What Type of Estimation method to choose during the planning?

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Whatever we plan everything leads to the success or failure of the project. And success depends on the accuracy of the estimates and the team's ability to execute the plan effectively. Every project began with a detailed plan that includes estimates for time, cost, and resources. Estimation is the key to successful project planning and project management, as it provides the information needed to accurately budget, schedule, and manage the project. But how to estimate successfully? What type of estimation methods can we choose as a project manager or team lead during the project life cycle? And how to use them? And today we will analyze in detail the type of Estimation methods that will help to plan our project.

What is Estimation in Project Management?

According to the Project Management Institute (PMI), estimation is the process of predicting the number of resources, such as time, money, and resources, required to complete a project. It is used as a basis for planning, scheduling, budgeting, and resource allocation. It includes techniques such as expert judgment, analogous estimation, parametric estimation, bottom-up estimation, and three-point estimation.

How to Use Estimation Methods in Project Management?

Estimation methods can be used in project management to help plan, budget, and allocate resources to a project. Estimation methods help project managers to set realistic expectations, identify potential risks, and make decisions about how to allocate resources. Estimation methods can also be used to help develop project plans, track progress, and adjust plans as needed. Estimation methods are also useful for forecasting and tracking costs and timelines.

The type of estimation method to choose during the planning phase depends on the complexity of the project and the level of accuracy required. Common estimation methods include bottom-up estimating, analogous estimating, parametric estimating, three-point estimating, and expert judgment. Each method has its own advantages and disadvantages and should be used in the context of the specific project.

Who and When Should Estimate Work During the Planning?

Who is Responsible for Estimation?

The project manager should be responsible for estimating during the planning phase. Estimating should be done in collaboration with the team, including key stakeholders, sponsors, and subject matter experts. This will ensure that all relevant perspectives are taken into account and that the estimates are more accurate.

When Should Estimates Take Place?

Estimating should be done as early as possible, preferably at the beginning of the project. This will ensure that all relevant perspectives are taken into account and that the estimates are more accurate. It will also help to identify potential risks and issues early on and allow for more accurate scheduling and budgeting.

Why is Project Estimates Important?

Project estimates are important because they enable project managers to plan and allocate resources appropriately, as well as to track progress and manage expectations. Without an estimate, a manager may find themselves understaffed, overworked, and unable to accurately gauge their project.

For example, a manager who has not estimated the work may find themselves overwhelmed by the amount of work that needs to be completed. They may find it difficult to keep up with their team’s progress and to stay on task as they are unable to accurately gauge how much work still needs to be done. This can lead to a lack of productivity and a decrease in the quality of the final product. The lack of an estimate can lead to unrealistic expectations and deadlines, resulting in frustrated team members and unhappy clients. Have you ever experienced any of these issues as a result of not having an estimate of the work? How did it affect your productivity and the project's success?

What are the Various Methods of Estimation?

There are several methods of estimation, including top-down, bottom-up estimating, analogous estimating, parametric estimating, three-point estimating, and expert judgment project estimation techniques. Each method has its own advantages and disadvantages and should be used in the context of the specific project. The most important factor is to choose the right method for the right project.

Top-Down Estimating technique

Top-Down Estimation is a technique used to quickly estimate the cost and timeline of a project. Using the Top-Down Estimation technique, project managers can estimate the total cost and timeline of a project by taking an overall timeline given by the client and breaking it down into individual tasks and phases. This allows for a more accurate estimate of the effort and cost of the project and helps project managers adjust their plans as needed to ensure the project is completed on time. This method is best suited for simpler projects, as it does not account for risk and uncertainty.

For example, a project manager is planning the launch of a new product. The project manager uses the expected size of the team, the expected timeline, and the estimated cost of materials and resources to make a Top-Down Estimate of the cost and timeline of the project. The project manager then adjusts the estimate as more information is gathered and the project progresses.

Pros: Quick and simple; can be used for simple projects.

Cons: Less accurate than other methods; doesn't account for risk and uncertainty.

Bottom-up Estimating technique

This method involves breaking down the project into smaller tasks and estimating each task individually. It is often used for complex projects as it allows for more accurate estimates and is easier to change when the scope of the project changes.

This allows them to have a better understanding of the total amount of time and resources needed for the project. This information can then be used to create a timeline for the completion of the project and to ensure that the project stays on track and on budget.

For example, a development company might use bottom-up estimating to determine the cost of a new mobile application. First, they would need to break down the project into smaller components such as planning, design, development, testing, and deployment. Once these components have been identified, the development team can estimate the cost of each component by researching and estimating the time and resources required for each. These estimates can then be added together to form an estimate of the total cost of the project.

Pros: Accurate; takes into account individual tasks and components.

Cons: Time-consuming; requires detailed planning.

Analogous Estimating technique

This method can be used to estimate the cost of a new project based on the cost of similar projects that have already been completed.

For example, a company may use Analogous Estimating to estimate the cost of developing a new feature based on the cost of similar features that have been created in the past.

Pros: Fast and accurate; can be used for complex projects.

Cons: Prone to errors; may not be suitable for all types of projects.

Parametric Estimating technique

This method uses a mathematical formula to calculate the time and cost of a project based on certain parameters. It is useful for highly structured projects with limited scope.

For example, a project manager estimates the cost of the project based on the number of hours of work required. The project manager uses a rate per hour to calculate the cost of the project. This method is often used for projects that are repetitive in nature, such as software development projects, as it allows for a more accurate estimate of costs.

Pros: Fast and accurate; take into account historical data.

Cons: May not be suitable for all types of projects; requires accurate historical data.

Three-Point Estimating technique

This method uses three estimates for each task: an optimistic estimate, a pessimistic estimate, and a most likely estimate. The final estimate is then calculated as a weighted average of the three estimates.

For example, a project manager may need to estimate the cost of a new software development project. They may use Three-Point Estimating to determine a best-case, most likely, and worst-case scenario for the cost of the project. This will give the manager a range of estimates so they can plan more accurately for the project.

Pros: Accurate; takes into account risk and uncertainty.

Cons: More complex than other methods; requires more resources.

Expert Judgment technique

This method relies on the experience of experts in the field to estimate the scope of the project. It is useful for projects with unique or complex requirements and can provide more accurate estimates than other methods.

For example, if a company is launching a new software product and wants to estimate the time needed to develop it, it could use expert judgment from software engineers to make an estimate.

Pros: Can be used for complex projects; accounts for risk and uncertainty.

Cons: Time-consuming; requires expert knowledge and experience.

Which is the best estimation method?

The best type of time estimation method to use depends on the project and its complexity. For simple projects, top-down estimates can be used to quickly estimate the amount of time needed to complete the project. For more complex projects, bottom-up estimates provide a more accurate estimate of the time required. Additionally, Three-Point Estimating is useful for more uncertain projects, as it allows for more accurate estimates by accounting for risk and uncertainty.

The best way to determine the most suitable estimation technique for a project is to experiment and see which technique works best. By using our helpful table to examine the different estimation methods, project managers can find the method that best suits their project and use it to estimate the cost, timeline, and resources needed. Experimenting with different methods helps project managers create more accurate estimates and adjust their plans as needed.

Can we combine the methods?

It is possible to combine estimation methods. For example, a project manager may use a combination of top-down and bottom-up estimation methods to create a more accurate estimate of the effort and cost of a project. Additionally, three-point estimating can be used in combination with other methods to account for risk and uncertainty. Combining estimation methods can help project managers create more accurate estimates and adjust their plans as needed.

Project Estimation Checklist

Here is a checklist for every stage of an estimation:

1. Cost Estimation:

All cost estimates should be based on research and analysis to ensure accuracy.

- Determine project costs, including labor, materials, and equipment

- Research and analyze vendor quotes and cost estimates

- Estimate project duration and any potential delays

2. Time Estimation:

Time estimates should consider potential risks and dependencies to ensure realistic expectations.

- Estimate project duration and milestones

- Develop a timeline and project plan

- Identify potential risks and dependencies

3. Resource Estimation:

Resources should be allocated in a way that maximizes efficiency and cost savings.

- Identify the skills and resources needed to complete the project

- Determine the number of personnel needed

- Allocate resources and create a budget

4. Quality Estimation:

Quality metrics should be established to ensure the project meets the desired level of quality.

- Set expectations for the quality of the project

- Establish metrics to measure quality

- Create a quality assurance plan

Estimation methods in Practice

In our team, we have chosen the Bottom-up Estimating methods for Time estimation with the ActivityTimeline app. The ActivityTimeline plugin can be used to facilitate bottom-up estimating. It allows project managers to break down a project into individual tasks and assign estimated times to each task. The plugin then aggregates the tasks and estimates to provide an estimate of the total cost and timeline of the project. This allows project managers to quickly and accurately estimate the cost and timeline of a project, and adjust their plans as needed.

1. We break the project down into individual tasks.

   

2. Estimated the effort for each task.

   

3. We used the ActivityTimeline plugin to aggregate the tasks.

   

4. Then we estimated the tasks.

   

5. Then we adjusted the project plan and allocated resources accordingly to the availability.

   

6. We monitored the progress and adjust the plan as needed.

   

Conclusion

Estimation methods are important for project managers to use when planning, budgeting, and allocating resources for a project. Estimation methods help project managers to set realistic expectations, identify potential risks, and make decisions about how to allocate resources. Different estimation methods can be used depending on the project and its complexity, allowing project managers to create more accurate estimates and adjust their plans as needed. Hope our article helped in your planning process.