At some point, project managers are asked for estimates on cost and time to completion. In order to provide reasonable estimates, information on the project is used in conjunction with estimating tools. The length of time it will take to complete a project might use parametric estimating. Mathematical formulas employ quantitatively based durations to determine the quantity of work to be completed. The tool also uses statistical modeling to produce cost estimates with historical data for various parameters (Phillips, 2014, p. 226). Analogous estimating also uses historical data from similar projects to provide cost estimates (p. 225). Adjustments are possible for known differences between the compared projects.
Bottom-up estimating is considered to be the most accurate approach to estimating project time to completion and cost because it looks at costs from the perspective of components (Phillips, 2014, p.222). Estimates of individual work packages are created and then summarized to produce an overall cost estimate. This approach is the most time-consuming but creates a higher level of team commitment than parametric estimating (Billows, 2017). On the other hand, the method of three-point estimating uses three estimates to create a range for the cost of the activity. The estimates are the most likely, optimistic, and pessimistic. The cost estimate is created by calculating a weighted average when historical data is not available (Phillips, 2014, p. 226).
As expected, there are software programs for project management estimating (Phillips, 2014, p. 236). Software includes applications for software and simulation, statistics, and spreadsheets. Computer software is particularly useful with comparing alternatives for cost estimations. Some software allows the use of three-point techniques created previously (Billows, 2017).
References
Billows, D. (2017). Estimating Techniques. Project Management Basics. Retrieved 24 January 2017, from http://www.4pm.com/category/larger-projects/estimating-techniques/
Phillips, J. (2014). CAMP/PMP Project Management Certification All-In-One Exam Guide (3rd ed., pp. 1-613). McGraw Hill Education.
