How much will the project cost? Providing an estimate is easy but providing a valid estimate which (with accuracy) predicts the real price for a project, may be much more difficult.

Estimates are vital and made on different levels and with different purposes. Estimates are used to predict the price for entire projects. Estimates are used to set a price on specific features and estimates are used as a vital source for planning.

Multiple factors impact the validity of estimates. Estimating small chunks of well defined work can be done more precisely than initial estimates for big projects with many unknowns. Estimating things that the team has done before provides more accurate estimates than estimating new things.

It is easy to be optimistic when estimating but also difficult to be realistic and take everything into account. Especially when things are big and new it is worth being extra careful with estimates, to invest in the estimation process, to be clear on assumptions and to incorporate sufficient contingency so accuracy in estimates (or rather lack off…) is mitigated.

Create estimates
Define an estimation method
Define estimation proces
Involve key resources in estimation process
Use detailed scope as basis for estimation
Create estimates
Document assumptions
Estimate non-functional scope
Identify deliverables with high uncertainty
Incorporate risk contingency
Review estimates
Align estimates with key stakeholders
Create baseline estimates
Update estimates
Follow-up on estimate accuracy
Estimates with lack of experience or limited reference data

Problem: The estimation team has limited subject matter expertise and limited access to useful reference figures.

Consequence: There is a significant risk that estimates contain a high degree of uncertainty. The business case may be threatened and the basis for planning the project may be inaccurate.

Lack of risk contingency

Problem: Estimates do not contain sufficient contingency for unforeseen events.

Consequence: Unforeseen events may make it impossible to execute the project successfully. There is a risk that the project will experience budget overrun and delays.

Estimates made without defined list of deliverables and activities

Problem: Estimates are not based on an actual breakdown of the work that should be carried out in the project.

Consequence: There is a risk that estimates will be uncertain (too low). During execution, it will be difficult to track actual progress against planned work.

Estimates not aligned with stakeholders' expectations

Problem: Estimates have not been aligned with the key stakeholders that provide resources and commitment for the project.

Consequence: There may be a potential conflict between the project owner and the project. The required resources may not be allocated.

Optimistic estimates

Problem: The project does not contain necessary contingency for unforeseen events or the estimates are unrealistic.

Consequence: The project will not be able to meet its cost and time objectives and a key prerequisite for planning is missing.