BUSI 313 Project Management
Foundations of Project
Management (Liberty
University)
,
, BUSI 313 Project Management
Chapter 5 Estimating Project Times and Costs
September 7, 2020
• Estimating: the process of forecasting or approximating the time and cost of
completing project deliverables.
o Frequently classified as top-down and bottom-up
o Top-down estimates are usually done by senior management
▪ Analogy, group consensus, or mathematical relationships
o Bottom-up estimates are typically performed by people who are doing the work
▪ Based on estimates of elements found in the work breakdown structure
• Cost, time, and budget estimates are the lifeline for control; they serve as the
standard for comparison of actual and plan throughout the life of the project
o Ideally, project managers and the customer would prefer detailed project
status reports for every work package, however, that is not always possible
• Factors Influencing the Quality of Estimates
o Planning Horizon: estimates of current events are close to 100 percent accurate
but are reduced for more distant events
▪ The accuracy of time and cost estimates should improve as you
move from the conceptual phase to the point of defining individual
work packages
o Project Complexity: time to implement new technology has a habit of
expanding in an increasing, nonlinear fashion
o People: accuracy of estimates depends on the skills of the people making
the estimates
o Project Structure and Organization: which project structure is chosen to
manage the project will influence the time and cost estimates
▪ Advantage of having a dedicated project team is the speed gained
from concentrated focus
▪ Operating in a matrix environment can help reduce costs by
more efficiently sharing personnel
o Padding Estimates: allowing for error for personal interests
▪ For example, depending on why you need to be somewhere, you
may change your estimate of how long it takes to get there
▪ In work situations, most are inclined to add a little padding to reduce
risk of being late or over budget
o Organizational Culture: organizations vary in the importance they attach
to estimates
▪ Some organizations think that detailed estimating takes too much
time and is not worth the effort
▪ Other organizations believe that accurate estimates are the bedrock
of effective project management
o Other Factors: non-project factors can impact time and cost estimates
Foundations of Project
Management (Liberty
University)
,
, BUSI 313 Project Management
Chapter 5 Estimating Project Times and Costs
September 7, 2020
• Estimating: the process of forecasting or approximating the time and cost of
completing project deliverables.
o Frequently classified as top-down and bottom-up
o Top-down estimates are usually done by senior management
▪ Analogy, group consensus, or mathematical relationships
o Bottom-up estimates are typically performed by people who are doing the work
▪ Based on estimates of elements found in the work breakdown structure
• Cost, time, and budget estimates are the lifeline for control; they serve as the
standard for comparison of actual and plan throughout the life of the project
o Ideally, project managers and the customer would prefer detailed project
status reports for every work package, however, that is not always possible
• Factors Influencing the Quality of Estimates
o Planning Horizon: estimates of current events are close to 100 percent accurate
but are reduced for more distant events
▪ The accuracy of time and cost estimates should improve as you
move from the conceptual phase to the point of defining individual
work packages
o Project Complexity: time to implement new technology has a habit of
expanding in an increasing, nonlinear fashion
o People: accuracy of estimates depends on the skills of the people making
the estimates
o Project Structure and Organization: which project structure is chosen to
manage the project will influence the time and cost estimates
▪ Advantage of having a dedicated project team is the speed gained
from concentrated focus
▪ Operating in a matrix environment can help reduce costs by
more efficiently sharing personnel
o Padding Estimates: allowing for error for personal interests
▪ For example, depending on why you need to be somewhere, you
may change your estimate of how long it takes to get there
▪ In work situations, most are inclined to add a little padding to reduce
risk of being late or over budget
o Organizational Culture: organizations vary in the importance they attach
to estimates
▪ Some organizations think that detailed estimating takes too much
time and is not worth the effort
▪ Other organizations believe that accurate estimates are the bedrock
of effective project management
o Other Factors: non-project factors can impact time and cost estimates
