The Top-down approach is practical for the initial stage of strategic decision-making and in situations where the information required to develop accurate duration and cost estimates is not available in the initial phase of the project. Hence, top-down estimates are used initially until the tasks in a WBS are defined clearly, which enable the development of well-defined schedules and budget.
Here are a couple of methods I have used:
Delphi (Consensus) Method: Uses the pooled experiences of senior and/or middle managers to discuss thoroughly and ultimately reach an agreement on the best estimate of the total project duration and costs in the initial stage.
Apportionment (analogous) technique: Uses good historical data of past projects that are relatively standard with minor variation or customisation as a reference to allocate duration and costs to the current project.
The apportionment method also known as analogous estimating, uses historical data of past projects that are relatively standard to allocate duration and costs to various segments of the current project. This is performed by assigning percentages of the total planned duration or costs to each segment. It is commonly used in projects that are relatively standard with minimal variation. The percentages are assigned with close reference to past projects’ resources and cost allocation. With good data integrity, estimates can be derived quickly with optimal accuracy.
Example: Assuming the total project costs of a standardised product are estimated using a top-down approach to be $500,000, the costs of each top project deliverable are apportioned as a percentage of the total project cost as follows:
Total Project Costs: $500,000
- Design Cost: 25% = $125,000
- Engineering Cost: 25% = $125,000
- Test Cost: 20% = $100,000
- Documentation Cost: 10% = $50,000
- Produce Goods Cost: 20% = $100,000
The Bottom-up approach is typically more reliable and preferred for estimating because it assesses each work package from the bottom, working up to a deliverable and phase. It is practical to use when project schedules and budgets from previous similar projects are available for reference. Estimating the duration and costs for each work package facilitates the development of schedules and a time-phased budget, which are required to monitor and control the project as it progresses.
Template Method: The schedules and budgets from past projects of similar starts but with different endings can be used as a starting point for the new project. For example, an engineering services company has different sets of standard templates for different equipment repair and site maintenance projects. These templates are used as starting points for estimating the duration and costs of new projects which are similar. Though similar in technical specifications, the equipment of the new project may require to be more sophisticated.
Therefore the differences in resources required are defined, and times and costs are adjusted accordingly. Storing such templates in the organisation’s database enables the project manager and project team members to develop potential schedules and budgets of optimal accuracy in a short time frame.
Parametric technique: Uses arithmetic means based on historical data and project parameters that are similar to the current project to calculate its duration and costs. This technique is typically used when the environment is stable.
Parametric Estimation is an estimating technique which uses bottom-up approach to calculate estimated cost and duration based on inputs from historical data and project parameters. It is calculated based on a mathematical relationship between historical data and other variables such as product output per day and cost per unit.
In a simple example, in a project task of configuring final specifications of workstations, based on similar past projects, it is determined that on average 1 technician could complete final configuration of 2 workstations per day. Supposed there are 3 equally qualified technicians performing the task and there are 24 workstations to be configured, the total days for this task to be completed is quantitatively determined from bottom-up as follows:
- 1 Technician = 2 Workstations
- 3 Technicians = 2 x 3 = 6 Workstations per Day
- 6 Workstations = 1 Day
- 24 Workstations = 1/6 x 24 = 4 Days
The configuration cost of a workstation unit is $100 and workmanship cost is $80 per technician per day.
Total costs are ($100 x 24) + ($80 x 3 x 4) = $2400 + $960 = $3360
Whether top-down or bottom-up, good historical data is needed. Below is a summarised comparison of the two approaches.
- Feasible for overview estimates
- Tasks are not defined clearly
- Volatile environment, not viable to develop well-defined schedules & budget
- Less reliable duration & costs estimates
- Feasible for detailed estimates
- Tasks are defined clearly
- Stable environment, viable to develop well-defined schedules & budget
- More reliable duration & costs estimates
Estimating Time to Complete
Calculating Realistic Project Timelines
People often underestimate the amount of time needed to implement projects, particularly when they’re not familiar with the work that needs to be done.
For instance, they may not take into account unexpected events or urgent, high-priority work; and they may fail to allow for the full complexity of the job. Clearly, this will likely have serious negative consequences further down the line.
This is why it’s important to estimate time accurately if your project is to be successful. In this article, we explore some of the methods that you can use for making good time estimates.
Why Estimate Time Accurately?
Accurate time estimation is a crucial skill in project management. Without it, you won’t know how long your project will take, and you won’t be able to get commitment from the people who need to sign it off.
Even more importantly for your career, sponsors often judge whether a project has succeeded or failed depending on whether it has been delivered on time and on budget. To have a chance of being successful as a project manager, you need to be able to negotiate sensible budgets and achievable deadlines.
How to Estimate Time Accurately
Use these steps to make accurate time estimates:
Step 1: Understand What’s Required
- Start by identifying all of the work that needs to be done within the project. Use tools such as Business Requirements Analysis, Work Breakdown Structures, Gap Analysis, and Drill-Down to do this in sufficient detail.
- As part of this, make sure that you allow time for meetings, reporting, communications, testing, and other activities that are critical to the project’s success.
Step 2: Order These Activities
- Now, list all of the activities you identified in the order in which they need to happen.
- At this stage, you don’t need to add in how long you think activities are going to take. However, you might want to note any important deadlines. For example, you might need to get work by the finance department finished before it starts work on year-end.
Step 3: Decide Who You Need to Involve
- You can do the estimates yourself, brainstorm them as a group, or ask others to contribute.
- Where you can, get the help of the people who will actually do the work, as they’re likely to have relevant experience to draw upon. By involving them, they’ll also take on greater ownership of the time estimates they come up with, and they’ll work harder to meet them.
It’s always a good idea to consult with others about your project. You can confirm your assumptions with them, and it can encourage initiative. Doing so will also ensure that you don’t miss something crucial – for fear of looking weak or feeling threatened by team members.
Step 4: Make Your Estimates
You’re now ready to make your estimates. Bear these basic rules in mind:
- To begin with, estimate the time needed for each task rather than for the project as a whole.
- The level of detail you need to go into depends on the circumstances. For example, you may only need a rough outline of time estimates for future project phases, but you’ll probably need detailed estimates for the phase ahead.
- List all of the assumptions, exclusions and constraints that are relevant, and note any data sources that you rely on. This will help you when your estimates are questioned, and will also allow you to identify any risk areas if circumstances change.
- Assume that your resources will only be productive for 80 percent of the time. Build in time for unexpected events such as sickness, supply problems, equipment failure, accidents and emergencies, problem solving, and meetings.
- If some people are only working part-time on your project, bear in mind that they may lose time as they switch between their various roles.
- Remember that people are often overly optimistic, and may significantly underestimate the amount of time that it will take for them to complete tasks.
It’s likely that your estimate following these principles will be longer than you want or are permitted to allow. But don’t be tempted to be unrealistic and knowingly underestimate.
Instead, look at removing wasteful steps using the Lean and 5S models. You may also be able to increase capacity, so that work can be done in parallel, or choose automated processes over manual ones.
Methods for Estimating Time
Here are a few different approaches that you can use to estimate time. You’ll probably find it most useful to use a mixture of these techniques:
Bottom-up estimating allows you to create an estimate for the project as a whole. To analyse from the “bottom up,” break down larger tasks into detailed tasks, then estimate the time needed to complete each one.
Because you’re considering each task individually, your estimate of the time required for each one is likely to be more accurate. You can then add up the total amount of time needed to complete the plan.
How much detail you go into depends on the situation. However, the more detailed your analysis is, the more accurate it will be.
If you don’t know how far to go, consider breaking work into chunks that one person can complete in half a day, for example. This may seem like a rather “circular” approach, but it will give you an idea of the level of detail you should aim for.
Yes, this does take a lot of work; however, this work will pay off later in the project. Just make sure that you leave plenty of time for it in the project’s Design Phase.
In top-down analysis, you develop an overview of the expected timeline first, using past projects or previous experience as a guide.
It’s often helpful to compare top-down estimates against your bottom-up estimates, to ensure accuracy.
Don’t assume that the bottom-up estimates are wrong if they differ widely from the top-down ones. In fact, it’s more likely that the reverse is true.
Instead, use the top-down estimates to challenge the validity of the bottom-up estimates, and to refine them as appropriate.
With comparative estimating, you look at the time it took to do similar tasks, on other projects.
With this method, you estimate the time required for one deliverable, then multiply it by the number of deliverables required.
For example, if you needed to create a trade entry form, you’d estimate how much time it would take to do one form, then multiply this time by the total number of forms to be produced for different scenarios.
Three-Point Estimating – My favourite!
To build in a cushion for uncertainty, you can do three estimates – one for the best case, another for the worst case, and a final one for the most likely case.
Although this approach requires additional effort to create three separate estimates, it allows you to set more reasonable expectations, based on a more realistic estimate of outcomes.
Planning Poker in Agile Project Management
Estimating anything inevitably involves guessing. Planning Poker is a tool to help you guess better. It’s a more rough-and-ready and less time-consuming approach, to help plan short sprints of work in Agile PM.
In the early stages of project planning, you often won’t know who will do each task – even though this can influence how long the task will take. For example, an experienced developer should be able to develop a software module much more quickly than someone less experienced.
You can build this into your estimates by giving best, worst, and most likely estimates, stating the basis for each view.
Apply Your Estimates
Once you’ve estimated the time needed for each task, you can prepare your project schedule. Add your estimates to the draft activity list that you produced in the second step, above.
You can then create a Gantt Chart to schedule activities and assign resources to your project, and to finalise milestones and deadlines.
If your project is complex, it’s crucial that you highlight the tasks that can’t be delayed if you’re to hit your deadline.
You need to estimate time accurately if you’re going to deliver your project on time and on budget. Without this skill, you won’t know how long your project will take, and you won’t be able to get commitment from the people required to help you achieve your objective.
More than this, you risk agreeing to impossibly short deadlines, with all of the stress, pain, and loss of credibility associated with this.
To estimate time effectively, follow this four-step process:
- Understand what’s required.
- Prioritise activities and tasks.
- Decide who you need to involve.
- Do your estimates.
Use a variety of methods to get the most accurate time estimates.