For the project management from available different estimation methods which one you should select and why. This will help you compare estimation methods like exerpt judgement, one point estimation, three point estimation, cocomo, top down estimation, bottom up estimation, etc. to identify time, efforts and cost with examples.

1. Cost/Time
Estimation Methods
Prepared By: Pragnendra Rahevar
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2. Estimation?

3. Estimation?
20 Pills
20Layers

4. Estimation?

6. What is an Estimation?
• the process of finding an
estimate, or
approximation, which is a
value that is usable for
some purpose even if input
data may be incomplete,
uncertain, or unstable.
• Cannot be evaluated
precisely

7. Estimating
• The process of forecasting or approximating
the time and cost of completing project
deliverables.
• The task of balancing expectations of
stakeholders and need for control while the
project is implemented

8. Why Estimation is Important?
•To support good decisions.
•To schedule work.
•To determine how long the project should take
and its cost.
•To determine whether the project is worth doing.
•To develop cash flow needs.
•To determine how well the project is progressing.
•To develop time-phased budgets and establish the
project baseline.

9. Estimating
Approach
Stable
Activities
Analogous
Expert Judgment
Parametric
Group Decision-
Making
Dependent
Activities
3 Point (PERT)
Expert Judgment
Analogous
Vendor Bid Analysis
Uncertain
Activities
3 Point (PERT)
Bottom Up Analysis
Top Down Analysis

10. How Estimating is done?
• Provide team enough information to properly
estimate each activity
• How refined the estimates must be
• Complete sanity check of the estimate
• Prevent Padding
• Formulate a Reserve
• Make sure assumptions made during
estimating are recorded for later review

11. One Point Estimation
• Estimator submits one estimate per
Activity/Project/Module.
– Activity will take 10 weeks
• It is just a Guess.
• Could be based on historical information
• Could be based on Expert Judgment

12. Negative Effects of
One Point Estimates
• Padding
• Hides important
information like Risks,
Uncertainties etc.
• Unreliable PM: A
Schedule no one
believes in
– PM estimates activity
will take 20 days and it is
completed in 10 days

13. Analogous Estimation
• Use the actual cost of a previous, similar
project as the basis for estimating the cost of
the current project.
• Uses Historical Judgment or Expert Advice
• Eg: Last 2 AR Mobile projects took around 4
months, so Somnath AR should take 4 months.

14. Parametric Estimation
• Uses project characteristics
(parameters) in a mathematical
model to estimate project costs.
• Parametric Estimating looks at
relationship variables on an
activity to calculate time or cost
estimate
• Data can come from Historical
Records from Previous projects 20 Pills
20Layers

15. Bottom Up Estimation
• Involve estimating individual work items or
activities and summing them to get a project
total.
• Can serve as a check on cost elements in the
WBS by rolling up the work packages and
associated cost accounts to major deliverables
at the work package level.
• Requires accurate WBS

16. Using WBS

17. Using WBS

18. Creating a Budget

19. Creating a Budget
Cost Baseline and Cost Budget is
determined, PM may compare
these numbers to Parametric
estimates/Expert
Judgment/Historical records

20. Why Bottom Up?
• More Accurate
• Gains buy in from team because team creates
estimates they can live with
• Based on a detailed analysis of the project
• Provides a bases for monitoring and
controlling, performance measurement and
management

21. Three Point Estimation
• Project hardly finishes on time.
• Best to estimate in a range
• Estimators can give
– Optimistic (O)
– Pessimistic (P)
– Most Likely (M)

22. Three Point Estimation
Formulas for Three Point Estimating and Activity Standard Deviation
Eg: An activity of 30 hours that has standard deviation of +/-2 could end up taking
between 28 hrs and 32 hrs.
The greater the range created by standard deviation calculation the greater the RISK

23. Lets Try!!
Activity P M O
Triangular
Distribution
Beta
Distribution
Standard
Deviation
A 47 27 14
B 89 60 41
C 48 44 39

24. Lets Try!!
Activity P M O
Triangular
Distribution
Beta
Distribution
Standard
Deviation
A 47 27 14 29.333 28.167 5.5
B 89 60 41 63.333 61.667 8.0
C 48 44 39 43.666 43.833 1.5

25. Why PM needs to understand Expected
Durations, Range Estimates and Standard
Deviations?
To better Control Projects

26. Top Down Estimation
• Are usually are derived from someone who
uses experience and/or information to
determine the project duration and total cost.
• Are made by top managers who have little
knowledge of the processes used to complete
the project.

27. Expert Judgment
• Looks to the expert to create an estimate based
upon their understanding of the project
requirements.
• It is quick and if the expert is knowledgeable.
• The disadvantages : "That's what I think it will
take to do this."

28. Group Decision Making
• Involves team members
• Brainstorming
• Nominal Group Technique
• Delphie Technique

29. Computerized Tools
• Tools, such as spreadsheets and project
management software, that can make working
with different cost estimates and cost
estimation tools easier.

30. COCOMO Model
• COnstructive COst MOdel
• An Algorithm developed by Barry Boehm,
1981
• Basic COCOMO applies parameterized
equation without much detailed
considerations of project characteristics

31. Project
Types
Organic
Semi-
Detached
Embedded
• Well
Understood
application
• Team Size is
Small
• Experienced
Team members
• 2-50 KLOC
• Little
innovation
• mixture of
experienced
and
inexperienced
staff
• 50-300 KLOC
• Medium Sized
• coupled to
complex
hardware
• >300 KLOC
• Large Project
team
• Severe
Constraints
• Complex
• Innovative

32. COCOMO
Efforts
Project
Duration
Average Staff Productivity
Cost required
to develop the
Product

33. Efforts
𝐸 = 𝑎 𝐾𝐿𝑂𝐶 𝑏
Where,
E is Effort in staff months
a and b are constants
KLOC is thousand lines of code
Mode a b
Organic 2.4 1.05
Semi-
detached
3.0 1.12
Embedded 3.6 1.20

34. Project Duration
𝑇𝐷𝐸𝑉 = 𝑐 𝐸 𝑑
Where,
TDEV is Time for Development
c and d are constants
E is Effort Mode c d
Organic 2.5 0.38
Semi-
detached
2.5 0.35
Embedded 2.5 0.32

35. Average Staff Size
𝑆𝑡𝑎𝑓𝑓 𝑆𝑖𝑧𝑒 =
𝐸
𝑇𝐷𝐸𝑉
Productivity
𝑃 =
𝐾𝐿𝑂𝐶
𝐸
Cost Required = Project
Duration*Avg Salary

36. Lets Try!
• Assume that the size of an organic type
software product has been estimated to be
32,000 lines of source code. Assume that the
average salary of software engineers be Rs.
15,000/- per month. Determine the effort
required to develop the software product and
the nominal development time.

37. • 𝐸𝑓𝑓𝑜𝑟𝑡 = 2.4 × 321.05
= 91𝑃𝑀
• 𝑇𝐷𝐸𝑉 = 2.5 × 910.38
= 14 𝑀𝑜𝑛𝑡ℎ𝑠
• 𝐶𝑜𝑠𝑡 𝑅𝑒𝑞. 𝑡𝑜 𝑑𝑒𝑣𝑒𝑙𝑜𝑝 = 14 × 15000
= 𝑅𝑠 210000

38. Techniques to be Used
• New Projects:
– COCOMO
– Bottom Up Estimation
– Parametric Estimation
– Group Decision Making
– Expert Judgment
• Similar Projects
– COCOMO
– Analogous Estimation
– Parametric Estimation
– Group Decision Making
– Expert Judgment
Project Estimate
Times
Costs

39. Phase Estimating

40. Submitting the Bid
Direct costs $80,000
Direct overhead $20,000
Total direct costs $100,000
Overhead (20%) $20,000
Total costs $120,000
Profit (20%) $24,000
Total bid $144,000

41. Thanks
“The models are just there to help, not to
make the management decisions for you”
-Barry Boehm