Deciding On Estimation Methods
In the previous installment, we took an overview of estimating and examined some of the basic concepts. Building off of that, it’s time to dig in with a little more detail and provide some context about selecting which methods to apply when you need to develop an estimate.
One estimation technique I didn’t go into was the “evening at the improv” technique. That’s the one where you make it up on the spot, and give your best guess without input from any data to support your estimate. While that remains a popular technique and you see it all the time, it’s not one that I can recommend in good conscience.
All estimation techniques have their pros and cons, but all the ones that have an actual methodology to them allow you to show your work, and how you arrived at your conclusion.
As mentioned last time, analogous or comparative estimation is based upon historical data from previous projects you’ve completed. Maintaining historical data on completed projects allows you to apply that data to the estimation process of the project you’re planning now.
Using inputs from historical data allows you to generate estimates of cost and duration based on comparable past projects. In order to have that historical data, it’s necessary to maintain a company archive. All that material is generated anyway by your designers, project managers, and technicians, it’s a matter saving it at the end of each project and making it searchable. Just as you should standardize every other function in your business, so should you standardize the retention of your installation data.
I’d explained previously that bottom-up estimating involves breaking the project down into all of its component tasks, calculating the time and materiel for each of them. Then all of those components are added up to calculate the total estimate for the project.
Because it’s extremely labor-intensive and sometimes requires specialist knowledge, it’s often done in teams, with multiple people assigned to the task, after the project manager has produced a rough work breakdown structure, and assigned teams to calculate the time and material for each task. The benefits to team-based estimating is that you’re tapping the specialist expertise of the people who best know what the tasks entail, and valuing their contribution to this phase can be a big positive for team morale.
The downside is that team input on bottom-up estimating can result in team members padding their estimates. People being, well, people, it’s natural to want to build in a buffer in order to avoid responsibility if the project is late, over-budget, or both. Knowing that, it’s also not uncommon for there to be some haggling done between the teams and the project managers when the final estimation is being totaled up.
One solution for dealing with padded-out estimates from the team is to use three-point estimation. That’s when the project manager asks for multiple estimates for each task. Team members need to consider every scenario from best-case to worst, and assess the cost, material, and duration requirements of each, and submit their estimates based on those parameters.
If anything, doing this is even more intensive than just straight up bottom-up estimating, but will also yield estimates on cost and duration that are likely to be more realistic and accurate.