Accurate estimating is a challenge, as you are typically attempting to predict the future based on past experience and limited data. Estimating is part science and part art, and made more difficult by a project’s uniqueness. Focus on sound estimating rules to significantly increase your opportunity for an accurate forecast.
Estimators forecast the future; they predict the time and money required to produce a product or service. The challenge for estimators is that many projects differ; each project is unique. And the more unique they are, the more difficult they are to accurately estimate.
Research and development projects are particularly difficult to estimate as these projects attempt to solve new problems. But even construction projects are unique in some way, requiring a different combination of tasks from historical project data. Though projects tend to be dissimilar, there are some standard rules one may apply to any project, which will help improve the opportunity for a successful estimate.
This article presents rules applicable to all projects that can help in increasing the possibility of a more accurate cost and schedule estimate.
Find the Right Estimator
There are many estimating techniques including: phased, top-down, analogous, parametric, and bottom-up. Regardless of the estimating method, the person making the estimate should have an understanding of the work to be done. Ideally, your best estimator is familiar with the work and is part of the team actually producing the product.
A proper understanding of the techniques and goals of estimating is also helpful. Understanding the nuances between analogous historical project comparisons and parametric estimating is important. And, to understand that the goal is not the most optimistic and favorable outcome, but the most likely outcome.
Estimate Based on Experience
Projects are unique, but often have similarities with other historical projects. Project data from past projects is often helpful in estimating future ones. Organizational databases of project data support analogous estimating efforts. Building a database of historical projects requires a departmental or organizational effort. The benefits of a project database, however, are worth the effort. Otherwise, estimates would rely solely on each team member’s memory and gut instincts. Yes, past performance data improves the accuracy of any of the discussed estimating techniques.
Avoid Negotiating Estimates
The tendency of management is to request estimate changes to reduce schedule and budget. The scheduler many times is pressured to reduce even the most accurate of estimates. In these situations the scheduler should respond that the estimate was created from project specifications and represents a realistic balance of cost, schedule, and scope. Also, demonstrate that the estimate is linked to product specifications and the work breakdown structure. Further, highlight that the only way to reduce an accurate estimate is by changing the product scope or worker productivity.
Estimators forecast the future, attempting to predict the time and money required to produce a product or service. Predicting the future is never an easy task, and becomes increasingly difficult the more unique the project. There are also many pitfalls to estimating.
However, know and apply the golden rules of estimating, which provide greater opportunity for a successful forecast. Estimators familiar with the work and estimating methods are key. And accumulation and access to historical project data is a significant plus. Last, don’t allow management to separate the cost and schedule estimate from the product specifications during project reviews.