Factors Influencing Estimates

1
Factors 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

2
Macro vs. Micro Estimating
Best approach is to do both
3
Estimating 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)

4
See 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

5
Norwegian 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.
•  
• A. How many labor hours should the eighth
  satellite require?
•  
• B. How many labor hours for the whole project of
  eight satellites?
•  
•  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
6
Estimating 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)

7
Level 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?

8
Developing 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)

9
Types of costs

• Direct costs (vary by project)
• Labor
• Materials
• Equipment
• Other
• Project overhead costs
• General administrative overhead costs

10
Estimating 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

11
Refining 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
12
Apportion Method
Return to Slide 3
13
Phase Estimating
Return to Slide 4
14
WBS Estimate
Return to Slide 4
15
Three Views of Costs
Return to Slide 6
16
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