Title: Factors Influencing Estimates
1Factors Influencing Estimates
- Planning horizon accuracies close to 100 when
events are current. - Project duration long duration project increase
uncertainty, technology tends to increase
exponentially - People close match of people and skills
improves accuracy - Project management structure dedicated project
teams save time and money - Padding estimates PMs tend to pad in order to
increase probability and reduce risk - Organization culture sometimes padding
encouraged, other organizations might place
premium on accuracy
2Macro vs. Micro Estimating
Best approach is to do both
3Estimating Time and Costs
- Macro Approaches
- 1) Ratio methods e.g., 2,700 sq ft _at_ 100
- 2) Apportion methods historical dependency,
time/costs apportioned to deliverables (e.g.,
slide 10) - 3) Function point methods software industry,
inputs, outputs, inquiries, files,
interfaces - 4) Learning curves repeated tasks weighted more
heavily when initially completed
(see table learning curve
values)
4See learning curve tables
- 50 to manufacture flying pig (5 pigs 250)
- 60 learning curve
- 5th .3054 x 5015.27
- Cost to manufacture five flying pigs
- 50 x 2.71135.50
5Norwegian Satellite Development Company
- Cost estimates for World Satellite Telephone
Exchange Project - NSDC has a contract to produce eight satellites
to support a worldwide telephone system ( for
Alaska Telecom, Inc.) that allows individuals to
use a single, portable telephone in any location
on earth to call in and out. NSDC will develop
and produced the eight units. NSDC has estimated
that the RD costs will be 12,000. Material
costs are expected to be 6,000. They have
estimated the design and production of the first
satellite will require 1,000 labor hours and an
80 improvement curve is expected. Skilled labor
cost is 30 per hour. Desired profit for all
projects is 25 of total costs. - Â
- A. How many labor hours should the eighth
satellite require? - Â
- B. How many labor hours for the whole project of
eight satellites? - Â
- Â C. What should NSCD estimate as the total cost
for this project?
RD 12,000 Materials 6,000 Labor 5346x30
160,380 COSTS178,380 25 PROFIT44,595 TOTAL
PROJECT ESTIMATE 222,975
 1000 labor hours x.512 512 labor hours for the
8th unit
 1000 labor hours for per unit x 5.346 5346
total for 8 units
6Estimating Time and Costs
- Micro approaches
- 1) Template method use when project is similar
to past project - 2) Parametric procedures applied to specific
tasks like the macro ratio method, but applied
to individual tasks - 3) Detailed estimates for the WBS most reliable
method (e.g., slide 12) - 4) Phase estimating begins with macro approach
then refines as phases of project completed
(e.g., slide 11)
7Level of detail
- Different for various levels of management
- Top total project milestones
- Middle one segment or one milestone
- First-line one task
- Excessive detail means unnecessary paperwork
- What are ways to determine level of detail needed
for a project?
8Developing budgets
- Cost estimates are not a budget!
- Time-phased budget determine when money will be
needed - Schedule is developed to mirror WBS
- Three views of costs (to slide 13)
9Types of costs
- Direct costs (vary by project)
- Labor
- Materials
- Equipment
- Other
- Project overhead costs
- General administrative overhead costs
10Estimating guidelines
- Responsibility At the WBS event level, the most
expert person should estimate - Use several people Time estimates are more
accurate with different perspectives - Normal conditions Estimates should be made
assuming normal conditions - Time units consistent time units should be
applied throughout - Independence estimates should assume
independence regardless of WBS dependencies - Contingencies WBS events should not incorporate
contingencies, a separate category should be
created - Add risk estimate optimistic, most likely,
pessimistic
11Refining estimates
- Some PMs adjust project costs up by 20 because
- Interaction costs are hidden
- Normal conditions are a starting point, but
seldom reality - Things go wrong on projects
- Changes in project scope and plans occur
end
12Apportion Method
Return to Slide 3
13Phase Estimating
Return to Slide 4
14WBS Estimate
Return to Slide 4
15Three Views of Costs
Return to Slide 6
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