Project estimation is the projection of the physical and time resource needs of a proposed project. The resources include the cost and personnel required to carry out a given project satisfactorily within a specific time-frame. In most cases these estimations are overrun (Swanson, 2011). It is not peculiar to find a project whose actual cost is by up to twice the estimated budget. Doloi (2011) reveals that some projects may also experience overruns of up to three times the allocated project duration. Armour (2012) argues that vague project estimations may result into serious red-flags if project decisions are based on those estimations without verifying their accuracy. It is paramount to provide enough time and resources towards the establishment of accurate project projections to avoid such errors (Armour, 2012).
Project managers can rely on experts with prior experience in project management of similar projects when coming up with estimates (Swanson, 2011). The comparison of the performance of past projects with the anticipated ones can draw the projected estimates more accurately. The method is known as the analogous technique (Doloi, 2011). It can be applied when there is historical data that can be used as a basis for comparison. Its use is relevant when comparing historical projects with current projects that share notable similarities in design and operation (Doloi, 2011).
Deriving estimations on a quantitative basis in cases where there are no historical data can be a great relief where the use of the analogous technique is rendered impossible (Doloi, 2011). Doloi (2011) calls this technique parametric method. Its use requires the translation of known information into measurable parametric values (Doloi, 2011). A good example where the parametric method is put to use would be to express a value such as dollars per kilowatt in an electricity generation project. Both analogous and parametric techniques are blanket methods and do not show the estimations of every activity or cost.
The third technique of project estimation, which is superior to both analogous and quantitative method, derives the total cost estimation of a project from the summation of the costs of unit components of the project (Doloi, 2011). This method is referred to as the bottom-up technique (Doloi, 2011). This technique is used when there are sufficient details of every activity that will be carried out within a project. An in-depth analysis of the available resources, skill-sets and time, is done to explore the project’s cost estimate within a given time-frame. This takes a lot of time and is costlier than the first two though it gives more accurate estimates compared to the first two.
Various information sources can determine the choice of estimation technique used in a project. Firstly, available stakeholders influence the selection of the estimation method (Swanson, 2011). Tapping into the skills of different stakeholders will ensure that they give estimates based on their know-how and strengths (Swanson, 2011). Secondly, data from past projects also determine the estimation method (Doloi, 2011).
Based on experience, data from past projects can be used to create a mirage of the future. Use of parametric references and data from past projects can be used as tools to vindicate the estimates of an intended project (Doloi, 2011). An overall project estimate can be justified by dissecting it into its unit components. These unit components may have conservative costs attached to them and thus, when summed up may give a very justifiable accurate overall estimate of the project.
References
Amour, P.G. (2012). Goldilock Estimate. Communication of the ACM, 55(10), 24-25
Doloi, H.K. (2011). Understanding stakeholders' perspective of cost estimation inproject management. International Journal of Project Management 29 (2011) 622–636
Swanson, S.A. (2011). Estimating Errors. PM Network, 25(10), 62-67
