How To Improve Project Estimates

Have you ever had an executive ask how long a project will take before the project started?

Perhaps they said they would not hold you to the date.

Pause. Your credibility is at hand. Let’s talk about the challenges of project estimates, how we can better manage expectations, and improve our estimates.

Problems With Over Estimating and Under Estimating

Stock Photo of a Sign for "Estimates"

Improving the accuracy of your estimates greatly improves your credibility. PMs must understand and appropriately apply different estimating techniques.

What happens if someone estimates a task to take 10 days when it should only take 5 days.  Work expands to fill the time allotted.

Conversely, what happens when someone estimates a task to take 5 days when it should take 10 days?  People rush their work. The results are poor quality, rework, higher costs, and extended schedules.

After each project, compare your actuals to your estimates. Do you see a consistent pattern where certain team members estimate too high or too low?  Calibrate your estimates accordingly.

Who Should Provide Estimates?

When possible, have the person doing the work provide the estimates.  They have the experience and expert judgment to provide the most accurate estimates.  PMs should work collaboratively with team members to complete estimates and build the schedule.

Estimating Techniques

Each estimating technique has its strengths and weaknesses. PMs should understand and apply different estimating techniques appropriately.

  • Top-Down Estimating (alias Analogous Estimating). Typically, the PM looks for past projects similar to the project at-hand.  If the previous projects took six to eight months, we could estimate this project at a similar duration with appropriate adjustments (i.e., unique risks).

Use this technique during the project initiation or early planning.  This technique is relatively quick but not as accurate as the Bottom-Up Estimating technique.

  • Bottom-Up Estimating (alias Detailed Estimating). This technique involves estimating work at a task level.  The detailed task estimates are rolled up to higher levels to provide a summary estimates.

Use this technique after completing your Work Break Down structure. This technique takes longer but provides greater accuracy than the Top-Down Estimating technique.

  • Three-Point Estimating. This technique requires the estimator to provide three estimates: 1) pessimistic estimate, 2) optimistic estimate, and 3) most-likely estimate. Using a weighted average formula, you calculate the expected value as follows: ((Pessimistic + 4 (Most Likely) + Optimistic)/6).

Use this technique when estimating work with which you don’t have prior experience. This technique will result in a more accurate estimate than a single point estimate.

How To Respond To An Estimate Request (the next time)

When an executive asks for an estimate early in a project, ask for a day or two to complete the estimate. Review past projects to find similar projects. Complete a top-down estimate and provide the estimate in a range such as 5-8 months.

Let management and your stakeholders know that you will provide a revised estimate with a higher confidence level after project planning. The team can complete a bottom-up estimate.

If the project is unlike previous projects, utilize the Three-Point Estimating technique.

Finally, track your hours. Review your results during and after the project. Recalibrate your estimates. Watch your credibility improve.

Question: In your experience, what are the biggest mistakes made by PMs in completing estimates? What can they do to improve?

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6 thoughts on “How To Improve Project Estimates

  1. Those techniques to estimate the duration of a project are interesting and can be very useful at first look, when as you mentioned above, we need to give a fast answer to an executive. On the other hand a project is delivered by a team and even if the Project Manager have to stand up in front of everyone especially to take the “hit” (because the success belongs o everyone, of course) he has to rely on his team to provide the required info, as accurate as possible. Now, if the PM has not a great experience, usually he will lead minor projects, where the estimation is easier the potential minor differences are not so crucial. When the project is big and complex, consequently the PM is experienced, he suppose to have a strong “library” of past learning and most probably developed a kind of “sixth sense” in evaluating a project from cost and schedule point of view. On top of this, he should be able to gather in his team experienced resources that will provide him quality and reliable input. Or, at least he should have built a strong network from where he can get the required help. Of course, as a PM we should always get some decent contingency, in realistic balance with the complexity of the project. For me, a PM have 3 major points to deliver as a “business card”: safety, schedule and cost. If a PM is able to deliver a project on time, in the projected cost and with 0 major incidents, then he is the one…there might be some Post start-up items that have to be improved (quality, design, efficiency..) but the client have to receive the project when promised. As a conclusion (mine, at least): Never give a “taken from the hat” answer when is about schedule and cost. It is better to ask some decent preparation time, balanced with the complexity of the project. Is good for PMs image (he looks serious and credible in front of any executive) and also is good for the “business card”. Most of the time when you say something in front of an executive, you create expectations, even if those words were not realistic and you will always be “judged” against those words.