Top 5 Project Estimation Techniques in 2024 | StarAgile

Overview 

Project estimation techniques is a method of finding a rough approximation, to a project that is an identified value to solve a problem with having data that is uncertain, incomplete, or unstable.

It is used to calculate some of the parameters such as cost, efforts, time, and resources to do a project.

The estimation is based on few things known as

• Available documents or Knowledge
• The structure of input data
• Experience
• The risks identified
• The assumptions made for the problem/project

5 Project Estimation Techniques

1. Parametric Estimating - The historical data or the past data is used for estimating each element of the project. 

2. Analogous Estimating - The similar past projects are used to estimate the project. It is like estimating with 20% plus or minus the previous project cost

3. Bottom-up/ Top-down estimating - It is the most reliable form of estimating the project considering the work break down structure, dividing into functions, efforts estimation and calculating the duration of the project, and then estimate the cost by combining each task and activities costs. For high-level chunks to be estimated Top-down is used and when the details are available in smaller chunks they are collated together using the bottom-up method. 

4.What-if analysis 

The project is broken down into smaller elements using the decomposition technique and the divide and conquer approach is used. The efforts, size, cost, and time are estimated by breaking down the project into major functions or software engineering activities. 

• Understand the scope of the software to be built.
• Estimate the size of the software it consists of following sub-steps
• Estimate the size by its scope
• Break down the software into functions
• Calculate the size of each software function
• Estimate each function by the cost and efforts from the baselines
• Combine the estimate of each function with the overall estimate of the project.
• Estimate the cost and efforts related to each software engineering function. It contains the following substeps,
• Make the sequence of activity to be performed.
• Measure by dividing the activity into smaller tasks
• Estimate the efforts that are person-hours per day required to complete each of the tasks
• Now combine each of the tasks to form individual activity
• Obtain the cost units that are cost per unit efforts for each of the activities.
• Compute the total costs and efforts of each activity.
• Now combine the total costs and efforts for each activity to form the total cost and efforts for the entire projects.
• Reconcile the estimates with the size and cost if they are agreeing, then the assumptions and data are reliable, otherwise, redo the data collection job by following the steps given below.
• Understand the scope again
• Do the function and activity break down once again
• Determine the cause of the divergence and do the reconciliation again.

This is the widely used method and every time, What is required, If not available then go back to the scope is the basics of this method. 

5. Three-point estimate – Only three points are considered to estimate the project namely the best, most likely, and the worst cases. For every element compare this and decide on choosing the best fit for your project.

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Chief parts of estimation techniques in project management

Project cost estimation management is an important and key step in project estimation.

It is the process of controlling and managing the cost of the entire projects effectively,

The cost of the project can be estimated with the various project sources such as 

• By doing the work break down the structure
• Developing scheduling or duration of the project
• Planning for the resources
• Risks Identification,

Inputs of the cost estimation management include the following,

• Project charter
• Project Management Plan
• Organizational Processes
• Enterprise environmental factors

The estimate of the cost of the project can be classified into these categories

• Equipment cost
• Labor Cost
• Training cost
• Cost of the supplies
• Overhead costs

Time estimation methods in project management

The top 4-time estimation methods are discussed below,

1) By historical data - The time can be estimated by having the historical data for the previous projects and calculating the efforts, duration and thus calculate the time for the current project

2) Taking the expert's view - The time of the project can be based on the expert's best practices and the views they have for the previous projects and the current projects.

3) Breaking down projects - In the Bottom-up estimating the larger project is broken down into granular small tasks. Then estimating the time for every task and combining them for the entire project. In top-down estimating the estimated timeline is calculated using the experiences, past projects, best practices, and expert's view of the project.

4) Program Evaluation and Review Technique (PERT) - Here the Optimistic Time (O) the fastest delivery time for an activity, the most likely value of time (M), and then the Pessimistic time which is the longest time to complete the activity of the project is considered.

The value of time is E = (O+4M+P)6 is calculated and 

then the variance is calculated by the equation V = [(P-O)/6]^2 are calculated.

After calculating the E and V of all the activities, by combining all the E's values the time for the entire project is calculated.

Time estimation using the Gantt chart is shown below,

Top 10 cost estimation techniques in project management

1. Expert Judgment - Many times for medium to small projects the expert judgments works.
2. Analogous Estimating - It is taking data points from the previous projects and doing the estimating for the current projects.
3. Parametric Estimating - Taking the historical values and is quite similar to analogous estimating.
4. Bottom-Up estimating - Taking the accurate data by dividing the projects and the work activities into granular levels such as tasks and then estimating the efforts, time and cost
5. Three-Point estimating - When you have the time at pessimistic value (P), the most likely (M) and the optimistic values (O). Calculate the three points for each task and then activities and then combine the time for the entire project.
6. Reserve Analysis - In the project taking the contingency reserves may be used or removed based on the projects. For the management reserves, they need to be added to the cost baselines.
7. Cost of Quality - Baselining the cost parameters depending on the quality focus in the projects.
8. Project Management software - You can use Gantt chart and other project management software for calculating the efforts, time and thus the cost of the entire project
9. Vendor Bid Analysis - When you do not have a clear idea of the calculation of the time, then use the vendor bid analysis and get the data based on that to calculate the time for the project.
10. Group Decision Making - When you have a large team and experts, and if you have formed a project board, get the analysis done by group discussion.

Take a look at the PMP exam questions on cost estimation to prepare for your PMP exam. 

Also Read: Gantt Chart vs PERT Chart

Final thoughts

Now you know the cost, time, and effort of project estimating techniques by calculating through various methods. To understand better and become an expert in estimation techniques in project management you must attend the PMP certification training and we recommend you attend the online training with StarAgile. 

StarAgile is the training partner for the PMP and all their project management certifications. Apply confidently for the PMP training at StarAgile.  Click on the link to know more about StarAgile, the courses, and registrations.