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Top-down estimation
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Bottom-up estimation
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Analogous estimation
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Parametric estimation
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How to choose
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Here’s what else to consider
Project estimation is the process of predicting the time, cost, and resources needed to complete a project successfully. It is a crucial skill for business operations, as it helps you plan, budget, and manage your projects effectively. However, choosing the best project estimation technique for your business can be challenging, as there are many factors to consider, such as the project scope, complexity, uncertainty, and quality. In this article, we will explore some of the most common project estimation techniques, their advantages and disadvantages, and how to select the most suitable one for your business.
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- Brian Odiwuor Mathematical model enthusiast of the dynamic relationship between controlled independent variable(time) and dependent…
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1 Top-down estimation
Top-down estimation is a technique that starts with the overall project goal and then breaks it down into smaller components. It is usually done by senior managers or experts who have a high-level view of the project and its requirements. Top-down estimation is useful when you need to provide a quick and rough estimate for a project, or when you have limited information or data available. However, top-down estimation can also be inaccurate, as it relies on assumptions and generalizations that may not reflect the actual project details or challenges.
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- Brian Odiwuor Mathematical model enthusiast of the dynamic relationship between controlled independent variable(time) and dependent variables, their inspection and execution/application simulated in real life situation(s) - R ∝ t
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Decomposition: The project is systematically broken down into its constituent parts, which can include major phases, milestones, or key deliverables. Each of these components is estimated individually.
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Top-down estimation is a method that starts with an overall project estimate and then breaks it down into smaller components. It is useful during early stages of a project, providing quick estimates before detailed planning. However, it can sometimes lack accuracy, especially in complex projects or with limited information. The process involves establishing a high-level estimate, breaking it down into smaller tasks, and refining estimates over time. Top-down estimation is beneficial for quick estimates, higher-level decision making, and early project phases. However, it can be inaccurate, especially without detailed project information.
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2 Bottom-up estimation
Bottom-up estimation is a technique that starts with the smallest tasks and activities and then aggregates them to estimate the total project duration and cost. It is usually done by the project team members or specialists who have a detailed knowledge of the project and its deliverables. Bottom-up estimation is useful when you need to provide a detailed and accurate estimate for a project, or when you have a lot of information or data available. However, bottom-up estimation can also be time-consuming, as it requires a lot of input and coordination from the project team and stakeholders.
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Bottom-up estimation is a method of estimating a project by breaking it down into smaller, manageable parts and summarizing them to determine the total project estimate. It involves estimating individual tasks and aggregating them to form the overall project estimate. This method offers higher accuracy and helps identify tasks and resource requirements. However, it is resource-intensive and may be difficult to apply in initial stages due to limited information. Combining top-down and bottom-up estimation techniques can improve accuracy and provide a more comprehensive view.
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3 Analogous estimation
Analogous estimation is a technique that uses the historical data and experience from similar past projects to estimate the current project. It is based on the assumption that the current project will have similar characteristics and outcomes as the previous ones. Analogous estimation is useful when you need to provide a fast and simple estimate for a project, or when you have limited resources or time to conduct a more thorough estimation. However, analogous estimation can also be unreliable, as it depends on the quality and relevance of the historical data and the similarity of the projects.
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- Tracy Wilson, MSOL Business Operations | Organizational Leadership, Strategic Planning, Operational Efficiency
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In my experience, when available, I have found the use of historical data as the most accurate and expedient way to estimate project resource demands. However, this data is not always available and a combination of top-down and bottom-up estimation is beneficial when both the larger overall strategy and the details of actual implementation requirements can be evaluated.
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Analogous estimation is a project estimation technique that uses historical data from similar previous projects to predict the duration or costs of a new project. It involves making adjustments to the historical data based on similarities and differences between the two projects. The resulting estimates for time, cost, or resources are derived. Analogous estimation is quick and easy, useful for early estimation in limited information. However, it has limitations such as reliability and lack of detail.
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4 Parametric estimation
Parametric estimation is a technique that uses mathematical models and formulas to estimate the project based on the relationship between variables. It is based on the assumption that the project can be measured and quantified by certain parameters, such as size, scope, complexity, or quality. Parametric estimation is useful when you need to provide a consistent and objective estimate for a project, or when you have reliable and valid data to support the model. However, parametric estimation can also be complex, as it requires a lot of expertise and analysis to develop and apply the model.
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Parametric estimation is a project estimation technique that uses historical data and statistical relationships to predict project characteristics like cost and duration. It involves identifying project parameters, collecting and analyzing historical data, and developing mathematical models to predict estimated values. While it offers efficiency and consistency, accuracy depends on the quality and relevance of historical data and may not be suitable for complex projects. It is commonly used in repetitive or standardized projects with established relationships between variables.
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5 How to choose
Choosing the right project estimation technique for your business is essential, as different techniques have different strengths and weaknesses. You should consider factors such as the purpose and audience of the estimate, the type and complexity of the project, and the availability and quality of the information and data. For instance, if you need to provide a high-level estimate for a proposal or a feasibility study, you may use a top-down or an analogous technique. If you have a lot of historical and relevant data, you may use a parametric or an analogous technique. By selecting the best project estimation technique for your business, you can improve your project planning, management, and performance. Ultimately, this will help you to achieve your project goals more efficiently and effectively.
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The choice of estimation technique for a project depends on several factors, including the project type, available data, project complexity, expertise, resource and time constraints, accuracy and precision, flexibility, and stakeholder expectations. Unique projects may benefit from analogous estimation or expert judgment, while repetitive projects may benefit from parametric estimation. Complex projects may require a combination of techniques or more detailed methods. Understanding these factors will guide the selection of the most suitable estimation technique.
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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Selecting the best project estimation technique for your business is a decision that requires careful consideration of various factors. Project type, data availability, scope, resource availability, risk tolerance, constraints & commitment to continuous improvement play crucial roles in this process. It's important to recognize that ideal estimation technique may vary from one project to another, and the ability to adapt to the specific circ*mstances is key to successful project management. Successful project estimation is an ongoing, evolving process that aligns with your business and project management needs. By making informed choices & learning from past experiences, your business can achieve more accurate estimates & better outcomes.
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