chapter 5 estimating project times and costs
Download
Skip this Video
Download Presentation
Chapter 5 – Estimating Project Times and Costs

Loading in 2 Seconds...

play fullscreen
1 / 30

Chapter 5 Estimating Project Times and Costs - PowerPoint PPT Presentation


  • 503 Views
  • Uploaded on

Chapter 5 – Estimating Project Times and Costs. Definition, Types, Influencing factors, Guidelines, Macro vs. Micro, Methods, Cost types . Course Structure. Estimating. Definition The process of forecasting or approximating the time and cost of completing project deliverables

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Chapter 5 Estimating Project Times and Costs' - loe


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapter 5 estimating project times and costs

Chapter 5 – Estimating Project Times and Costs

Definition, Types, Influencing factors, Guidelines, Macro vs. Micro, Methods, Cost types

SJSU - Bus. 286 David Bentley (Gray & Larson)

course structure
Course Structure

SJSU - Bus. 286 David Bentley (Gray & Larson)

estimating
Estimating
  • Definition
    • The process of forecasting or approximating the 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, group consensus, or mathematical relationships
    • Bottom-up (micro) estimates: estimates of elements of the work breakdown structure

SJSU - Bus. 286 David Bentley (Gray & Larson)

estimates are needed to 1
Estimates Are Needed to …(1)
  • Support good decisions.
  • Schedule work.
  • Determine how long the project should take and its cost.
  • Determine whether the project is worth doing.

EXHIBIT 5.1

SJSU - Bus. 286 David Bentley (Gray & Larson)

estimates are needed to 2
Estimates Are Needed to …(2)
  • Develop cash flow needs.
  • Determine how well the project is progressing.
  • Develop time-phased budgets and establish the project baseline.

EXHIBIT 5.1

SJSU - Bus. 286 David Bentley (Gray & Larson)

factors influencing the quality of estimates

Planning Horizon

Other (Nonproject)Factors

ProjectDuration

Quality of Estimates

OrganizationCulture

PaddingEstimates

Project Structure and Organization

Factors Influencing the Quality of Estimates

People

SJSU - Bus. 286 David Bentley (Gray & Larson)

estimating guidelines for times costs and resources 1
Estimating Guidelines for Times, Costs, and Resources (1)
  • Have people familiar with the tasks make the estimate.
  • Use several people to make estimates.
  • Base estimates on normal conditions, efficient methods, and a normal level of resources.
  • Use consistent time units in estimating task times.

SJSU - Bus. 286 David Bentley (Gray & Larson)

estimating guidelines for times costs and resources 2
Estimating Guidelines for Times, Costs, and Resources (2)
  • Treat each task as independent, don’t aggregate.
  • Don’t make allowances for contingencies.
  • Adding a risk assessment helps avoid surprises to stakeholders.
  • Consider 3-time estimates (O = optimistic, P = pessimistic, M = most likely)

SJSU - Bus. 286 David Bentley (Gray & Larson)

macro versus micro estimating
Macro versus Micro Estimating

Conditions for Preferring Top-Down or Bottom-Up Time and Cost Estimates

Condition Macro Estimates Micro Estimates

(Top-down) (Bottom-up)

Strategic decision making X

Cost and time important X

High uncertainty X

Internal, small project X

Fixed-price contract X

Customer wants details X

Unstable scope X

TABLE 5.1

SJSU - Bus. 286 David Bentley (Gray & Larson)

estimating projects preferred approach
Estimating Projects:Preferred Approach
  • Make rough top-down estimates
  • Develop the WBS/OBS
  • Make bottom-up estimates
  • Develop schedules and budgets
  • Reconcile differences between top-down and bottom-up estimates

SJSU - Bus. 286 David Bentley (Gray & Larson)

methods for estimating project times and costs

Project Estimate Times Costs

Methods for Estimating Project Times and Costs
  • Macro (Top-Down) Approaches
    • Consensus methods
    • Ratio methods
    • Apportion method
    • Function point methodsfor software and system projects
    • Learning curves

SJSU - Bus. 286 David Bentley (Gray & Larson)

apportion method of allocating costs using the wbs
Apportion Method of Allocating Costs Using the WBS

FIGURE 5.1

SJSU - Bus. 286 David Bentley (Gray & Larson)

simplified basic function point count process for a prospective project or deliverable
Simplified Basic Function Point Count Process for a Prospective Project or Deliverable

TABLE 5.2

SJSU - Bus. 286 David Bentley (Gray & Larson)

example function point count method
Example:Function Point Count Method

TABLE 5.3

SJSU - Bus. 286 David Bentley (Gray & Larson)

methods for estimating project times and costs cont d
Methods for Estimating Project Times and Costs (cont’d)
  • Micro (Bottom-Up) Approaches
    • Template method
    • Parametric procedures appliedto specific tasks
    • Detailed estimates for the WBS work packages (see SB45)
    • Phase estimating: A hybrid (project life cycle)

SJSU - Bus. 286 David Bentley (Gray & Larson)

sb45 support cost estimate worksheet
SB45 Support Cost Estimate Worksheet

FIGURE 5.2

SJSU - Bus. 286 David Bentley (Gray & Larson)

phase estimating over product life cycle
Phase Estimating overProduct Life Cycle

FIGURE 5.3

SJSU - Bus. 286 David Bentley (Gray & Larson)

level of detail 1
Level of Detail - (1)
  • Level of detail is different for different levels of management.
  • Level of detail in the WBS varies with the complexity of the project.

SJSU - Bus. 286 David Bentley (Gray & Larson)

level of detail 2
Level of Detail - (2)
  • Excessive detail is costly.
    • Fosters a focus on departmental outcomes
    • Creates unproductive paperwork
  • Insufficient detail is costly.
    • Lack of focus on goals
    • Wasted effort on nonessential activities

SJSU - Bus. 286 David Bentley (Gray & Larson)

types of costs

Types of Costs

Direct Costs

Project Overhead Costs

General & Administrative Overhead Costs

SJSU - Bus. 286 David Bentley (Gray & Larson)

direct costs
Direct Costs
  • Costs that are clearly chargeable to a specific work package.
    • Labor, materials, equipment, and other

SJSU - Bus. 286 David Bentley (Gray & Larson)

direct project overhead costs
Direct (Project) Overhead Costs
  • Costs incurred that are directly tied to an identifiable project deliverable or work package.
    • Salary, rents, supplies, specialized machinery

SJSU - Bus. 286 David Bentley (Gray & Larson)

general and administrative overhead costs
General and Administrative Overhead Costs
  • Organization costs indirectly linked to a specific package that are apportioned to the project

SJSU - Bus. 286 David Bentley (Gray & Larson)

contract bid summary costs
Contract Bid Summary Costs

Direct costs $80,000

Direct overhead $20,000

G&A overhead (20%) $20,000

Profit (20%) $24,000

Total bid $144,000

FIGURE 5.6

SJSU - Bus. 286 David Bentley (Gray & Larson)

three views of cost
Three Views of Cost

FIGURE 5.5

SJSU - Bus. 286 David Bentley (Gray & Larson)

refining estimates 1
Refining Estimates - (1)
  • Reasons for Adjusting Estimates
    • Interaction costs are hidden in estimates.
    • Normal conditions do not apply.
    • Things go wrong on projects.
    • Changes in project scope and plans.
  • Adjusting Estimates
    • Time and cost estimates of specific activities are adjusted as the risks, resources, and situation particulars become more clearly defined.

SJSU - Bus. 286 David Bentley (Gray & Larson)

refining estimates 2
Refining Estimates - (2)
  • Contingency Funds and Time Buffers
    • Are created independently to offset uncertainty
    • Reduce the likelihood of cost and completion time overruns for a project
    • Can be added to the overall project or to specific activities or work packages
    • Can be determined from previous similar projects

SJSU - Bus. 286 David Bentley (Gray & Larson)

refining estimates 3
Refining Estimates - (3)
  • Changing Baseline Schedule and Budget
    • Unforeseen events may dictate a reformulation of the budget and schedule.

SJSU - Bus. 286 David Bentley (Gray & Larson)

creating a database for estimating
Creating a Database for Estimating

Estimating Database Templates

FIGURE 5.7

SJSU - Bus. 286 David Bentley (Gray & Larson)

key terms
Key Terms

Apportionment methods

Bottom-up estimates

Contingency funds

Delphi method

Direct costs

Function points

Interaction costs

Learning curves

Overhead costs

Padding estimates

Phase estimating

Ratio methods

Template method

Time and cost databases

Top-down estimates

SJSU - Bus. 286 David Bentley (Gray & Larson)

ad