Describe at least three ways to make duration and cost estimates for a project. Give an example of each using your experience and/or create a scenario to illustrate. When would you use one over the other? How could you get “better” or more accurate estimates for cost and duration of work packages?
Three ways to make duration and cost estimates for a project are analogous, parametric and Three-point estimating (Usmani, 2019). The analogous technique is often used when limited information is known about a project. I have used this method in the past to gauge how long a project will take, an example being a product-testing event. To be successful, I know that I need at least 20 days of pre-work before entering the event. Although the analogous method does not produce accurate numbers, it is a good starting point during early project phases (Goebel, 2005).
A second method is the parametric method of estimating. In this method, variables are entered into a formula to determine the end cost (Warburton & Kanabar, 2013, p. 135). A simple example of a parametric formula I have used is ordering pizza’s for an event. The average person eats three slices of pizza and each pizza typically has eight slices. When put into an equation it is N=1+(3G/8) to order. Therefore, for a party of 10 people, I would need 4.75 pizzas, which rounds up to five pies for the party. The problem with parametric is the assumptions can break down. In our pizza example, the three slices per person is an “average.” If you are planning for teenagers, you may want to increase that to account for appetites.
A third method of estimating is the three point estimating. This is used to reduce data point biasing. “Three estimates are determined instead of finding one estimate, and then their average is taken to reduce the uncertainties, risks, and biases” (Usmani, 2019). According to Usmani, the most commonly used version of three-point estimation is the PERT method (2019).
Although I have used all three, I find the most accurate estimates come from a combination of all three. By comparing analogues to parametric to PERT estimates, the project manager can determine how accurate the estimate is, since they should all be similar. If one is askew, there may be an estimation error somewhere.
Name and describe the different types of reserves in a project and who controls them. How could you determine the appropriate amount for a contingency in a project?
The first type of reserves is the contingency reserve. This is controlled by the project manager and is a budget set aside in the event that a risk (known-unknowns) is realized (Usmani, 2012). Since this reserve is tied directly to a risk, we must calculate the amount to reserve. The simplest method is to calculate the expected monetary value of the risk. Example, if a realized risk will cost -$4,000 and has a 10% chance of happening, the reserve is -$400 (Impact*probability).
The second type is the management reserve. This is for the “unknown-unknowns” and is controlled by the organizational management. Generally, this is a standard amount (percentage of project cost)) set aside to address unexpected risks. Since this is not controlled by the PM, they must request use of this reserve from management.
What is a “Resource Requirements Matrix” and what is its purpose in a project? How are WBS work packages related to this type of matrix? What are some cost considerations to include when creating this type of matrix? How can you develop your budget using a “Resources Requirements Matrix?”
A resource requirements matrix identifies the resources needed for each task in the WBS (PM4DEV, 2016, p. 11). These resources include things such as time, skills and materials needed to accomplish a WBS element. Using this information, the PM can develop a bottom-up estimate of the total project budget.
Goebel, C. J. (2005). Estimation is not an event, it’s a process! Paper presented at PMI® Global Congress 2005—North America, Toronto, Ontario, Canada. Newtown Square, PA: Project Management Institute.
PM4DEV. (2016). Project Scope Managment. PM4DEV.
Usmani, F. (2012, Fef 16). Contingency Reserve vs Management Reserve. Retrieved from PM Study Circle: https://pmstudycircle.com/2012/02/contingency-rese…
Usmani, F. (2019, Jan 28). 4 Tools to Estimate Costs in the Project Management. Retrieved from PM Study Circle: https://pmstudycircle.com/2012/06/4-tools-to-estim…
Warburton, R., & Kanabar, V. (2013). The art and science of project management. Newport, RI: RW Press.