Week 4 - PM

CASE STUDY

THE ESTIMATING PROBLEM 1

Barbara just received the good news: She was assigned as the project

manager for a project that her company won as part of competitive

bidding. Whenever a request for proposal (RFP) comes into Barbara’s

company, a committee composed mainly of senior managers reviews

the RFP. If the decision is made to bid on the job, the RFP is turned

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over to the Proposal Department. Part of the Proposal Department is an

estimating group that is responsible for estimating all work. If the

estimating group has no previous history concerning some of the

deliverables or work packages and is unsure about the time and cost for

the work, the estimating team will then ask the functional managers for

assistance with estimating.

Project managers like Barbara do not often participate in the bidding

process. Usually, their first knowledge about the project comes after the

contract is awarded to their company and they are assigned as the

project manager. Some project managers are highly optimistic and trust

the estimates that were submitted in the bid implicitly unless, of course,

a significant span of time has elapsed between the date of submittal of

the proposal and the final contract award date. Barbara, however, is

somewhat pessimistic. She believes that accepting the estimates as they

were submitted in the proposal is like playing Russian roulette. As

such, Barbara prefers to review the estimates.

One of the most critical work packages in the project was estimated at

twelve weeks using one grade 7 employee full time. Barbara had

performed this task on previous projects and it required one person full

time for fourteen weeks. Barbara asked the estimating group how they

arrived at this estimate. The estimating group responded that they used

the three-point estimate where the optimistic time was four weeks, the

most likely time was thirteen weeks, and the pessimistic time was

sixteen weeks.

Barbara believed that the three-point estimate was way off of the mark.

The only way that this work package could ever be completed in four

weeks would be for a very small project nowhere near the complexity

of Barbara’s project. Therefore, the estimating group was not

considering any complexity factors when using the three-point estimate.

Had the estimating group used the triangular distribution where each of

the three estimates had an equal likelihood of occurrence, the final

estimate would have been thirteen weeks. This was closer to the

fourteen weeks that Barbara thought the work package would take.

While a difference of 1 week seems small, it could have a serious

impact on Barbara’s project and incur penalties for late delivery.

Barbara was now still confused and decided to talk to Peter, the

employee that was assigned to do this task. Barbara had worked with

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Peter on previous projects. Peter was a grade 9 employee and

considered to be an expert in this work package. As part of the

discussions with Barbara, Peter made the following comments:

I have seen estimating data bases that include this type of work

package and they all estimate the work package at about 14 weeks. I

do not understand why our estimating group prefers to use the three

point estimate.

“Does the typical data base account for project complexity when

considering the estimates?” asked Barbara. Peter responded:

Some data bases have techniques for considering complexity, but

mostly they just assume an average complexity level. When

complexity is important, as it is in our project, analogy estimating

would be better. Using analogy estimating and comparing the

complexity of the work package on this project to the similar works

packages I have completed, I would say that 16–17 weeks is closer

to reality, and let’s hope I do not get removed from the project to put

out a fire somewhere else in the company. That would be terrible. It

is impossible for me to get it done in 12 weeks. And adding more

people to this work package will not shorten the schedule. It may

even make it worse.

Barbara then asked Peter one more question:

Peter, you are a grade 9 and considered as the subject matter expert.

If a grade 7 had been assigned, as the estimating group had said,

how long would it have taken the grade 7 to do the job?

“Probably about 20 weeks or so,” responded Peter.

QUESTIONS

1. How many different estimating techniques were discussed in the

case?

2. If each estimate is different, how does a project manager decide

that one estimate is better than another?

3. If you were the project manager, which estimate would you use?