Accurate estimating is one of the biggest challenges faced by project teams. Projects commonly miss their estimates by orders of magnitude. Standish reports “52.7% of projects will overrun their initial cost estimates by 189%”. Why is it so difficult to estimate projects? Is it an estimation problem or a management problem?
The Project Management Institute’s Book of Knowledge (PMBOK) provides very little guidance for estimating projects. It describes the various factors that should be considered such as scope, resources, and risks and lists the updated artefacts but very little guidance is provided.
How do we create a repeatable estimating process when so many projects are creating a unique product? This lack of repeatability results in a heavy dependence on the experience of the person producing the estimate. Experience-based estimates may explain variations of 50% but the Standish reports show variations close to 200%. There must be other factors.
Significant variations between the estimated costs and actual costs can be the result of the can also be the result of management issues. When a project team creates an estimate, that estimate should represent a commitment. If the project team does not view the estimate as a commitment, then there is very little chance the estimate will be met.
This section discusses options for addressing the variability resulting from the unique nature of each project and management considerations that will result in more predictable outcomes. Meeting project schedules and estimates requires a combination of repeatable estimating and consistent management practices, and an acceptance of the commitment to meet the dates and estimates.
1. Define Standards and Models
While the results from individual projects are unique and rarely repeatable, the definition of standards and models allows for the definition of repeatable activities that can be combined to create unique results.
2. Manage Creativity
Creative activities are the most difficult to estimate. How do we know when we are done being creative? While many people who participate in projects want to be creative, few people have the skills and the discipline required. Creative activities must be defined and assigned to individuals with time limits for completion.
3. Adjust for Available Skills Levels
There are very few times when the desired skill levels are available. Repeatable estimates have to be defined based on an assumed skill set but when the desired skill levels are not available, a project manager has to re-assess the estimated efforts and durations and ensure the available staff skills are sufficient for meeting the commitment.
4. Manage the Learning Curve
Technology is changing rapidly. Many projects involve the deployment of technology and few people on the project have significant experience with the new technology. As a result, the team learns the technology by experimentation as they complete their assignments. This type of on-the-job training is very difficult to estimate. A project that deploys new technology should include an evaluation period by a small experienced group who will make decisions regarding best practices and recommended usage and then train the rest of the team.
5. Manage Requirements and Scope
While this is an obvious recommendation, a common reason for project cost over-runs is the failure to manage requirements and scope. Many people treat consider requirements and scope as synonymous. They are not and they must be managed separately.
Requirements management should begin by defining the expected business outcomes. Functional requirements must be defined that support the desired outcomes. Finally, technical requirements and design specifications should describe how the functional requirements will be delivered. All of these types of requirements must be identified and documented and managed.
The scope of the project identifies which of the requirements will be estimated and delivered. Some requirements may not be approved and others may not be deferred. Project teams must document and obtain formal approval for all requirements that are included in the project scope. If the decision is made to change the project scope to add or remove requirements, then the estimate and schedule should also be updated.
6. Treat Estimates as Commitments
When the project team is established, the estimates should be reviewed by lead members of the team and any issues should be identified and resolved. Once the issues are resolved, the team leads should accept the estimate as a commitment. When assignments are made to individual participants, they should also review their assigned estimate and raise issues or commit to the estimate and date.
7. Manage Issues
Issues include anything that may impede the ability of the team to complete the assigned tasks. All issues should be logged and assessed to determine their impact to the estimate and schedule. Ownership for resolving the issues should also be assigned.
Effective estimating cannot be achieved without commitment and effective management.