Project Estimator – How to Play the Commitment Game

Dick Billows, PMP
Dick Billows, PMP
CEO 4pm.com

The project estimator knows how to play the commitment game. The project sponsor wants commitments about the project’s duration and cost very early in the project. The process is often political and involves much more than numbers. But experienced project estimators play the estimating game properly and don’t get caught committing to numbers that have a low probability of success.

Project Estimator: The Tactics

Let’s look at some of the games surrounding project estimates and then discuss what tactics the project estimator should use. In the real world, estimating a project’s duration and cost is a high stakes game. The client or executive wants an accurate estimate of the project’s costs and duration. And they want the project manager to commit to hitting those numbers. When an executive asks for those estimates during the initiation process, project estimators often respond with some of the following answers:

  1. I’m 60% confident that we can finish the project within a duration range of 3-8 months and a cost between $50,000 and $250,000.
  2. We’ll be done in approximately 5 months and the cost will come in at about $110,000. But that’s just a rough guess!
  3. I will have no idea until we detail the deliverables, estimate the work and find out how many people I will have to do that work.
  4. When do you want us to finish and what’s the budget?

Answer #1 – It’s truthful but it enrages executives.
Answer #2 – Executives quickly forget the“rough guess” and are happy.
Answer #3 – It’s the whole truth but it’s useless for executives.
Answer #4 – It’s very ingratiating to executives but it’s a project deathtrap.

Which choice do most project managers make? Choice #2. It deals with the reality of the situation. Executives are under the gun to make cost/benefit and priority decisions about projects. There are also strategic realities that force certain completion dates on everyone.

The project estimator, you, are caught in a vise when asked to provide estimates. That’s especially true when the scope of the project is vague and the availability of resources is largely unknown. Project estimator tactics can make this situation a little better for everyone.

Project Estimator: The Four Stage Process

You should announce this four-step estimating process during the project initiation process. You explain the estimates you’ll give executives in each of the four stages in the project lifecycle.

  1. Project Initiating: Use project-level order-of-magnitude estimates that are based on similar projects.
  2. Early in Planning: Use analogous estimates for major deliverables that are based on similar project deliverables.project estimator
  3. Final Stages of Planning: Use bottom- up estimates based on data from project team members.
  4. Status Reporting: Use rolling estimates weekly until the project is completed.

Project Estimator: Stage One

Let’s look at a four-stage estimating process that you might use on a very simple project. An executive invites you into the conference room and says, “All these weekly reports from the branches come in with different data in different formats. I want you to develop a consistent template. Pronto. This is a high priority for me and you’ll get everyone’s cooperation. I have to run to a meeting now but come back at 3:00. I want to know when you and your team can get it done.”

You think through your experience with similar projects and access the archives for estimates from those projects. At 3:00 you’re ready and tell the executive, “During the project I will give you 4 different estimates. The accuracy will improve as I know more about the project. The best I can do now is give you a project-level, order-of-magnitude estimate based on prior experience. I’m 60% confident we can have it done in 18 to 35 working days.”

The executive gives you a poisonous look and says, “Okay, come back when you can give me a better estimate.”

You reply, “I can give you a better estimate as soon as we have finalized the scope and major deliverables and you have signed off on what you want.”

The executive frowns and replies, “I was planning to delegate that.”

You smile, “I would still need a sponsor’s signature on the scope and deliverables.”

The executive nods glumly, “OK let’s get together tomorrow at 8:00 AM.”

Project Estimator: Stage Two

After the following day’s morning session, the executive frowns at you and asks, “Now, how long will the project take?”

You look over your notes and say, “At this point, I can give you a better project-level estimate. We’re still working from the top down based on similar projects. But I can give you a somewhat tighter estimate. I’ll apply some ratios to that and give you project estimates for each phase. I’m 75% confident we can finish in 23-30 working days. Using my experience and the ratios between phases on previous projects, I can also say that I’m 75% confident of the following phase estimates:

  1. Requirements sign-off: Branch office managers sign off on requirements: 4-7 days
  2. Development test: test group can complete the template in < 60 minutes: 5-8 days
  3. Training: Users can complete the template in 45 minutes: 4-5 days
  4. Roll-out and enforcement: 95% user compliance: 10-15 days.”

The executive frowns again and asks, “When will I get better numbers?”

You answer, “As soon as I detail the work estimates and get commitments on the people here at headquarters and in all the branches. Then, I can give you a bottom-up estimate, which will be more precise than the top-down estimates I’ve been using. Bottom-up is more accurate because I’ll be using estimates from the people who will be doing the work. Then I’ll aggregate them into the overall numbers.”

Project Estimator: Stage Three

A few days later, you return to the executive’s office and say, “Here is the bottom-up estimate I mentioned. With the work breakdown structure completed and the resource commitments I’ve noted, I’m 60% certain we can finish within 24-28 working days.”

The executive gives another slightly less venomous sigh and says, “Okay, this is getting better but I’d still like really tight project estimates.”

Project Estimator: Stage Four

You nod and say, “The fourth type of estimate I’ll be giving you is a revised estimate each week. As work progresses, the uncertainty will decrease and I’ll  give you new, more accurate, estimates every week. We call these rolling estimates. As an example, after the stakeholders approved the requirements, the uncertainty in the development work decreased a lot. So I can give you a much tighter estimate.”

Project Estimator Tactics: Statistical Hocus Pocus?

This four-step process illustrated how a project manager changed estimating techniques as the uncertainty about the project declined. In the example, the project manager used analogous estimates based on information about earlier projects. Next working top-down, the PM estimated major deliverables using ratios from prior projects. This information could have come from several sources:

  • an organizational project databank
  • commercial estimating methodologies
  • elaborate statistical analysis of previous projects.

Whatever the source of the data, the top-down estimates provided relatively broad ranges in the overall estimates.

In the third and fourth estimating techniques, the PM used the project work breakdown structure (WBS) and duration/work estimating techniques at the level of individual team member assignments. The numbers got a lot better because the PM used a bottom-up approach. They aggregated the estimates from project team members to develop the overall project estimate. In this bottom-up approach, the PM based the project estimate on the team member’s own estimates for their individual assignments. The fourth estimate type was rolling estimates. They’re also based on a bottom-up approach where the team members make regular weekly re-estimates of their work/duration. As the team completes tasks and deliverables each week, the uncertainty decreases and the estimates become more accurate.

There was one consistent thread through each step. The PM had the benefit of a clear and unambiguous scope definition. And they had  measurable outcomes for each of the assignments and project deliverables. Estimating is difficult enough without the burden of a vague project scope or team member assignments that can’t be measured.

Project Estimator Tactics: Archived Estimates

A major step to consistent project success and vastly improved project estimates comes from archiving data from previous projects. This is a modest investment that makes the entire estimating process more effective. When data from completed projects is archived, the organization can stop playing estimating fantasy games. They have a consistent database and methodology for developing the kind of “better and more accurate” estimates we’ve been discussing.

To learn more about these estimating techniques consider our project management courses over the Internet. You work individually with your instructor and have as many live video conferences as you want.

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Author: Dick Billows, PMP

Dick has more than 25 years of project and program management experience throughout the US and overseas. Dick was a partner in the 4th largest professional firm and a VP in a Fortune 200 company. He trained and developed 100's of project managers using his methodology. Dick is the author of 14 books, over 300 articles and director/producer of 60 short project management videos. He and a team of 25 project managers work with client companies & students across the US and in Europe, South America, Asia and the Middle East. They have assisted over 300 organizations in improving their project performance. Books by Dick Billows are on Amazon.com