THE ESTIMATING PROBLEM1 Barbara just received the good news: She was assigned as
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Question
THE ESTIMATING PROBLEM1
Barbara just received the good news: She was assigned as the project manager for a project that her company won as part of competitive bidding. Whenever a request for proposal (RFP) comes into Barbara’s company, a committee composed mainly of senior managers reviews the RFP. If the decision is made to bid on the job, the RFP is turned over to the Proposal Department. Part of the Proposal Department is an estimating group that is responsible for estimating all work. If the estimating group has no previous history concerning some of the deliverables or work packages and is unsure about the time and cost for the work, the estimating team will then ask the functional managers for assistance with estimating. Project managers like Barbara do not often participate in the bidding process. Usually, their first knowledge about the project comes after the contract is awarded to their company and they are assigned as the project manager. Some project managers are highly optimistic and trust the estimates that were submitted in the bid implicitly unless, of course, a significant span of time has elapsed between the date of submittal of the proposal and the final contract award date. Barbara, however, is somewhat pessimistic. She believes that accepting the estimates as they were submitted in the proposal is like playing Russian roulette. As such, Barbara prefers to review the estimates. One of the most critical work packages in the project was estimated at twelve weeks using one grade 7 employee full time. Barbara had performed this task on previous projects and it required one person full time for fourteen weeks. Barbara asked the estimating group how they arrived at this estimate. The estimating group responded that they used the three-point estimate where the optimistic time was four weeks, the most likely time was thirteen weeks, and the pes- simistic time was sixteen weeks. Barbara believed that the three-point estimate was way off of the mark. The only way that this work package could ever be completed in four weeks would be for a very small project nowhere near the complexity of Barbara’s project. Therefore, the estimating group was not con- sidering any complexity factors when using the three-point estimate. Had the estimating group used the triangular distribution where each of the three estimates had an equal likelihood of occurrence, the final estimate would have been thirteen weeks. This was closer to the fourteen weeks that Barbara thought the work package would take. While a difference of 1 week seems small, it could have a serious impact on Barbara’s project and incur penalties for late delivery.
Barbara was now still confused and decided to talk to Peter, the employee that was assigned to do this task. Barbara had worked with Peter on previous projects. Peter was a grade 9 employee and considered to be an expert in this work package. As part of the discussions with Barbara, Peter made the following comments:
I have seen estimating data bases that include this type of work package and they all esti- mate the work package at about 14 weeks. I do not understand why our estimating group prefers to use the three point estimate.
“Does the typical data base account for project complexity when considering the esti- mates?” asked Barbara. Peter responded:
Some data bases have techniques for considering complexity, but mostly they just assume an average complexity level. When complexity is important, as it is in our project, analogy estimating would be better. Using analogy estimating and comparing the complexity of the work package on this project to the similar works packages I have completed, I would say that 16–17 weeks is closer to reality, and let’s hope I do not get removed from the project to put out a fire somewhere else in the company. That would be terrible. It is impossible for me to get it done in 12 weeks. And adding more people to this work package will not shorten the schedule. It may even make it worse.
Barbara then asked Peter one more question:
Peter, you are a grade 9 and considered as the subject matter expert. If a grade 7 had been assigned, as the estimating group had said, how long would it have taken the grade 7 to do the job? “Probably about 20 weeks or so,” responded Peter.
QUESTIONS :
1. How many different estimating techniques were discussed in the case?
2. If each estimate is different, how does a project manager decide that one estimate is better than another?
3. If you were the project manager, which estimate would you use?
Explanation / Answer
:
1) Primary estimation techniques discussed in given case are;
Both of these estimating techniques have their own disadvantages & advantages. It depends upon the need of the project & the understanding of the project manager to decide which estimation technique to use in project. Often, functional managers & project manager make use of combination of estimating techniques to arrive at most accurate values required to begin the project that is, time, money & other valuable resources.
2) It is true that there are so many estimation methods / techniques in project management & each of these estimation techniques are different to each other. Therefore, functional manager or project manager should first develop understanding of the project. Their understanding should exactly match with understanding of the client with respect to the project. Therefore, it is very important to first understand what all is required in order to complete the project. The requirements may include time, money, resources, people, technology, etc. The project managers may make use of common tools like work breakdown structures, business requirements analysis, etc. to arrive at these details.
Now, the project manager can order these activities that he has figured in the previous step. The order of the activities will decide the sequencing of the actionable. Also, in this step, the project manager will also decide which people he will need in this project for successful completion. Here, the skill-set of the people - , non-technical; technical experience, past exposure, etc. will be considered to make them a part of project.
At this stage, project manager will be in a position to make the estimates. There is variety of estimation methods that he may use. These include:
In most of scenarios, the project managers make use of the combination of the estimation methods rather than relying on any 1 estimation methods. This enables them to arrive at the closest values i.e. time, other resources & money.
3) If I was the project manager of this project, I would have used combination of parametric estimation & Analogy based estimation. As highlighted by Peter in the case, analogy estimation method uses a similar past project that he has completed with almost same complexities & estimate the cost or duration of the current project. This estimation technique is mainly used when you do not have much information on the current project & therefore, you compare it with one of your previous projects to arrive at the approximate values. But, analogy based estimation is not considered to be the most accurate method. Therefore, along with it I would have used parametric estimation as well. In parametric method, in order to calculate the cost & duration, project managers identify the unit cost / duration first & then multiply it with the number of units required. For example, if it take 2 hours to complete one unit of a certain activity & if 4 units are to be completed to finish the project. Then, as per parametric estimation technique, it would take approximately 8 hours to complete the whole project.
Therefore, with use of analogy based estimation & parametric estimation, I would have arrived at the closest values that Peter & Barbara needed to complete the project.
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