A successful project starts with a successful estimate. To properly schedule the work to execute your project, you need to know the timeline, costs, scope, risk and more. All of these considerations are part of project estimation techniques.
Estimation techniques are helpful for making decisions on the viability of your project. If you decide to move forward, they’re essential to forecasting projects accurately. Let’s define project estimate techniques, including a checklist of what needs estimating, and offer some of the more popular techniques that you can implement.
What Are Project Estimation Techniques?
Project estimation techniques are tools that help project managers forecast cost, time and other variables as they relate to a forthcoming project. These estimation techniques allow for a more accurate forecast of key elements in every project and include cost, time, scope, risk, resource and quality. Resource allocation estimates tend to be used more in agile IT operations.
The purpose of project estimation techniques is to help clients understand the investment necessary to deliver the project. The project manager has to sell the project to the client and convince them that they’ll get a return on their investment. If the project is approved, the project manager needs these estimation techniques to figure out a feasible plan to deliver the project on time and within budget.
Specifically, project estimation techniques include a rough calculation of price, time or other measurable project aspects. These estimation techniques are necessary for clients, stakeholders and the project planning process because, without them, you’re making a guess. Instead, project estimation techniques allow you to calculate a realistic number.
Project management software can help when using estimation techniques. ProjectManager is online project management software that not only helps you estimate project cost, time, resources and more but also has the features you need to plan, monitor and report on that project. Our Gantt charts let you estimate time, cost and resources to help you build your project schedule, including a work breakdown structure, linking dependent tasks to avoid bottlenecks and even filtering for the critical path. When you set a baseline, you’ll be able to automatically calculate variance as you execute your project to stay on track. Get started with ProjectManager today for free.
Project Estimation Checklist
We’ve gone over the essential items that should be part of your project estimation techniques, but it’s helpful to know more about them individually. As noted above, there are six main areas that should be estimated when researching or planning a project. They are cost, time, scope, risk, resource and quality. Let’s look at each of these project elements more closely.
Cost is what most people think when they think about estimate techniques. This is understandable as most projects are discussed in dollars and cents. Projects are an investment and if you’re unable to get a return on that investment, you haven’t delivered a successful project.
If you’re familiar with project management, then you know the triple constraint: cost, scope and time. These are the three main forces that impact any project. Cost is simply money; you either don’t have enough to complete the project or you spend too much and the project ends up costing far more than was predicted. Neither scenario is ideal.
Accurately forecasting how much the project will cost before execution is important to your client and stakeholders. That figure often determines if they move forward with the project or not. It also helps you manage your client’s expectations about the project, so finding out how much you’ll need and when you’ll need it are critical project estimates.
Another pillar of the triple constraint is time. This refers to the overall amount of time it’ll take to complete the project and accompanying tasks. If you know how long your team will take to do their tasks, those tasks can be included to offer a fairly accurate time estimate.
This is vitally important for the project manager as they begin to formulate the project plan and schedule. While project managers want to know how long a project takes and the project stakeholders certainly are interested in deadlines, there are other reasons why time is a crucial project estimate.
Just as money dictates project funding, knowing how long the project will take enables the project manager to schedule the necessary resources. Coordinating resources is dependent on the timeline developed. Time also informs when the key deliverables will be received.
The last triple constraint is scope. The project scope is simply everything that must be done in the project for it to be successfully delivered. In other words, project managers need to estimate how much work is involved in order to receive the final deliverable. By doing this, including what tasks are involved, you’ll know the materials necessary to execute the project.
Scope dovetails nicely with time and cost to create the triple constraint and a foundation on which any accurate project estimate techniques must be based. In fact, scope, time and cost are so interdependent that they’re key to managing a project.
If, for example, a project requires more time, then either the scope or the cost will have to change. The same is true if extra costs occur. It’s like a balancing act with the project’s success being held up by these three legs. But that doesn’t mean they’re the only estimates required for estimate techniques.
Related: Free Project Scope Template for Word
Outside of the triple constraint but no less impactful is project risk. Risk is anything that’s not expected to happen that does happen and impacts the project. Risk can be bad and is mostly thought of as a negative, but there are positive risks that can be opportunities.
Whether you want to mitigate or take advantage of a risk, you need to estimate what might occur so you’re prepared. Estimate techniques for risk involve identifying what might happen and coming up with a plan to respond to it. This might not cover all bases, but it puts you in a better position to act.
This is the start of a risk management plan. There will also be team members who are responsible for identifying risk, and if an issue shows up, there will be team members who own it. That means they’re responsible for tracking its progress as it’s mitigated or used to the project’s advantage.
Resources are anything you need to get the project done including your team, materials, equipment and so forth. Naturally, resources need estimation techniques, too. You don’t want to start executing a project without knowing how many subcontractors you’ll need or what software your team will be using.
Resource management helps you know what you need and when you need it so there aren’t delays as teams wait for equipment when working on tasks. You also need to know who is available and when so they can be assigned work. It’s important to know who’s assigned what work to make sure to balance their allocation.
It’s clear that while the triple constraint features three of the most important factors in bringing a project to a successful end, they’re not alone. Certainly, resources are critical. They might even be more difficult to estimate as they often come from a variety of vendors, suppliers and outsiders that are beyond the control of the project manager.
Finally, the project isn’t a success unless quality expectations are met. You can deliver the project on time and even under budget, but without meeting the demands set by your client’s customers or stakeholders, that’s a failed project.
Quality is delivering on certain regulations or expectations, depending on the project. There might be environmental restrictions or the product has to work as advertised. Whatever the quality constraints, they can lead to more time and money poured into the project.
Making an accurate estimate of what quality level is expected informs the other five estimates above. In a sense, all six of these project estimates are related or, at least, interconnected. Whatever quality estimates you come up with are sure to impact your cost and time, possible scope, risk and resources, too.
Types of Project Estimation Techniques
Now that we understand what we’re estimating, let’s look at some of the more popular project estimation techniques. Projects will likely use one or more of these when making estimations and the more you use, the more likely your estimates will be accurate.
1. Top-Down Estimate
Top-down estimates are an estimation technique that starts with an overall time for the project and then breaks that down into phases, which are then broken down further into tasks. This is a classic estimation technique that uses a look such as the work breakdown structure (WBS).
This is commonly used when a client demands that the project be completed within a certain timeframe. This project estimate technique works well for this scenario as you have a block of time and can split it into activities to meet the deadline.
2. Bottom-Up Estimate
This is the reverse of the above estimate technique. Instead of breaking up the timeline into tasks, you estimate each task and combine them into an estimate for the whole project.
This is a more accurate method as using smaller tasks to build a larger schedule will give you a better estimate of the time it’ll take to complete the project. The problem is this estimation technique takes more time.
3. Analogous Estimating
Analogous estimating is a technique in which the project manager looks at a previous, similar project and studies its variables to come up with an estimate for the time and cost of the current project. This comparison works best when there’s more data that leads to more accuracy.
This is a top-down estimating technique as the project manager is first estimating the project’s costs and then breaking it down into smaller parts. It’s helpful to use this estimation technique when you have limited estimation resources.
4. Parametric Estimate
This is another estimation technique that takes advantage of past project data. In this estimation technique, there are attempts to adjust the data to reflect the differences between the past project and the new one you’re estimating.
By taking the details from a previous project and pro-rating it, the project manager can estimate the current project more accurately. This is sometimes referred to as parametric modeling.
5. Three-Point Estimating
Often when estimating from the bottom up, three-point estimating will be used. In this case, instead of estimating the duration of a single task, three estimates are applied. One is the optimistic estimate, the other is a pessimistic one, and, finally, the most likely guess. The average of these will be used as the actual estimate.
You might be familiar with three-point estimating if you’ve ever used the program, evaluation and review technique (PERT). It, too, uses what’s called a weighted average as an estimating technique to forecast more accurately.
6. Expert Judgement
Seeking the help of experts or those with experience managing the type of project is by far the most common estimating technique. It’s certainly faster and easier than making calculations. People tend to trust others who have gone through a similar experience.
It’s a flexible estimating technique in that you can use it for top-down or bottom-up estimating. In some cases, experts and experiences don’t align with your current project. Experts can still be helpful, but their opinions should be tempered by other estimating techniques.
Estimation Techniques & ProjectManager
ProjectManager is project management software that helps you turn estimating techniques into project plans and schedules. Our software delivers real-time data so project managers can track progress and performance as it happens. Using the software is the best tool in your arsenal for adjusting plans when estimates are off. Estimating techniques are educated guesses, but real-time data are facts.
Monitor Costs in Real Time
Making sure your estimates are accurate and that you’re not overspending is hard. Being unable to track those costs can mean trouble for the project’s success. That’s why we have real-time dashboards that give you a high-level view of the project, automatically calculating and displaying six metrics, including costs. For a deeper dive, there are timesheets and reports on timesheets, costs and more that can be customized to focus on only what you want to see.
The same goes for your project scope. You’ve made an accurate estimate but is the project holding to it? We have resource management tools that allow you to track the workload of your project team. If they’re over-allocated or under-allocated with tasks, that could mean trouble. A quick glance at the color-coded workload chart and it’s clear to see who is doing what. You can then balance the workload from the chart to keep your team productive and stay on track.
Estimation techniques are important. Project managers can use our Gantt chart or sheet view to plan the project and figure out costs, time, scope and more. But once the project starts that’s when the rubber hits the road. You better have a project management tool that can monitor in real time and track your time, scope and cost in order to deliver success.
ProjectManager is award-winning software that helps you plan, monitor and report on projects throughout their lifecycle. Our collaborative platform means you can easily share files and collaborate whether you’re in the office, the field or working remotely. Join teams at NASA, Siemens and Nestle who are already using our tool. Get started with ProjectManager today for free.