PRJMANA CHAPTER 4

Top down
budgeting
Top & Middle
managers
estimate overall
project cost is
estimated by
estimating cost
of major tasks
Accurate overall
estimation but
may include
significant error
for low-level
tasks
Accuracy: -20%
to 60%
For
feasibility/concep
tual stage
Methods:
Consensus,
ratio/apportion,
Learning curves
Acceptable for S
shape life cycle

Bottom-up
budgeting
Resource
requirements
estimated by those
responsible for
execution
Direct and indirect
costs are included
Accurate for lowlevel tasks but
risks overlooking
some small but
costly task
Accuracy: -10% to
30%
For budgeting and
scheduling
Methods: Template
& WBS
Used for J-shaped
life-cycle projects

Learning Curves

Each time the output doubles, the

worker per unit decreases by a
fixed percentage of their previous
value
This percentage = the learning rate
o Higher values: Mechanical
tasks
o Lower Values: Mental tasks

Two types of Error

Random error: The average size of

the error is approximately equal
over and under estimates.
o Estimates are not biased
System error: The chances of over
or under estimates are not equal/

the size of over or under estimates

are not about equal.
o Estimates are biased