assumptions. A common mistake when estimating is listing tasks and numbers while not specifying assumptions behind the numbers. For example, team members may say they can create an online form in seven hours, but they’re envisioning a form with 10-12 fields, while you are expecting 20 fields. Employ good requirements management by making sure team members provide clear details on what they’re estimating to avoid costly surprises later in the project.
  4. Avoid using only high-level breakdowns. The more detailed the breakdown, the more accurate the estimate and the easier it is to get the whole team on the same page. For example, it’s too high-level to say: We will create an online store with a shopping cart. It’s clearer to state: We are responsible for the login, account creation, account management interface, shopping cart and confirmation emails.Clearer estimates may reveal higher costs, but it’s better to find that out while you can still control scope or expectations, rather than mid-project when you are reporting an overage.
  5. Double-check for commonly overlooked activities. In the strain to consider every task, deliverable and bit of scope, it can be easy to overlook ancillary activities, such as meetings, edits on internal or client feedback and bug fixing. But these often-overlooked activities happen frequently during a project—and can frequently derail estimating efforts. Though these tasks can have a huge impact on your estimate, it’s difficult to gauge how long certain parts of the project will take. Feedback, for example, can range from “Change these two sentences” to “I don’t like the concept, can you propose something else?” To handle this ambiguity, look at historical documents like past project reports and assess a percentage of the work rather than a specific amount of money or time.
  6. Include the accuracy of the estimate. Estimates are all guesses based on assumptions, but some guesses are more accurate than others. If the project involves using new technology, for example, then your estimate will be less accurate than if you’re using a system the team already knows. In addition, many estimates are done too quickly due to time constraints; in those cases, the accuracy of estimates drastically diminishes.It’s crucial to communicate the accuracy of the estimate, meaning to specify by how much the amount given can vary. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) provides the following guidelines:
    • Rough Order of Magnitude Estimate: -25 percent to +75 percent
    • Budget Estimate: -10 percent to +25 percent
    • Definitive Estimate: -5 percent to +10 percent

    By communicating this information to your client, you set expectations and avoid surprising anyone when the estimate changes. Please note that A ROM estimate takes place very early in a project’s life cycle — during the project selection and approval period and prior to project initiation in most cases.  The main purpose of the ROM estimate is to provide decision-makers with the information necessary to make a decision on whether it makes sense to move forward with the project based on the estimated level of effort, in terms of completion time and cost.  The point is to provide a “ballpark” estimate using the information available at the time.

    The following information provides a comparison of the three general kinds of estimates as the project makes its way through the life cycle.

    1. ROM Estimate (Variance of -50% to +50%, or -25% to +75% depending on preference)
      • A “ballpark” estimate used to provide a starting estimate to move forward
      • A top-down estimation approach
      • Use of previous expert knowledge and experience
      • Not a great deal of time is spent to develop the ROM estimate
    2. Budget Estimate (Variance of -10% to +25%)
      • Also a top down estimation approach
      • Use of analogous estimation techniques helps provide a slightly more accurate estimate than the ROM estimate (e.g., referencing previous similar types of projects for effort)
    3. Definitive Estimate (Variance of -5% to +10%)
      • A bottom-up estimation technique that requires a decomposition of work and its level of effort that is summed up to develop a more accurate estimate
      • Generally performed during the planning phase and maintained through the remainder of the project
      • This is the most time-consuming estimation effort of the three listed.When developing a ROM estimate, it is best to try estimating in buckets of time and cost.  Providing categories may help estimators who otherwise would not be able to provide one number due to the limited amount of information available at the onset of a project.  The example below provides categories of “Low”, “Medium”, and “High” levels of effort.  Using such a scale may be easier than trying to pull a number out of a hat.  It also sets the expectation on both sides — project team and client — that the ROM estimate has a large variance and should be recognized as just an initial ROM.
        1. Low Effort
          • Hours: 40 to 80 hours to complete
          • Cost: $1000 to $5000 dollars
          • Duration: 1 to 4 weeks
          • Number of Resources: 1 to 3 Resources
        2. Medium Effort
          • Hours: 80 to 480 hours to complete
          • Cost: $10,000 to $50,000 dollars
          • Duration: 2 to 6 months
          • Number of Resources: 4 to 10 Resources
        3. High Effort
          • Hours: 480 to 2080 hours to complete
          • Cost: $100,000 to $500,000 dollars
          • Duration: 6 to 12 months
          • Number of Resources: 11 to 20 Resources
  7. Don’t forget risks. This part may be tricky depending on how aware of risk management your team is. Often, the team will do a quick assessment, agree that it’s a risky project and add more hours to the estimate.However, that’s not enough. Planning for your risk budget means using the registered risk and mitigation plans and accounting for the time needed to make those plans happen. For example, to prevent a technological constraint in a future phase of the project, you may plan to build a prototype. It would potentially avoid 200 hours of rework and would confirm the look and feel the team can obtain before the organization commits to the client. However, the prototype will still take 70 hours to build, and that effort needs to be taken into consideration when estimating the project.

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