Scope management :

ESTIMATION OF PROJECT TIMES AND COSTS

Prepared by : Eng. Abdelsalam Mahmoud Shiha Supervised by : Dr Mohamed Hussien 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.

Introduction :

Importance of estimation Supports good decision makingSupports schedulingPermits evaluation of project feasibilitySupports cash-flow planningPermits project evaluation (benchmarking)Supports construction of project baseline

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.

Project cost estimation

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.

Estimate cost process Variable costsFixed Costs Direct costsIndirect costsSunk costs

Types of Costthe 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 costsBy 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.

Benefits of estimating costs

Estimate cost process Scope baselineThe 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 scheduleIt 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 planThe human resource plan describes the staff requirements for a project and is another important input for estimated costs.

Inputs for estimate cost processRisk registerIt 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 processEnterprise 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 processOrganizational process assetsThese are sources of knowledge within your organization that can be useful to a project.

Inputs for estimate cost processExamples 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.

Inputs for estimate cost processExpert 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 TechniquesExpert 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 TechniquesExpert Judgment limitationSubjective;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 TechniquesExpert Judgment limitationThe 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 TechniquesAnalogous 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 TechniquesAnalogous 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 TechniquesParametric estimatingA 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 TechniquesParametric estimatingParametric 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 TechniquesParametric estimatingUsing 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 TechniquesBottom-up estimatingBottom-up estimating involves making separate estimates of the cost for each work package in the work breakdown structure (WBS).

Estimate Costs Tools and TechniquesReserve analysisReserve 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 TechniquesCost 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 TechniquesProject 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 TechniquesVendor 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 TechniquesThree-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 TechniquesThree-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 Tools and TechniquesActivity 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 estimatesThese 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 updatesOnce 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.

Estimate costs outputs 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 estimation38To 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 estimationAlso 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 white-ants/termites in the walls).

project time estimationActivity 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 Process41Activity attributesActivity 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 Process42Activity resource requirementsThe 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 Process43 The resource calendarThe 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.

Inputs of the Estimate Activity Resources Process44Activity resource requirementsThe 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 45Project 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 objectivesEstimate activity duration process 46Enterprise environmental factorsEnterprise 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 placeEstimate activity duration process 47Organizational process assetsOrganizational 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.Estimate activity duration process 48expert judgmentanalogous estimatingParametric estimatingThree-point estimatingReserve analysis

Estimating Activity Durations Process toolsThe scope of a project typically consists of a set of deliverables, an assigned budget, and an expected closure time. 49The 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.

Estimating Activity Durations Process Output The scope of a project typically consists of a set of deliverables, an assigned budget, and an expected closure time. 50http://www.brighthub.com/error-notfound.aspx?aspxerrorpath=/office/project-management/articlesPMBok Guide 4Th edition PMP Exam Prep 6Th Edition RITA MULCAHY, PMPhttp://en.wikipedia.org/wiki/Main_Pagehttp://www.ehow.com/info_8469500_methods-estimating-project-times-cost.htmlwww.csu.edu.au/division/psc/pmguides

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