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.
| Activities |
|---|
| 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 |
| Re-estimate |
| Risks |
| 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. |
OBV Consulting ApS
Skovvej 5 DK-4180 Sorø
info@obvconsulting.dk
Ole Barkou Vilstrup
+45 61 62 73 12
obv@obvconsulting.dk
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