Project Estimation: How Accurate is Your Project Estimation

Scope of the project:

You need to know the project scope and the actual work of the project. Particularly, you need to focus on the unwanted work; any way it should not be included with the actual work of the project. You need to understand what exactly you are going to produce and how? It is completely your work along with other stakeholders to decide the actual scope. You should estimate your project based on the work that you need to do.

Volume of the work required:

As a project manager you need to know the total volume of the work. If it is finalized and completely clear to you, you can easily estimate the project depending on the total volume of the work. Keep a hawk eye on the project charter to get the total volume of the work so that your assumptions on estimation are at least precisely accurate.

Schedule of the work:

Again, if you know the volume of the work and the milestone dates of delivery, it is very easy to estimate or rather guesstimate initially. You need to know by when you will be able to finish this project. At that point of time you must have accurate information on volume and schedule of the work. Then, altogether you can guesstimate the work accurately. 

Skill set of resources:

It is very imperative to know the skill sets required for accomplishing the requirements of the project assigned to you. Based on the skill sets and expertise you need to accumulate the expenses for those resources and it should be reflected in the estimation of the project. So, initially, if you have the information on the skill set of the resources, you can accurately estimate the project. But if some other aspects get added in between the project and if you need new resources having the new skill set, the estimation should be updated accordingly because of new addition of resources.

Risk associated in the project:

It is always wise and important to include risk associated costs such as contingencies and management reserves. Note that contingencies are for expected risks while management reserve is for unexpected risks such as natural calamities. As a project manager you must consider risk associated with your project and you must reflect those values while estimating overall budget for the project.

There are some tools and techniques through which you can estimate your project:

Analogous Estimating:  This estimating is done on the basis of historical data available in the organizational database (Project archival data). If the same type of project had been performed by the organization with similar skill set in past, you can easily guesstimate the project. Remember, it might not be very accurate always.
 
Parametric Estimating: This estimating is done again on the basis of historical data with some statistical calculations. You can estimate calculations based on the units, for example you need to execute x units that would cost y then total estimate would be xy. It is more accurate than analogous estimating but more time consuming.
 
Heuristic Estimating: This is popularly known as rule of thumb. Project manager and other SMEs based on their expertise estimate the project phases; for example construction would cost 36% of total project cost and so on.
 
Bottom-up Estimating: This estimation is done on the basis of created WBS (Work Breakdown Structure). You need to aggregate costs of each and every lower level of WBS (Work Package) to develop a larger estimate for overall project. This is very accurate in nature.

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