Validating The Project Estimate

A project manager should be familiar with the procedural and/or legal requirements associated with the use of project contingency. In many situations the owner thinks of the contingency as the amount of funding available to add more scope if need be. The project manager typically views the contingency, as funds to be tapped, if the project is delayed for whatever reason. Contingency should cover the uncertainty for risks that are difficult to estimate portions of the project. Therefore, it's important that the documentation surrounding the use of the contingency amounts is well documented. It will come in handy when meeting with the client on project changes.

When validating project estimates, check:

- Level of Detail In The Requirement Document

- The Method Of Estimating Utilized
- The Experience Of The Estimator

In any case, it is safe always to estimate a contingency value, that is the amount of “set a side” in dollars or hours, which is over and above the initial project estimate. This is necessary to cover risk related items and to provide coverage for items that were difficult to identify in detail during the time the estimate was prepared. Risk and contingency are interrelated, the higher the risk the greater need for contingencies.

Contingency estimating is a tricky process, and it's best to follow a process

-Verify mitigation approach or steps to the solution
-Consider the degree of uncertainty (subjective) associated with each
-Add a percentage amount 10, 20 % etc. The percentage amount is based on:
-Contract Provision

Project Cost: building the project resource sheet

Project cost is defined as the approximate (estimated) cost of all resources (people, materials and equipment) consumed by the performing organization necessary to achieve the project deliverables.

Using this information it is possible to build a project resource sheet, such as illustrated in the table above.

-Resource names can be individuals or generic. 
-Resources should be coded uniquely. 
-Resources must be grouped for hours. 
-Rates must be assigned to generate cost information. 
-Max. average Availability per day to work on this project only.

An example of estimating the cost of a task could be:

-to develop a software module in 10 days
-2 resources available (given on a unit effort per day) :

-a programmer @ 20% per day, at a rate of $50/hour.
-a contractor @ 10 hours per day, at a rate $70/hour.

Calculating Total Effort = 116 hours

-programmer: 20% of 10 days = 2 days = 16 hours
-contractor: 10 hours/day per 10 days is 100 hours

Calculating Total Cost = $7,800.00

-programmer: $50/hour x 16 hours= $ 800.00
-contractor: $70/hour x 100 hours= $7,000.00

Project Estmating Techniques

There are different ways for estimating project tasks and, consequently, the overall project. Here's a few of them:

Use of Historical Data - if projects are categorized in a knowledge database system, together with learned lessons, then they can easily be retrieved and consulted for estimating purposes. Of course, they have to be similar projects.

Use of Experienced Resources - estimating is a team effort, and the contribution from experienced resources in making estimation is very valuable.

Use of Estimating Databases - if available, make use of industry databases published by organizations.

Range of Estimates using PERT Weighted Average equation used for statistical based risk analysis.

E= (O+4M+P)/6 = Expected Value; O= Optimistic Value; M= Most Likely Value; P= Pessimistic Value


In any case, points to remember when estimating are:

-Use experienced people
-Emphasize team estimating
-Breakdown to 1-2 weeks for control
-Itemize the doneness criteria for tasks
-Do not estimate for others (detail only)
-Check resource hours vs. time elapsed
-Try to be realistic not optimistic and not pessimistic