ESTIMATION OF PROJECT

TIMES AND COSTS

Prepared by :
Eng. Abdelsalam Mahmoud
Shiha

Supervised by :
Dr Mohamed
Hussien


Introduction :
Estimation
means to form an approximate notion of the
amount, number, magnitude or position of
anything, without actual enumeration or
measurement.
In projects management estimating is the
process of forecasting or approximating the
time and cost of completing project
deliverables.

Importance of
estimation
1.Supports good decision making
2.Supports scheduling
3.Permits evaluation of project feasibility
4.Supports cash-flow planning
5.Permits project evaluation (benchmarking)
6.Supports construction of project baseline

PROJECT COST
ESTIMATION
The Estimate Costs process is part of the
Project Cost Management knowledge area
and the Planning process group. You use
cost estimation to develop funding
requirements and to establish the cost
estimate baseline.

ESTIMATE COST PROCESS

Estimate Costs process is the process

of developing an approximation of the
monetary resources needed to
complete project activities. Cost
estimates are usually defined in terms
of currency.

TYPES OF COST

Variable costs
Fixed Costs
Direct costs
Indirect costs
Sunk costs

BENEFITS OF ESTIMATING
COSTS
the project Cost estimation provides project
managers with two main benefits:
it identifies funding requirements The
project sponsor needs to identify the funding
requirements for a project before deciding to
grant funding.
It establishes a cost baseline

BENEFITS OF ESTIMATING
COSTS

By estimating costs, you establish a cost

baseline, which enables you to monitor and
control costs as the work progresses. This
baseline contains the estimated costs of the
resources the project will use.

Estimate cost process

Inputs for estimate cost

process
Scope baseline
The scope baseline, which describes the
work required to complete the project,
consists of the work breakdown structure
(WBS)
The WBS is a hierarchical breakdown of the
project's scope, including all components of
the work that must be done. It shows the
relationships between the deliverables and
work packages.

Inputs for estimate cost

process
Project schedule
It contains the planned dates for performing
schedule activities and information about
what resources are needed, when, and for
how long.

Inputs for estimate cost

process
Human resource plan
The human resource plan describes the staff
requirements for a project and is another
important input for estimated costs.

Inputs for estimate cost

process
Risk register
It is the section of the project management
plan that documents the risks associated
with the project. Risks can pose a threat to a
project because if realized, they usually
cause an increase in the duration and cost of
an activity. The risk register identifies each
risk, its cause, and the impact it will have on
the project.

Inputs for estimate cost

process
Enterprise environmental factors
These are external factors that can influence
a project. Information about these factors is
another input for estimating costs.

Inputs for estimate cost

process
Organizational process assets
These are sources of knowledge within your
organization that can be useful to a project.

Inputs for estimate cost

process

Examples of organizational process

the historical information from past projects .
Lessons learned .
Cost estimating policies Documents from previous
projects often include cost estimating policies that
standardize the way you need to perform certain
activities.
Cost estimating templates These templates save
you time and effort when estimating costs for a
current project, because you can input data without
first having to develop a spreadsheet for your
project.

Estimate Costs Tools and

Techniques
Expert Judgment
Expert judgment is the most common tool and
technique of project management. This term
refers to using the knowledge and experience of
someone who has done the types of things you
are about to do

Estimate Costs Tools and

Techniques
Expert Judgment advantages
Quick to produce;
Requires little resource in terms of time and cost,
and;
Can be as accurate as other more expensive
methods .

Estimate Costs Tools and

Techniques

Expert Judgment limitation

Subjective;
Risky and prone to error;
Three experts with the same starting information
will provide different cost estimates;
Use of expert judgment is not consistent and an
unstructured process;
Prone to bias: personal experience, political aims,
resources, time pressure, memory recall;

Estimate Costs Tools and

Techniques
Expert Judgment limitation
The reasoning is known only to the owner of the
estimate;
Estimate reuse and modification is difficult;
Difficult to negotiate effectively with customers;
Difficult to quantify and validate the estimates;
Estimate depends on level of experience;
Experts leave the company knowledge loss;
Difficult to provide an audit trail, and;
Estimates are black box in nature;

Estimate Costs Tools and

Techniques
Analogous estimating
You use the costs of a past project to forecast the
costs of a current project. It's most reliable when
the projects you compare are very similar.
Analogous estimating uses expert judgment to
adjust past costs according to the scope, duration,
and budget of the current project.

Estimate Costs Tools and

Techniques
Analogous estimating
This technique is most effective when used in
conjunction with other estimating techniques.
It is useful whether you're estimating costs for the
total project or for a particular phase or part of the
required work.
Analogous estimating requires solid industry
experience.

Estimate Costs Tools and

Techniques
Parametric estimating
A parametric estimate is typically used for an
analogy project. It's a mathematical cost
estimation method that is not used too frequently
in the business world.

Estimate Costs Tools and

Techniques
Parametric estimating
Parametric estimating is a powerful technique for
forecasting costs using parameters related to the
scope of the project and product, as well as
resource cost information.
Parameters, which are attributes of an activity,
can include its scope, cost, budget, and duration.
The accuracy of the parameters you include will
determine how accurate an estimate is.

Estimate Costs Tools and

Techniques
Parametric estimating
Using parametric estimating to approximate the
cost of materials to build a townhouse, you use
the average cost per square yard of building
materials and the size of the house in square
yards as parameters. This is a very rough
estimate. Then when you get the actual costs and
quantities of the required bricks and cement, you
can use the parameters to create a more accurate
estimate.

Estimate Costs Tools and

Techniques
Bottom-up estimating
Bottom-up estimating involves making separate
estimates of the cost for each work package in the
work breakdown structure (WBS).

Estimate Costs Tools and

Techniques
Reserve analysis
Reserve analysis calculates contingency reserves
based on a percentage of the estimated cost, a
fixed number, or through quantitative analysis
methods.
As the project progresses and information
becomes available, reserves may be used,
reduced, or eliminated.

Estimate Costs Tools and

Techniques
Cost of quality
Cost of quality describes all the costs associated
with conforming to a project's quality
requirements.
It also includes the costs of failing to meet the
requirements and of having to rework a product
until you achieve the required quality.

Estimate Costs Tools and

Techniques
Project management estimating software
The software includes spreadsheets, cost
simulation models, and other computerized
statistical tools for rapidly estimating costs.
Some of these tools enable you to forecast how
the budget will look for the entire project, based
on your current parameters and cost estimates.

Estimate Costs Tools and

Techniques
Vendor bid analysis
Once qualified vendors have submitted their bids
or quotations for work on a project, you compare
the various quoted costs in order to arrive at a
market-related cost estimate.

Estimate Costs Tools and

Techniques
Three-point estimates
When determining a three-point estimate, you
first assign weights to the costs and calculate the
denominator.
A three-point estimate typically assigns a weight
of one to the optimistic and pessimistic estimates
and a four to the most likely estimate

Estimate Costs Tools and

Techniques
Three-point estimates
Most likely (Cm): The cost of activity based in
realistic effort assessment for the required work
and any predicted expense.
Optimistic (Co): The activity cost based on
analysis of the best case scenario for activity.
Pessimistic (Cp): The activity cost based
analysis of the worest case scenario of activity.

Estimate costs outputs

Activity cost estimates

These are quantitative valuations of how

many the resources necessary for carrying
out project activities will cost.
Activity cost estimates may be presented
in detail or summarized and presented as
costing totals.

Estimate costs outputs

Basis of estimates
These provide a detailed explanation of the
factors on which each activity cost estimate is
based.
It's important to record the factors, as well as
any assumptions or constraints, on which
estimates are based.
You should also indicate how confident you are
about the estimates by specifying the range of
anticipated variance for example, 10%.

Estimate costs outputs

Project document updates
Once you have estimated project costs,
you need to update any project documents
affected by these costs or information you
gained during the process. This will often
require changes to the risk register but
changes can include any project-related
documents that require updates after costs
are estimated.

PROJECT TIME ESTIMATION

For two main reasons:
Time estimates drive the setting of deadlines for
delivery and planning of projects,
Time estimates often determine the pricing of
contracts and hence the profitability of the
contract/project in commercial terms.

PROJECT TIME ESTIMATION

To start time estimation first you need to fully
understand what it is you need to achieve. Review
the project/task in detail so that there are no
"unknowns." Some difficult-to-understand, tricky
problems that take the greatest amount of time to
solve.
The best way to review the job is to just list all
component tasks in full detail.

PROJECT TIME ESTIMATION

Also make sure that you have allowed time for:
Other high urgency tasks to be carried out which will have priority over
this one.
Accidents and emergencies.
Internal/external meetings.
Holidays and sickness in key staff/stakeholders.
Contact with other customers, suppliers and contractors.
Breakdowns in equipment.
Missed deliveries by suppliers.
Interruptions by customers, suppliers, contractors, family, pets, co-workers
etc.
Others priorities and schedules e.g. local government planning processes.
Quality control rejections etc.
Unanticipated events (e.g. renovating the bathroom finding whiteants/termites in the walls).

Inputs of the Estimate

Activity Resources Process
Activity lists
You need to know what must be done before you
can assess what's needed to support required
activities. Important starting points for required
resource estimates include activity lists.
Activity lists include specific tasks such as getting
approval for a media campaign, passing graphics,
and writing copy for a direct mail letter.

Inputs of the Estimate

Activity Resources Process
Activity attributes
Activity attributes include consulting affected
internal and external stakeholders for their
peripheral or active participation in meeting
specific activities' goals.

Inputs of the Estimate

Activity Resources Process
Activity resource requirements
The duration of most activities will be significantly
influenced by the resources assigned to them.
For example, two people working together may be
able to complete a design activity in half the time
it takes either of them individually, while a person
working half-time on an activity will generally take
at least twice as much time as the same person
working full-time.

Inputs of the Estimate

Activity Resources Process
The resource calendar
The most important input for estimating activity
resources is the resource calendar.
This calendar provides details on the available
human resources for the duration of the project.
It can also include information about the
availability of material resources, such as
equipment and space. For example, a project may
require use of a printer and a specific conference
room.

Estimate activity duration

process
Activity resource requirements
The duration of most activities will be significantly
influenced by the resources assigned to them.
For example, two people working together may be
able to complete a design activity in half the time
it takes either of them individually, while a person
working half-time on an activity will generally take
at least twice as much time as the same person
working full-time.

Estimate activity duration

process
Project scope statement
Generally describes the projects deliverables and
the work required to create those deliverables.
The project scope statement provides a common
understanding of the project scope among all
project stakeholders and describes the projects
major objectives

Estimate activity duration

process
Enterprise environmental factors
Enterprise environmental factors are circumstances
surrounding a project that can affect its success.
These include the availability of resources
internally and externally and company
infrastructure.
A project manager needs to consider enterprise
environmental factors, such as the availability of
staff members and their skills for the period in
which the campaign takes place

Estimate activity duration

process
Organizational process assets
Organizational process assets include a company's
policies, procedures, and guidelines, as well as
historical information about previous projects. These
may help determine how resources must be acquired
and used.
Company policy an organizational process asset
may stipulate that only local suppliers can be used.
Records from previous, similar projects might identify
specific assets as key resources for such projects.

Estimating Activity Durations

Process tools

expert judgment
analogous estimating
Parametric estimating
Three-point estimating
Reserve analysis

Estimating Activity Durations

Process Output
The duration estimates you calculate using
estimating tools are the primary output of the
Estimate Activity Durations process.
Another output is updates to project documents.
When the project schedule is constructed, the
estimates help determine the time needed to
complete the entire project.
Each estimate represents a quantitative
assessment of the likely time required to complete
a project activity, drawing on the best available
data.

References :
1. http://www.brighthub.com/error-notfound.as
px?aspxerrorpath=/office/project-managemen
t/articles
2. PMBok Guide 4Th edition
3. PMP Exam Prep 6Th Edition RITA MULCAHY,
PMP
4. http://en.wikipedia.org/wiki/Main_Page
5. http://www.ehow.com/info_8469500_methodsestimating-project-times-cost.html
6. www.csu.edu.au/division/psc/pmguides