Estimating Project Times and Costs
Chapter 5
time and cost of completing project deliverables
The task of balancing the expectations of stakeholders and the need for control while the project is implemented
Types of Estimates Top-down (macro estimates! analogy" gro#p
consens#s" or mathematical relationships
 
EXHIBIT 5.1
Estimates are needed to sched#le work)
Estimates are needed to determine how long the project sho#ld take and its cost)
Estimates are needed to determine whether the project is worth doing)
Estimates are needed to develop cash flow needs)
Estimates are needed to determine how well the project is progressing)
 
Quality ofQuality of
Project "tructureProject "tructure
a# $r%ai&atioa# $r%ai&atio Pa##i%Pa##i%
EstimatesEstimates
'ulture'ulture
,actors,actors
.) /ave people familiar with the tasks make the estimate)
0) 1se several people to make estimates)
2) $ase estimates on normal conditions" efficient methods" and a normal level of reso#rces)
3) 1se consistent time #nits in estimating task times)
5) Treat each task as independent" don4t aggregate)
) 6on4t make allowances for contingencies)
 
T/B0E 5.1
Time a# 'ost Estimates
9trategic decision making :
6evelop the %$9;<$9
econcile differences between top-down and bottom-#p estimates
 
8acro (Top-6own &pproaches
Consens#s methods
=earning c#rves
$reakdown 9tr#ct#re
5-11
9implified $asic *#nction Point Co#nt Process for a Prospective Project or
6eliverable
T/B0E 5.3
8icro ($ottom-1p &pproaches
Phase estimating! & hybrid
,I78E 5.2
,I78E 5.3
=evel of detail is different for different levels of management)
=evel of detail in the %$9 varies with the complexity of the project)
Excessive detail is costly) *osters a foc#s on departmental o#tcomes
Creates #nprod#ctive paperwork
'ns#fficient detail is costly) =ack of foc#s on goals
%asted effort on nonessential activities
 
Costs that are clearly chargeable to a specific work package)
o =abor" materials" e?#ipment" and other 
6irect (Project <verhead Costs Costs inc#rred that are directly tied to an
identifiable project deliverable or work package)
o 9alary" rents" s#pplies" speciali@ed machinery
,eneral and &dministrative <verhead Costs <rgani@ation costs indirectly linked to a specific
package that are apportioned to the project
 
,I78E 5.5
6irect costs AB"
6irect overhead A0"
efining Estimates
easons for &dj#sting Estimates 'nteraction costs are hidden in estimates)
Formal conditions do not apply)
Things go wrong on projects)
Changes in project scope and plans)
 &dj#sting Estimates Time and cost estimates of specific activities are
 
efining Estimates (cont4d
Contingency *#nds and Time $#ffers  &re created independently to offset #ncertainty
ed#ce the likelihood of cost and completion time overr#ns for a project
Can be added to the overall project or to specific activities or work packages
Can be determined from previo#s similar projects
Changing $aseline 9ched#le and $#dget 1nforeseen events may dictate a reform#lation of
the b#dget and sched#le)
 
,I78E 5.
Bottom-u! estimates
Del!(i met(o#
Direct costs