Chapter 8

Estimating Time, Costs, and Resources

 Estimating

• is the process of forecasting the time, cost, and

resources needed to deliver a project.
• It typically happens during project initiation and/or
planning and takes the project’s scope, deadlines, and
potential risks into account.
• gives you and your stakeholders a general idea of
how much time, effort, and money it’ll take to get the
job done.
• That makes it easier to build a feasible project budget
and plan so you can set your team and organization
up for success.
 Ways to Estimate Projects

• Top-down estimating:
• This estimation technique takes a broad look at the project as a
whole, then breaks the total estimate down into major phases of
work; used when you have limited information about the project to
work from.
• Bottom-up estimating:
• is considered more accurate than top-down estimation because it
starts with a detailed list of tasks and estimates each step.
• Individual task estimates are then combined to create an overall
project estimate.
• Analogous estimating:
• compares the current project to similar past projects to quickly produce a
general project estimate.
• Parametric model estimation:
• uses past projects to inform new project estimates.
• It takes forecasting a step further by applying past data to current project
specs for more accurate cost estimation.
• Three-point estimating:
• Estimates a project based on 3 different scenarios: best-case (or
optimistic), worst-case (or pessimistic), and most likely. Estimates for all 3
scenarios are then added up and divided by 3 to generate a simple average.
 Why Estimating Time and Cost Are Important

• To support good decisions.

• To schedule work.
• To determine how long the project should take and its cost.
• To determine whether the project is worth doing.
• To develop cash flow needs.
• To determine how well the project is progressing.
• To develop time-phased budgets and establish the project
baseline.
Factors Influencing the Quality of Estimates
 Estimating Guidelines for Times,
Costs, and Resources

1. Have people familiar with the tasks make the estimate.

2. Use several people to make estimates.
3. Base estimates on normal conditions, efficient methods, and a normal
level of resources.
4. Use consistent time units in estimating task times.
5. Treat each task as independent, don’t aggregate.
6. Don’t make allowances for contingencies.
7. Adding a risk assessment helps avoid surprises
to stakeholders.
 “We must be careful not to penalize workers who
perform better than expected by loading them down
with excessive work.”
Effective Estimation
• Historical Data
– Learn from the past.
– can be considered the best source for project
estimates.
• How long did this task take to complete last time?
• How much did this subassembly cost? If the
historical data has integrity— meaning that it has
not been contaminated—use these data as you
estimate project schedule/cost/resource
requirements, and so on.
• Level of Detail
– Determine the required level of
detail for your estimates.
– The smaller the unit of the work, the
more accurate your estimate is likely
to be.
• Ownership of the Estimate
– If the individual supplying the estimate
owns it, it is likely to be more accurate.
– Consider the team member estimating the
duration to complete a task, knowing that
because her name will be associated with
the estimate, she will be held
accountable.
– The team member now owns the estimate
and will invest more time and effort to
produce a more accurate number.
• Human Productivity
– Project managers, team members,
and others supporting the project
cannot be expected to be 100
percent productive during the
course of a working day.
– This would not be realistic. People
are distracted, call in sick, move in
and out of the project, and so on
• Time/Cost/Resource
– Tradeoff When estimating in the
project environment, don’t forget
the human dynamic.
– Team members are not robots, yet.
Note that…
The three-point estimates
technique is used to identify the level of
uncertainty in an estimate using three
sets of assumptions:
the optimistic estimate,
the pessimistic estimate, and
the most likely estimate.
 Chapter 9
Project Procurement Management
• Procurement, in terms of
project management, is when you need
to purchase, rent or contract with some
external resource to meet your project
goal.
• refers to all the actions and strategies
related to the cycle of identifying,
evaluating and selecting suppliers of
production inputs.
• getting the best quality from the outside
vendors employed by the company to assist in
its doing business.
• is a way to more efficiently and productively
handle the process of sourcing, requisitioning,
ordering, expediting, inspecting and reconciling
of procurement.
• weigh the pros and cons of producing the goods
or services in-house and contracting the work
out. Is the relationship with outsider companies
necessary and cost-effective in the long-term?
What Is the Project Manager’s Role in
Procurement?
• they control in the project management
process.
• this is a process they might not own with
the same authority as other parts of the
project.
• While the project manager does have
the authority to make agreements with
contractors on behalf of the company,
the project manager is often not the
person who administers that contract
once in place.
• That means knowing the six processes with the
project procurement management knowledge
areas

• The first being the plan purchases and

acquisitions, meaning determining
what external resources are needed for the
project.

• The project manager will have control over this, as

they are more knowledgeable about overall
project needs.
When procuring goods and services from suppliers
and vendors, project managers must ask three
questions:

• What must be procured?

• When is it needed?
• How will it be acquired?
 What Is a Procurement Management Plan?

• outlines the procurement requirements,

guidelines and overall process that’ll be
followed by an organization for a
particular project.

• The level of complexity and detail of a

procurement management plan varies
from one organization to another.
Project Management Plan composed of:
 Procurement Documents

• Request for Information (RFI)

– is used for a formal information-gathering process. It’s
directed towards those suppliers of goods and services
with which you might want to contract.
– helps procurement managers find the supplier who’ll
deliver what they need and when they need it for a price
with which they’re comfortable.
• Request for Proposal (RFP)
– When an organization is looking to contract with a vendor
or contractor, it’ll send out an RFP that explains what they
want to be done.
– The document then captures the description and price of
doing that work by a variety of entities, where one can be
chosen as they offer the best all-around deal.
• Request for Quotation (RFQ)
– This process is used to ask a vendor
or vendors to submit their price
quotes for items that will be used in a
project or other venture.
– This allows the sender to compare
prices with other potential vendors
who are vying for the job. It’s an
essential part of making the right
decision about who to contract with.
Procurement Management Process

1. Plan Procurement Management

• Procurements are first identified during
the planning phase of the project.
• For every external contractor, there
needs to be a statement of work (SOW)
to serve as a document outlining the
work being contracted.
2. Conduct Procurements

• After finishing the paperwork of the first

phase, the conduct procurement phase is
when you study the bids that come back and
determine which one to accept.
• There should be a criterion in place to decide
which bid is best for the project and fits
your logistics management. The agreements
are then sign and the project management
plan is updated.
3. Control Procurements

• Once the contracts are signed, the

management of those contractors must
be folded into the overall management
responsibilities.
• Contractors can have a negative impact
on budgets and schedules, which can
lead to a project going off-track or
worse.
4. Close Procurements

• There needs one in place to finalize it.

• What constitutes completed work should be
detailed in the initial agreement with the
contractor so there’s no confusion on either’s
part as to when the work is done.
• Insurance and bonding also usually require a
formal release of liability.
• This makes sure that there are no outstanding
changes related to the value and completion
date of the contract
End 