Bottom-up Estimating – Definition, Example, Pros & Cons

What Is Bottom-Up Estimating?

Also known as the deterministic, definitive or detailed estimate, it is a project management methodology approved by Project Management Institute. It ensures to cover each detail for accurate estimation of cost, duration or resources required for the project or its parts. The bottom-up estimating approach acts at a granular level by gathering requirements from lower-level components of the Work Breakdown Structure, thus focusing on the smallest detail for reliable prediction.

Benefits of Utilizing Bottom-up Estimating

Bottom-up estimating witnesses several benefits over its other counterparts utilized for the same functioning:

1. Accuracy

The bottom-up estimating is said to have an accuracy level between -5% and +10% as per PMI. The accurate estimation is beneficial while deciding the project scope as it enables the management team to predict obstacles and opportunities and further devise their efficient utilization. Considering all the factors, the bottom-up approach is reliable and accurate for deciding the strategy to overcome the lack of any type of resources that the project may face.

2. Error Mitigation

The bottom-up method ensures no harm in the chances of error. With an error mitigation option, the feature of cost-benefit analysis yields alternate solutions to help resolve any problem occurring throughout the project. It is also possible to estimate the different aspects of the project to balance the overall estimate.

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 3. Versatility

The method is versatile to overcome any problem in situations requiring a shutdown of the project, deep involvement of the members or letting them lead the project themselves. Coupled with other methods, it increases effectiveness. 

4. Reduction in Overall Risk

All the risks and challenges are already covered in a bottom-up approach by concerning the possibility in each phase. It helps the strategy decision during the project scope leading to the smooth running of the project. Handle new problems with a flexible and natural approach. The leading person handles the task, which indicates a sense of responsibility and accountability. 

How to Use Bottom-up Estimating?

The bottom-up estimating requires efforts from the manager but once understood, it is easy to go. Follow the steps for better insights:

1. List All the Tasks for a Project

Ensure to cover all the tasks, as it is the basis of a bottom-up approach. Irrespective of level, the task may be exhausting or time taking. Hence, it needs to be considered. Segregate the task, followed by estimating the duration and cost of the project.

2. Determine Resources and Timeline

The next step is to set a realistic time frame by determining the resources and time requirements. To increase efficacy, match the skill set of resources with the task, which decreases the time and cost input for implementation. Also, the requirements of equipment should be included in the estimation. Then, cross-check the overall estimation. 

3. Delegate to the Team

Each team member is equally responsible and accountable for the success and failure of the project. It is their responsibility to ensure proper and accurate completion of the parts of the project, and it needs not be cross-checked by the project manager. However, the feedback from the team members and stakeholders can be used for optimization procedures. 

What are the Differences Between Bottom-up, Top-Down and Parametric Estimating?

Though all methods work at a granular level, the bottom-up approach is focussed on each and smallest component. Top-down refers to the previous examples of similar projects, which comes out to be misleading in most situations regarding cost estimates. Top-down estimating is beneficial for time estimation, and managers can know resource requirements based on parametric estimating. 

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Example of Bottom-up Estimating

A research team requires the conduction of experiments. They estimate the budgets based on the required team of researchers, chemicals, biologicals and equipment in a similar previous experiment. However, the efficiency of researchers makes them take up a bottom-up approach to analysis. On detailed insight, they know that half of the researchers are inexperienced, thus requiring extra supplies. Moreover, the supplies have been exhausted, which requires refilling. Equipment requires an update in warranty and parts, involving more budget. Thus, proper estimation and division of researchers on different parts of experiments can now be performed safely with accurate estimation. 

Advantages and Disadvantages of Bottom-up Estimating

The numerous advantages and disadvantages of bottom-up estimating are listed as follows -

Pros

• Bottom-up estimating presents accurate estimates. The responsibility lies on team members who perform the work and state the requirements, thus being an authentic source. 
• It provides an opportunity to balance the excess or less hence not compromising the project and its efficiency.
• It can be used with other validation techniques and different centric estimations.

Cons

• It ignores integration efforts usually found in complex and large projects.
• The duration estimate depends on the cost estimate, which increases the chance of miscalculation affecting the overall endeavour.
• Requirement of high resources
• It involves multiple estimators, which may lead to biased results.

Start Small and See if Bottom-up Estimating Works for You

Bottom-up estimating holds multiple benefits, but it might not suit every management and company. A hit-and-trial method would be an effective approach to understanding the suitability of the bottom-up approach for the company. It can be applied to simple projects with small cost estimates and duration. Now, compare the results with application methods to choose the approach for further estimation. 

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Conclusion

Bottom-up estimating is a reliable and accurate method that companies can use. It aims to define the project's cost requirements and time and resource estimate. Holding numerous benefits and a simple method to carry out the bottom-up approach, it can be used by organizations. But the cons and suitability vary depending on numerous factors and require efforts to find the optimized approach for application. Learn more about project management with our PGP Project Management Certification course aligned with PMI-PMP® and IASSC-Lean Six Sigma. Sign-up today!