CHAPTER 3
PREPARE TO ESTIMATE
This chapter covers the Prepare to Estimate stage of the estimating life cycle and focuses on the creation of a project estimating approach. The objective of Prepare to Estimate is to outline the fundamental inputs, activities, and outputs with regard to the appropriate planning for estimates.
This chapter includes the following sections:
3.1 Introduction
Before a project estimate can be created, it is critical to document the project estimating approach. Documenting the approach helps the project manager to consider the many factors involved in the project estimating process. Documenting an estimating approach also helps to identify the resources required and techniques used to estimate the project.
Figure 3-1 shows the inputs and outputs for the Prepare to Estimate stage which is described in this chapter.
Spending the appropriate time planning for an estimate will help to mitigate some of the causes of variance identified in Section 2.6, specifically the evolution of requirements and faulty estimating.
3.2 Inputs
In order to begin the Prepare to Estimate stage, the project manager needs to gather the relevant information.
3.2.1 Project Documents
The first step is for a project manager to obtain all relevant project information to understand what is being estimated, as the information becomes available.
- Requirements Documentation—Describes how individual requirements meet the business need of the project.
- Scope Baseline—An approved specific version of the detailed scope statement, work breakdown structure (WBS) and its associated WBS dictionary.
- Activity List, Attributes, and Schedule—If the project has an existing activity list and schedule, this should be used in conjunction with the high-level scope as inputs to the Prepare to Estimate stage. Activity lists may also include activity attributes of associated data items, which can be helpful in estimating, such as relationships, predecessors, and resource requirements.
- Risk Register—Identification of project risks assists the project manager in determining the areas that may require more project resources, time, or costs. For example, a technology that is new to an organization presents a risk, in that team members may not know how to use it effectively for the project, and therefore it may require more time to plan, design, and test.
- Resource Calendar—Any inventory of available resources is useful for estimating. Estimated activity duration is related to the availability and allocation of resources.
3.2.2 Experts
Once the high-level scope of the project has been documented, the project manager should identify the resources that can be used to estimate the various parts of the project. Several of the techniques described in Chapter 4 utilize the knowledge and experience of key resources. Note that these experts do not have to be dedicated members of the project team, although the use of project resources increases buy-in of the estimates and generates a stronger commitment to meet the realization of those estimates.
3.2.3 Estimating Techniques
The project manager should have an understanding of the available estimating techniques. These may be included in the organizational process assets that are gathered. By understanding the estimating techniques, a project manager will have the appropriate inputs available when it is time to prepare the estimate. For example, an analogous estimate requires historical information for projects, while a bottom-up estimate requires a detailed WBS and activity list. These techniques will be described in more detail in Chapter 4.
3.2.4 Constraints and Assumptions
An important input for the Prepare to Estimate stage is to recognize the identified project constraints and assumptions. Some projects have fixed scope, fixed costs, or fixed schedules, which will constrain the estimates. Identifying these constraints and assumptions allows the project manager to develop an understanding of the flexibility of various options when estimating (e.g., scope, duration, or cost), and which requirements cannot be changed. It is also important to note any early assumptions made about the project.
3.2.5 Additional Influences
There are two primary influences of a project that are external to the specific project requirements: organizational process assets and enterprise environmental factors. Both influences need to be considered when estimating projects because they directly impact the activities, activity durations, and cost.
- Organizational Process Assets. Most organizations have standard processes, tools, and project management deliverables for managing projects. These assets should be understood so that they can be planned for during the project estimating stage and included in the estimates. Examples include:
- Deliverables and processes included in the WBS that need to be estimated;
- Estimating processes and standards required to be followed, which may include an approach for levels of confidence ranges, and contingency reserve; and
- Checklists of areas included in a project that need to be estimated.
- Enterprise Environmental Factors. These include internal and external environmental factors that surround or influence a project's success. Examples include, but are not limited to, organizational culture, industry or government standards, and marketplace conditions. A more comprehensive list can be found in Section 1.8 of the PMBOK® Guide—Fourth Edition.
3.2.6 Historical Project Information
Once the high-level scope is known, a project manager is able to gather historical information on similar projects that have been completed. This can be the basis for a comparison or starting point, which can be used in the analogous estimating technique. It may also be used to understand how to utilize lessons learned so that these are included in the project estimate. The following are examples of historical information that can be used:
- Project Effort—Documents the completed activities and their durations on other past or parallel projects, which may be used to develop the current estimates. The activity list is also used to ensure that critical activities are not missed in the estimate.
- Project Schedule—Documents the overall duration of the project which may be used to calibrate the new estimate.
- Project Cost—Documents the overall cost of the project which may be used to calibrate the new estimate. Detailed project cost information is compared to specific units of work to quantify what each unit costs. This is helpful in parametric estimating.
- Project Resources—Identifies the resources used and their duration on the project, which may be used to calibrate the new estimate and ensure that the critical resources are included in the estimate.
- Project Documentation—Documents detailed requirements or testing conditions that help to gauge the size of the project when comparing to a new project. This may include lessons learned and risk reports.
3.3 Activities
Once the inputs have been gathered, the project manager should document the project estimating approach with regard to estimating cost, activity duration, and activity resources.
3.3.1 Create Project Estimating Approach
The following information provides the foundation for this approach and should be included in the project management plan:
.1 Scope of Estimate
The scope of the estimate should be clearly defined. During this activity all items included and excluded should be expressly identified and documented, along with a detailed list of assumptions. This should not be confused with the project scope statement or scope baseline.
.2 Organizational Process Assets
Companies that have standard organizational process assets may also have a list of mandatory deliverables for projects. These should be noted so that estimates are obtained for these deliverables within the project.
.3 Project Work Information
Document the evolving estimates as an output of progressive elaboration and show ranges and levels of confidence during the project evolution. These may exist in the organizational process assets.
.4 Estimating Assumptions
Explicitly state any assumptions with regard to what is in the scope of the estimate as well as what is known and not known at the time of the estimate. These can include assumptions around the business case, the skill and availability of the team, and the project environment.
.5 Constraints
Constraints may include specific data or costs for the project which cannot be altered. If there are specific constraints identified by the customer, these need to be identified and documented.
.6 Estimation Technique(s)
The project manager determines the best estimation technique(s) based on available information and identified risks. Note that it is a good practice to use more than one technique to calibrate and compare them. Chapter 4 outlines the scenarios in which each technique is best applied.
.7 Resources Needed to Estimate
Include the resources and skills needed to create the estimate based on the identified technique(s).
.8 Estimate Confidence
Identify what is needed to have a high level of confidence for the project estimate.
.9 Contingency Reserve Planning
State the approach for using contingency reserve, including how it will be created, how it will be managed, and how it may change as the project progresses.
.10 Risk Assessment
Assess the existing project risk register for risks that can impact the project estimate and how they are being managed.
.11 Management and Monitoring Processes
Document the plan for managing estimates, the timing and approach for reforecasting estimates, and the approach for monitoring the estimates and actuals. This should include the approach for metrics collection and reporting and the use of earned value analysis, if being applied.
.12 Improvement Processes
Document the approach for capturing and utilizing lessons learned plus actual costs and effort to improve the project estimating process.
Once the project estimating approach is documented, it is a good practice to share it with team members and subject matter experts, and obtain signoff from key project stakeholders. This helps to set expectations as to what is being estimated, what the evolving estimates mean, and how the estimating process will evolve.
3.4 Outputs
Upon completion of the Prepare to Estimate stage, there are two key outputs:
3.4.1 Project Estimating Approach
Documented approach for estimating costs, activity durations, and activity resources. This includes a description of the project being estimated, the estimation techniques used, resource needs, assumptions, constraints, and timing of estimates.
3.4.2 Information and Resources to Create the Estimate
While preparing the estimate, relevant information is gathered that is used during the Create Estimates stage (see Chapter 4). This includes project information, such as scope documents, as well as historical information from similar projects.
3.5 Considerations
There are a few considerations for the Prepare to Estimate stage that should be taken into account by the project manager.
3.5.1 Allocate Appropriate Time to Plan
The project estimating process does take time to plan and execute properly. Since projects are often held to commitments from early project estimates, it is important to spend an appropriate amount of time on planning the estimate.
3.5.2 Proper Stakeholder Expectations Management
The project estimating stage is an evolving one. As described in Section 2.5, the known information and the subsequent confidence levels and ranges for estimates change over the course of the project. Therefore, it is important for the project manager to set expectations with stakeholders and sponsors early in the project and to manage expectations over the course of the project.
Early on in a project, there are many unknowns; therefore, project estimates can offer a wide confidence range (See Figure 2-2) with many assumptions. It is important to explain this to stakeholders and to provide them with an idea as to when information will become available and when higher confidence levels for estimates can be made.
Failing to manage expectations around early project estimates can result in stakeholders having a different understanding of the commitments for a project.
3.5.3 False Perception of Level of Accuracy
Early estimates usually involve many broad assumptions, however sometimes project estimating techniques result in very specific numbers. This may give the impression of a higher accuracy or level of confidence during the project estimating stage than was actually performed. Project managers should consider rounding numbers to the next higher increments and providing ranges for early project estimates.
3.6 Summary
Prepare to Estimate is an important stage in the project estimating life cycle. It occurs when the project estimating approach is identified, which outlines the key parameters for the project estimate. This stage includes considering how the project will be estimated using techniques, organizational process assets, and experts. It also documents any constraints and assumptions that need to be factored in and provides a level of confidence to management. Also during this stage, key project and historical information are gathered, which will be used as inputs into the Create Estimates stage.