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Project Estimating Process

 

Project Workflow Management

SERIES ARTICLE

By Dan Epstein

New York, USA

 



Note:
 This article is based on the book Project Workflow Management: A Business Process Approach by Dan Epstein and Rich Maltzman, published by J Ross Publishing in 2014. The book describes PM Workflow® framework, the step-by-step workflow guiding approach using project management methods, practical techniques, examples, tools, templates, checklists and tips, teaching readers the detailed and necessary knowledge required to manage project “hands-on” from scratch, instructing what to do, when to do and how to do it up to delivering the completed and tested product or service to your client.

The project workflow framework is the result of Dan’s research into the subject, having the following objectives:

  1. Create the virtually error-free project management environment to ensure significant reduction of project costs
  2. Reduce demands for highly qualified project managers using the step-by-step workflow guiding approach.

While PM Workflow® is the continuous multi-threaded process, where all PM processes are integrated together, this article will attempt to describe the estimating group of processes as a stand-alone group that can be used independently outside of PM Workflow® framework. It will be difficult in this article not to venture into processes outside of the current subject, such as planning, quality, communications and other management processes, so they will be just mentioned. However, to get full benefit and the error free project management environment, the complete implementation of PM Workflow® is required. In order to understand how PM Workflow® ensures this environment, I strongly recommend reading my article Project Workflow Framework – An Error Free Project Management Environment in the PMI affiliated projectmanagement.com (https://www.projectmanagement.com/articles/330037/Project-Workflow-Framework–An-Error-Free-Project-Management-Environment)

The article above provides the overview and explanation of how the project workflow framework works and achieves the established objectives.

For more information, please visit my website www.pm-workflow.com

 

Purpose

The purpose of the Estimating process is to describe the steps for developing size, effort, cost, schedule and critical resource estimates for a project throughout its life cycle. P12A and P12B have essentially the same content, but used for different purposes and placed in different areas of the Planning Frame.

Accuracy of Estimates

Accuracy of estimates depends on:

  • Level of detail – i. e. the degree of decomposition of the Work Breakdown Structure.
  • Risk assessment results and the remediation plan.
  • Quality of requirements.
  • The point in the project lifecycle where the estimating took place.
  • The estimator’s experience.
  • The estimating method.

There are three levels of estimating accuracy:

  1. Ballpark estimates – Ballpark or initial estimates are made when little information about the project is available and there are no detailed requirements, except the initial project request. In order to do estimates, the delivery team must be familiar with the similar types of project and the technology used. This type of estimate is also done when significant risks are involved. The accuracy range of the ballpark estimates has a range of -25% to +75%.
  1. Preliminary estimates – Preliminary estimates are performed immediately after completion of Business Requirements. Those estimates heavily depend on the team’s familiarity with similar projects, business, and technology with no high risks present. A high level WBS should be used to do this type of estimating. Preliminary estimates are used to establish the preliminary project budget and are often used to establish initial project funding. The accuracy range of preliminary estimates never exceeds -10% to +25%.
  1. Accurate estimates. – Accurate or definitive estimates are prepared from a well-defined detailed data and WBS, using techniques described below. This type of estimate is done just before the project plan package is created or updated. The estimate may not cover the entire project, but only the well-defined next stage of the project plan. It is not usually possible to do accurate estimates for the entire project, because the lack of detailed information for the required activities in the distant future. The best accuracy that can ever be achieved has a range of –5% to +10%.

Note: In some organizations, where delivery managers with no real project management experience are constantly under pressure from senior management, the PM may face demands for accuracy of estimates better than -5% to +10% or even +– 0%. Since this is an unrealistic and unachievable accuracy, project managers are forced to use tricks to match real cost to estimates. Since the project scope changes are inherent in all projects, one of those tricks is overestimating or underestimating scope changes to keep the visibility of the overall project cost within the required accuracy of estimates in accordance with managers’ demands. Another trick is using reserve activities for each group of tasks, which are adjusted as necessary to match costs to estimates. In fact, most managers are aware of this, but due to demands from senior management or temptations to report excellent achievements to the CEO, they keep of this practice ’under wraps’. We assert that these tricks provide no real benefits whatsoever and in fact threaten the project, and even may cost the project manager his/her job.

More…

To read entire article (click here)

 

Editor’s note: This series of articles is based on the book Project Workflow Management: A Business Process Approach by Dan Epstein and Rich Maltzman, published by J Ross Publishing in 2014. The book describes the PM Workflow® framework, a step-by-step approach using project management methods, practical techniques, examples, tools, templates, checklists and tips.  The book teaches readers how to manage a project “hands-on” from scratch, including what to do, when and how to do it up to delivering a completed and tested product or service to a client.

How to cite this article: Epstein, D. (2018). Project Estimating Process, Series on Project Workflow Management; PM World Journal, Volume VII, Issue X – October. Available online at https://pmworldjournal.net/wp-content/uploads/2018/11/pmwj76-Nov2018-Epstein-estimating-process-series-article.pdf

 



About the Author


Dan Epstein

New York, USA

 

 

 

Dan Epstein combines over 25 years of experience in the project management field and the best practices area, working for several major Canadian and U.S. corporations, as well as 4 years teaching university students project management and several software engineering subjects. He received a master’s degree in electrical engineering from the LITMO University in Leningrad (today St. Petersburg, Russia), was certified as a Professional Engineer in 1983 by the Canadian Association of Professional Engineers – Ontario, and earned a master’s certificate in project management from George Washington University in 2000 and the Project Management Professional (PMP®) certification from the Project Management Institute (PMI®) in 2001.

Throughout his career, Dan managed multiple complex interdependent projects and programs, traveling extensively worldwide. He possesses multi-industry business analysis, process reengineering, best practices, professional training development and technical background in a wide array of technologies. In 2004 Dan was a keynote speaker and educator at the PMI-sponsored International Project Management Symposium in Central Asia. He published several articles and gave published interviews on several occasions. In the summer of 2008 he published “Methodology for Project Managers Education” in a university journal. His book, Project Workflow Management – The Business Process Approach, written in cooperation with Rich Maltzman, was published in 2014 by J. Ross Publishing.

Dan first started development of the Project Management Workflow in 2003, and it was used in a project management training course. Later this early version of the methodology was used for teaching project management classes at universities in the 2003–2005 school years. Later on, working in the best practices area, the author entertained the idea of presenting project management as a single multithreaded business workflow. In 2007–2008 the idea was further refined when teaching the project management class at a university.

Dan is an author of many publications in professional magazines, speaker at the international presentations, a guest at podcasts, etc. The Project Management Institute’s (PMI) assessment of his book says: “Contains a holistic learning environment so that after finishing the book and assignments, new project managers or students will possess enough knowledge to confidently manage small to medium projects”. The full list of his publications and appearances can be found at the website www.pm-workflow.com in the Publications tab.

Dan can be contacted at [email protected].

To see other works by Dan Epstein, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/dan-epstein/