Estimation

How to undertake an Estimation RAP (The same principles and techniques apply to benefits. )

All estimates should acknowledge the following principles:

• the earlier the estimate is made, the higher the degree of uncertainty;
• estimation is a formal process that requires time;
• estimation is an open process and should involve critical stakeholders;
• the greater the risk of the project, the greater the possibility of estimating error;
• estimate by teams – an estimate undertaken by one person is wrong; and
• estimation is different to budgeting, which is “bidding” for funds.

Estimation Points

There are various points for estimation and revision of estimates. Initial estimates variation could be large depending upon project risk (see later)

Sensitivity Analysis and Project Risk

The use of Sensitivity Analysis techniques when estimating is mandatory. This technique involves making estimates which are ranged into three figures:

• Optimistic/Best Case;
• Realistic/Likely;
• Pessimistic/Worst Case.

Then, based on Project Risk Assessment, the project manager should select one of these figures as a base for scheduling. For low risk projects, the Best Case estimates would be the estimates used for scheduling. The higher the risk of the project the more the Realistic or Pessimistic range would be used. However, all three sets of figures would be included in the Business Case. In many cases, the Realistic estimate would be the most useful estimate for scheduling, however, certain tasks may be of a higher risk than others and may require the Pessimistic estimate. In other words, by doing an informal risk assessment of each task, the low risk tasks would be scheduled using the Optimistic estimate, medium risk tasks use the Realistic estimate and high risk tasks would be scheduled on the Pessimistic estimate.

Wide-band Delphi estimation

In the absence of any formal estimating history (there is a standard organisational project tracking/effort data-base), estimation in many projects would be better termed "guestimation". In some texts, guestimation is defined as a guess based on internalised experience or "gut-feel".

It involves 10 simple steps:

• Step 1 - provide RAP particpants with the relevant information regarding the project, i.e. the Mandate, Business Case, business requirements;
• Step 2 - develop Quality Agreement attributes, criteria;
• Step 3 - conduct a formal Project Risk Assessment;
• Step 4 - develop phase/task lists;
• Step 5 - each person at the RAP session individually estimates each task using Sensitivity Analysis to provide a Best Case,
• Likely and Worst Case estimate;
• Step 6 - all estimates are written on to a white-board and grouped in the three ranges;
• Step 7 - each person discusses the various assumptions and issues they considered when developing their estimates;
• Step 8 - where required, the various estimates are adjusted based on the team discussion;
• Step 9 - each range is averaged with out-riders being discarded;
• Step 10 - the resultant ranges are used as the basis for scheduling as normal.