Estimating Time and Costs

When managers are required to start working on an urgent project, they sometimes reduce the exertion they have to follow during estimation of project time and expenditure. However, such an attitude is a big mistake and is very expensive. There are vital basis required to make an effort of project estimation. Good estimates are required to schedule work, support good decisions, determine the cost and duration of the project, evaluate whether the project is worth doing, develop the cash needed, determine how the project is moving and to develop time phased budgets and create the project baseline.

Process of forecasting and approximating the duration and cost of a project is known as project estimation. Estimation processes are classified into two: bottom-up and top-bottom. Senior management takes care of the top-bottom estimates while bottom-up estimates are taken care of by the people who are doing the work. Senior managers derive approximations from correspondence, mathematical relationships and group consensus. The people who conduct the work base their estimates on the elements found in the break down of the work.

Accurate cost and time estimates are usually prefered by the project stakeholders, however, they understand the risk in all projects. If estimates are accurate there is a high probability that expectations will be false and may lead to a customer’s dissatisfaction. To deliver the project in good time, extra effort is required although its worth time and cost. Estimation of a project develops into a trade off balancing the benefits of better accuracy against the cost for securing raised accuracy.

Price, duration and budget approximates are the link for control where they serve as the measure for comparison of actual and plan throughout the lifespan of the project. Standing reports of the project usually depend on the trustworthy estimates as the main input for determining variances and taking the right course of action. In most cases the manager and the customer prefer having a breakdown and a database of the estimates of the project in terms of time and cost. However this is not mostly applicable as gathering the whole information is not always possible, hence, other methods are used to develop project estimates.

Factors that Influence the Quality of Estimates

There is always a key desire in the field to have a ninety five percent likelihood of get-together time and cost approximates. For one to develop good estimates of time and cost, past experience is a vital thing. However, these past experiences need to be revised putting into consideration some other factors in order to meet 95% of likelihood level. Factors which relate to the exceptionality of the project usually have a well-built weight on the correctness of estimates. External factors, people and the whole project, all need to be put into consideration in order to develop the quality of the approximates of time and cost.

Planning Horizon

The estimates quality usually depends on the planning horizon. Current events have almost 100% accuracy but it reduces when we move to more distant events. The approximation of time and cost normally improves as you move from the conceptual level to where individual work structure has started.

Project Duration

Implementation of new technology expands in a rising, nonlinear trend. Errors may arise in estimating times and costs if the scope of the new technology is poorly written. Projects which have a long duration usually increase risks in the estimates.

People

Errors may also be caused by the people factor when it comes to estimation. For instance, the accuracy of the estimation depends highly on the skills that the people making them have. A close equivalent of people skills to the job of estimation will manipulate learning time and productivity. On the other hand, whether the people carrying out the project have participated together before on a similar project will influence the time taken to make up a good team. Stuff turnover can sometimes influence estimates. One should note that if people are added in an ongoing project there will be extra time of communication which will slow down the project. Normally people have from five to six working hours in a day. The other hours are used in indirect work such as answering emails, meetings and paper work.

Project Structure and Organization

Another important factor to consider is project structure and organisation. Project structure is used to manage the project and it will definitely influence time and cost estimates. Devoted project team has an advantage of achieved speed from determined centre of attention and localized project conclusions. This speed, however, comes at an additional cost of attaching workers full time. On the other hand, costs may be reduced if projects operate in a matrix since personnel are shared across projects, however, they may take longer time to finish since attention is divided and demand for coordination is high.

Padding Estimates

Padding estimates happen in some cases. For instance, if one is asked how long it would take him to drive to a certain destination he might probably say 40 minutes, thereby assuming a 50/50 chance of being there in 40 minutes. If asked how fastest he could be there, he could reduce the time to 20 minutes. Again if asked how long it could take him, he could give a longer duration to avoid being late. In the work scenario when asked about time and cost, they tend to add a little padding to raise the chances and reduce the uncertainty of being late. We can conclude that if everyone at one time adds a little padding to minimize risk, then cost and project duration are badly overstated. This belief makes some owners or managers call for not more than 15% cut in cost or/and time of project. This phenomenon will make the game go on and the people making the estimate will have to pad up to 20% the next time they are estimating. It is such a kind of games that beats the realistic of having clear estimates which now calls for competition.

Organization Culture

The culture of an organization can significantly influence project estimates. Padding in some of the organization is accepted and secretly encouraged. Other firms usually put a premium on accuracy and strongly deject approximating gamesmanship. Normally firms vary in the weight the put in estimates. Some organizations have a prevailing believe that a detailed estimation takes a lot of time to come up with and that it’s not easy to predict the future. Others believe those accurate estimates are the basis for a successful project management. The cultures of organization shape every dimension of project management; estimating is not resistant to this influence.

Other Factors

Other factors that are non project factors may also influence cost and time estimates. For instance, equipments failing to arrive in time can alter time estimates. National holidays, legal limits and vacations may also reduce or increase time of project completion. Priority of the project may also influence resource allocation and have an effect in time and cost estimates. Project estimation is a difficult course of action to take. If the above variables are put into consideration there will be an improved quality of time and cost estimates. Project management and project control are made possible by proper estimation of time and cost as it allows managers to develop a time phased budget. A review of estimating guidelines reminds us the importance of rules of the game that might improve estimation.