Do you ever feel like the Lone Ranger when trying to improve cost estimates? You’re not alone. Actually, you have a team.
Many project managers are left to their own devices when estimating projects. This can be rather challenging. So, how can we improve our cost estimates?
I’d like to suggest something different — engage your project team and key stakeholders. Not only will you improve your cost estimates, but you’ll also get better buy-in and support in keeping the project within budget.
What kinds of projects would benefit from this approach? Large complex projects. And alien projects that are different projects than previously undertaken.
3 Techniques to Improve Cost Estimates
Number one: Brainstorm your estimates. A senior leader asked Jane to manage a project to implement a new policy administration system for her employer, a large property and casualty insurance company. She conducted an estimating workshop. Jane asked the five participants to come prepared to brainstorm the project expenses. The group identified several items that Jane had not thought of including facilities, the cost to interface the policy admin system to a third party, contingency reserves, and here’s one – financing cost (including interest charges).
Number two: Delphi Technique. Bob had the same task as Jane. However, he knew that he could not get the participants together for a brainstorming exercise since several of the individuals lived in other parts of the country. Therefore, Bob used the Delphi Technique.
Bob emailed the stakeholders a survey link asking, “What items should be included in the project budget?” He compiled and sent the results to the stakeholders asking them, “Do you agree with these budget items? If not, where do you disagree and why?” Bob compiled and shared the final results.
Number three: The nominal group technique (NGT). Betty decided to use the NGT with her stakeholders. She had identified expense categories such as software, hardware, vendor, configuration, and testing before the NGT meeting.
Betty started with the software expenses and asked the participants to write down software expenses. Then she asked — round robin style — each participant for one response, allowing for questions and clarifications. Betty captured each item on Cling On Sheets (affiliate link). She continued the second and subsequent rounds until the ideas had been captured. The team worked together to combine items where it made sense.
Next, Betty instructed the participants, “Write down what you think will be the top three expenses for this category.” She facilitated the round robin exercise asking each participant for their top three.
Afterward, she asked, “Where do we see agreement and disagreement? Why are there differences in opinions?” Participants shared details behind the estimates allowing others to understand the costs better.
Documenting Your Basis of Estimates
Have you ever been asked how you estimated something later in your project, but you could not remember? I know I have.
What about Bob, a project manager who had not been able to answer this question in a previous project? In his current project, Bob documented the supporting detail for the project’s cost estimates including:
- How the estimates were developed
- Range of estimates (e.g., +-20%)
- Confidence level of the estimates
Question: What steps are you taking to improve cost estimates?
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