7/7/2010

EMBA 619

EMBA 619

06-23-2010

EMBA 619

06-23-2010

1

7/7/2010

In today's highly competitive and fast paced environment, the rapid creation and deliveryy of high g q quality y p products and services is critical to business survival. To meet these demands, modern businesses need to operate at high performance levels, harnessing the full power of their resources to focus on strategic and business objectives. To supplement general management approaches that do not suffice in this environment any more, organizations are focusing their energies on project management. And this must be done with success ensuring leaner organizations and lighter budgets.

EMBA 619

06-23-2010

The success or failure of a p project j is dependent p on the accuracyy of several estimates through-out the course of the project. Estimating which is done before the physical performance of the work requires a detailed study and careful analysis of the bidding documents, in order to achieve the most accurate estimate possible of the probable cost consistent with the bidding time available and the accuracy and completeness of the information submitted. Overestimated or underestimated cost has the potential to cause losses to contracting companies.

EMBA 619

06-23-2010

2

7/7/2010

Estimating ¾The process off forecasting ¾Th f ti or approximating i ti the th time ti and d costt off completing l ti project deliverables ¾The task of balancing the expectations of stakeholders and the need for control while the project is implemented

Types of Estimates ¾Top-down (macro) estimates: analogy, group consensus, or mathematical relationships ¾Bottom-up (micro) estimates: estimates of elements of the work breakdown structure EMBA 619

06-23-2010

¾Estimates are needed to support good decisions. ¾E ti t are needed ¾Estimates d d tto schedule h d l work. k ¾Estimates are needed to determine how long the project should take and its cost. ¾Estimates are needed to determine whether the project is worth doing. ¾Estimates are needed to develop cash flow needs. ¾Estimates are needed to determine how well the project is progressing progressing. ¾Estimates are needed to develop time-phased budgets and establish the project baseline.

EMBA 619

06-23-2010

3

7/7/2010

EMBA 619

06-23-2010

¾Have people familiar with the tasks make the estimate. ¾U severall people ¾Use l tto make k estimates. ti t ¾Base estimates on normal conditions, efficient methods, and a normal level of resources. ¾Use consistent time units in estimating task times. ¾Treat each task as independent, don’t aggregate. ¾Don’t make allowances for contingencies. ¾Adding a risk assessment helps avoid surprises to stakeholders.

EMBA 619

06-23-2010

4

7/7/2010

Conditions for Preferring Top-Down or BottomUp Time and Cost Estimates Condition Strategic decision making Cost and time important High uncertainty Internal, small project Fixed-price Fixed price contract Customer wants details Unstable scope

Macro Estimates X

Micro Estimates X

X X X X X

EMBA 619

06-23-2010

¾Make rough top-down estimates ¾Develop the WBS/OBS ¾Make bottom-up estimates ¾Develop schedules and budgets ¾Reconcile differences between top-down and bottom-up estimates

EMBA 619

06-23-2010

5