Estimating Project Costs & Time

1
Estimating Project Costs Time

• Project Management Unit, Lecture 5

2
Cost Schedule Estimates

• As previously mentioned the principal measures of
  a project are cost, time (schedule) and
  performance
• For a given project one or more of these measures
  may be constrained
• For LA ACES your launch opportunity has a fixed
  date and you must have a payload ready by this
  date
• Initial estimates on cost and schedule are
  essential to determine if your plan is realistic
• May need to plan for (or implement) trade-offs
  according to established priorities
• Cost and schedule needs to be monitored
  throughout the project life-cycle

3
Factors affecting the estimate

• Task Definition The completeness of your project
  definition will determine if all tasks have been
  taken into account.
• People Productivity People do not focus on a
  task with 100 efficiency. The difference between
  calendar time and effort must be considered.
• Project Structure A dedicated project team will
  be able to focus its effort on completing the
  project effectively.
• Padding People may increase estimates to take
  into account unknown risks and this may force an
  unnecessary trade-off.
• Culture What is deemed acceptable behavior by
  the organization (e.g. padding vs. accuracy) will
  affect estimates.
• Downtime Equipment repairs, holidays, vacations,
  exam schedules can all affect the time estimate.

4
Categories of estimates

• The Macro or Top-Down approach can provide a
  quick but rough estimate
• Done when the time and expense of a detailed
  estimate are an issue
• Usually occurs during conception stage when a
  full design and WBS are not available
• Requires experienced personnel to do the estimate
• Can be highly inaccurate
• A Micro or Bottom-Up approach can provide a
  fairly accurate estimate, but is time consuming
• Takes into account the project design and a
  roll-up of WBS elements
• May require multiple personnel and time to
  complete
• If done properly, a bottom-up estimate can yield
  accurate cost and time estimates

5
Steps to developing the estimates

• Start with a Macro estimate then refine with a
  Micro estimate
• Develop the general project definition
• Perform a macro cost and time estimate
• Develop the detailed project definition and WBS
• Roll-up the WBS elements as part of a micro
  estimate
• Establish the project schedules
• Reconcile differences between the macro and micro
  estimates

6
Macro Estimates

• Scaling Given a cost for a previous project
  then an estimate for a new project can be scaled
  from the known cost. E.g NASA, at times, uses
  spacecraft weight to estimate total cost.
• Apportion Given a similar previous project,
  costs for major subunits of the new project would
  be proportional to similar subunits in the
  previous project.
• Weighted Variables Certain types of projects can
  be characterized by specific parameters (e.g.
  number of inputs, number of detector channels).
  Historical costs times for single units of
  these parameters are weighted by the numbers
  required for the new project.
• Learning Curve If the same task is repeated a
  number of times there will be a cost / time
  savings relative to the first time the task is
  done.

7
Micro Estimates

• Template Uses historical data to establish
  detailed costs and schedules for project
  subunits. A new project composed of some
  combination of these subunits can then be quickly
  estimated.
• Ratio Similar to the Macro ratio method but
  applied to specific tasks associated with project
  subunits. For example, if it takes 1 day to
  build test a particular sensor unit, then an
  instrument with 10 sensors would take 2
  technicians, 5 days to complete.
• WBS Roll-up Times and costs associated with the
  lowest level WBS work packages are estimated and
  then these are added or rolled-up to yield the
  costs for higher level units. This method
  provides the most accurate estimates at the
  expense of time devoted to developing the
  estimate.

8
Phased Approach

• On a phased project, details over the entire
  life-cycle may not be immediately available.
• During the each phase details for the remaining
  phases are refined, modified or changed.
• In this case an alternate approach may be
  appropriate.
• Develop the general project definition
• Perform a macro cost and time estimate for all
  phases
• Develop a detailed definition and WBS for the
  immediate phase
• Roll-up the WBS elements as a micro estimate for
  the immediate phase
• Establish a detailed schedule for the immediate
  phase
• Reconcile differences between previous macro
  current micro estimates
• Refine the macro cost and time estimate for the
  remaining phases
• Refine the schedule for the remaining phases
• Repeat items 3-8 just prior to next phases for
  the entire life-cycle

9
Guidelines for Estimates

• Estimates should be done by the person most
  familiar with the task
• If possible obtain estimates from several people
  and use the variance for risk assessment (lecture
  7)
• Multiple estimates should be done independently
  to avoid GroupThink (lecture 1)
• Base the estimates upon normal conditions.
• Use consistent units when estimating task time.
• Work package estimates should not include
  contingencies
• Use a separate risk assessment (lecture 7) for
  estimating the affect of abnormal conditions and
  contingencies.