# PERT Three Point Estimating in Project Management by StarAgile

September 11, 2021
Category Project Management

## What Is 3 Point Estimation?

Three-Point Estimation is the way to exactly predict how long a project will take to complete by collaborating with the development team. It is the process of analyzing the data obtained about the project and its sources. Generally, this can begin with an approximation and modify it afterwards.

Managers have utilized this strategy to provide more accurate predictions of future events by integrating the finest and worst-case outcomes withore realistic alternatives and determining what they will prepare accordingly.

This estimating method is crucial to project cycle management; therefore, you should look into it if you're unsatisfied with your planning methods. The concept that data on upcoming developments is limited reduces its effectiveness, but it gives employees insights about how to manage data analysis and map a budget plan.

The PMP examination features numerous questions based on formulas. Most of these issues are based on a three-point calculation. The three-point assessment strategy provides a suitable optimization methodology and balances top-down or topical estimations. PMP certification course demonstrates the expertise, training, skills and expertise needed to conduct and manage projects.

3 Point Estimate Formula It is easy to calculate a three-point estimate using the triangle distribution system.

There are three different periods, each of which is determined by specific circumstances.

Most likely Estimate (TM): - The length of the activities, due to the anticipated allocation of funds, their efficiency, reasonable perceptions of accessibility for the scheduled activity, reliance on certain contributors, and disruptions.

Optimistic Estimate (tO): - The length of the activities is made on the basis situation outlined in the most likely estimation.

Pessimistic Estimate (tP): - The timeframe of the application is based on the worst circumstance indicated in the most likely estimation.

## The Triangular Distribution

The straightforward yet frequently used technique is to take the average of the three calculated values. This triangular distribution has the formula:

E = (O + M + P) / 3

Where:

E Indicates Estimated time or cost,

O Indicates Optimistic estimation,

M Indicates most likely estimation,

P Indicates a pessimistic assessment.

The PMBOK employs the values t(E), t(O), t(M), and t(P) for time estimation and c(E), c(O), c(M), and c(P) for cost estimation.

The 3 point estimate formula has the same weight. Therefore, the most likely scenario has no more significant effect on the final assessment than the two less potential scenarios. This is distinct from the technique of beta distribution.

The PERT Beta Distribution

This method considers that the most likely scenario seems to be more likely to happen, which is expressed in multiplication for the estimation for such an instance. Therefore, the PMI technique recommends this computation as a substitute for the triangular distribution when estimating costs.

The most likely estimate is multiplied by four in this procedure, but the total denominator is six. Thus, the following is the formula:

E = (O + 4*M + P) / 6

Where:

E Means Estimated time or cost,

O Means Optimistic estimation,

M Means most likely estimation,

P Means a pessimistic estimation.

The formula for calculating the PERT distribution's standard deviation is as follows:

The standard deviation is equal to (P – O) / 6.

A similar principle is used to estimate a complete path, but the standard deviations of all activities are integrated.

## Three-Point Estimation Steps:

Step 1: Get to the WBS.

Step 2: Determine three attributes for each activity: the most optimistic estimation (O), the most likely estimation (M), and the pessimistic estimation (L).

Step 3: Determine the average of the three variables

(O + M + L) / 3

Step 4: Determine the task's three-point estimation. The Average is calculated as a three-point assessment. Therefore,

E = Mean is equal to (O + M + L) / 3.

Step 5: Determine the default task standard deviation

SD = √ [((O − E)2 + (M − E)2 + (L - E)2)/2]

Step 6: Repeat the same procedures in steps 2, 3, and 4 for each activity in the WBS.

Step 7: Determine the program's three-point estimation.

E (Project) = ∑ E (Task)

Step 8: Determine the program's standard deviation.

SD (Project) = √ (∑SD (Task) 2)

## Benefits of Three-Point Estimation Technique

The three-point estimation technique has significant benefits above other program estimations:

1. More precise estimations

When decision-makers use the three-point estimation technique, they can receive very accurate estimations for their initiatives. The ultimate result of this strategy is a weighted average.

2. Risk minimization

A three-point assessment provides a more accurate description, minimizes the chances of failures and reduces the probability of an unduly optimistic value being generated. Additionally, you can utilize the variance to determine the risks concerned. A significant deviation indicates that the chances are excessive. After assessing risks, you can take remedial measures to resolve any unanticipated issues during the project lifecycle. You can operate in practically any business, everywhere in the universe, and with almost every project management approach if you have a PMP certification to your name.

3. Risk analysis and prioritization

After you've done the research, you can use the three-point assessment methods to examine and evaluate them based on the severity of the outcomes. The optimistic scenario implies that no risk will exist, whereas the realistic figure means that some risk will exist. Finally, the pessimistic estimate indicates that the probability is highly likely to occur.

4. Budget estimate

Offering a fixed cost to the client while carrying out a task with significant deviations is not a good idea when working on projects with significant variations from the original plan. It would be preferable to specify a limit in this scenario 3 point estimation assists you in having an appropriate calculation of the resources necessary to accomplish the task. This enables the most efficient usage of available resources and also the minimum possible expenditures.

5. Duration of the project

As with other estimating approaches, a three-point assessment can assist in determining the project completion time. It offers a comprehensive estimate of the length of the contract by taking into account all relevant elements. You may organize your task more effectively if you have a general estimate of how long it will require. This enables officials to make wise decisions about obtaining specialized services or employing additional staff.