Tag Archives: Estimation process

One of the most important aspects of project management is an estimation. All projects require a budget and stakeholders want to know what it is before the project is started.

Project estimates are an estimate of the time or effort required to complete a project. When you are working on any project, the estimate – it is also the estimate of the time/money of the project – cannot be 100% known until its completion. Most frequently, a buyer will want to know the price of any project at the outset. In order to somehow calculate this estimate, there are 3 types of assessment one can use:

  • Order of magnitude rough estimate or ROM estimate – accuracy (-25% to + 75%)
  • Budget Estimate – Accuracy (-10% to + 25%)
  • Final grade (Definitive) – accuracy (from -5% to + 10%)

Let’s try to figure out what will give a more accurate result for the ROM or the Final Evaluation.

Assessment and its types

An approximate order of magnitude estimate is considered rough or less accurate than other types. Reasons for this vary because of the fact that it is done in the early stages of the project, usually at the initiation stage, when there are still many unknowns. This estimate is usually requested by the client to decide on when to start the work.

  • With ROM, the difference between the estimate and the actual figures can reach 75% or more, making it 25% or less accurate.
  • The final estimate is used at the last stage of the project. Usually, in the case of the final assessment, the range of accuracy is from -5% to + 10%, both in plus and minus.
  • In addition to the ROM and the Final Evaluation, there are several other types of estimates: preliminary and budget. In the case of a preliminary estimate, the deviation range can be from -15% to + 50%. Budget estimate from -10% to + 25%. And, of course, the final estimate is 100%.

The accuracy of the estimate may change as the project progresses. It is like a funnel where the initial spread can be large, but over time it will narrow.

 

ROM versus Final Evaluation

For clarity, we will take the PMP Exam study project, and in practice, we will illustrate the degree of accuracy of the assessment.

At the very beginning of their preparation, applicants may have little or no knowledge of the PMBOK examination program and guidelines. The time period for preparation is about 3 months of distance learning, which is considered a rough order of magnitude (ROM) estimate. 

The actual study period cannot be known for sure, as the only way to estimate it is through the experience of other examiners.

After the exam preparation course, the PMP applicant should be able to understand the topics and fill in the knowledge gaps. This means that the approximate study time will be 100 days. At first glance, it seems like it looks more like a final assessment.

Usually, at this time, you need to immediately book the date of the exam, which can serve as an additional incentive.

 

Mock exam question

The project runs for 3/4 of the projected duration, and the last component needs to be built to improve the accuracy of the system. The project manager updates the cost of the entire system.

How accurate is the estimate?

  1. Preliminary estimate
  2. A rough estimate of the order of magnitude
  3. Budget estimate
  4. Final assessment.

 

Helpful Memo: Approximate Order of Magnitude

Early in the project, you have very little information, and the management has asked you to quickly provide a budget estimate. In this instance, you will provide a ROM of the budget estimate. It is likely that you will find the accuracy of this estimate is lower than you would after more information is gathered. The accuracy typically ranges from -25% to + 75%.

You will probably find this value by comparing any similar types of projects completed in the past, or simply by looking over a wide range of work and then making a decision about it.

In this instance, you are rapidly estimating and finding a cost estimate that is likely less than you will spend.

 

Answer:

The correct answer is choice #4 because the project is nearing the end and most of the costs are already known. The only variable is the “last component”. It can be concluded that the estimate of the cost of the system should be in the range from + 10% to -10%.

 

Now you are guided by the difference between the ROM and the Final Grade, and at the same time, you have acquired something new and useful for yourself.

 

 

In over ten years of existence we’ve picked up a fair share of expert knowledge on many different projects. This makes our team of over 50 developers and systems administrators all highly experienced and dedicated professionals. All of whom possess Brainbench, Retratech, MCP, RHCE and MCSE certification and are backed by an expert, PMI/UPMA certified management team.

Why is this important when it comes to an accurate quotation that genuinely reflects the quality and complexity of work you require? When using inexperienced developers (or those with irrelevant qualifications), they will almost always send back a quote that – when broken down – shows a lack of understanding for the project’s wants and needs in terms of their time and expertise. This is often down to a lack of confidence on the part of the ill-experienced contractor that ultimately means large risks on the part of you – the client. This is true with all kinds of freelancers and contractors that lack the skills and quality to provide the assurances you need to make sure your project comes in on time, on budget and to your exact specifications.

A similar problem can occur with lone freelancers, who may have the relevant skills, but not the time to properly dedicate themselves to a project; once again leading to costs over and above the original estimate.

Conversely, a good developer, working with a strong team can accurately match and compare the skillset of the team to the various aspects of the works. Assigning various packages to the most suitable and able members regardless of experience, common problems that can affect project estimation will always include:

  • Simply extending and building on a previous project, meaning a break in code and unity,
  • Integrating unknown third party services to another API with unreliable updates and patches,
  • Unpredictable system behavior once the changes have been made,
  • Complex custom tasks for niche markets, and the difficulty in finding people with the right experience.

This wide gap in experience and quality is generally the reason behind the discrepancy in estimated costs you may see. Contractor “X” may have offered the cheapest, but have they covered all the needs and outcomes you require, furthermore taking into account the points above. These are the questions you need to ask when faced with widely disparate quotes for the same piece of work.

All of these hurdles can be overcome by choosing a highly qualified, and widely sourced team, who take an individual and flexible approach to every client and every job, to provide your quotation. That’s why, by working closely with you, we at Itera Research will always pick the best and most appropriate methodology; as a result all estimates take into account your bespoke requirements.

 

Sincerely,

Itera Research team