Bottom up estimation VS Parametric estimation

Bottom up estimation VS Parametric estimation1

 

In project management, one of the onerous tasks faced by the project managers and organizations is how to estimate the project’s resources i.e. time and schedule. Different types of estimation techniques are in practice. Two of them are explained below:

  • Bottom up estimation

Bottom up estimation, as the name implies entails judging the cost and schedule of an entire project by aggregating the cost and time required by discrete deliverables as specified in the work break down structure. Work break down structure decomposes the project into tractable tasks, therefore bottom up estimation works by calculating the resources required by each task and finally summing them in the end to get and estimate of the overall project.   Usually, in this type of estimation process, the people who are going to work on the project estimate the resources.

Bottom up estimation instills team bonding and commitment among the project team members because if they are involved from the very basic level, they in turn get more committed and dedicated in achieving the project’s overall objectives. In order to correctly estimate the resources, each team member who has been assigned a particular task from a work break down structure should be given a authority to estimate the project’s resources. Bottom up estimation displays a more detailed overview of time and cost. It also aids in realizing the specific resources needed during different phases of the project’s lifecycle. The following steps are followed in a bottom up estimation:

  • Prepare a work break down structure of the project i.e. divide the entire project into smaller and tractable tasks including the work package which is the smallest task in the project.
  • Next step is to identify the dependencies between the tasks and allocate resources to each task carefully.
  • Aggregate your individual estimates of each task in order to determine the resources needed by the entire project.

Project team members usually employ the three point estimation technique to determine the cost and time of each task. In three point estimating process, team members provide their pessimistic, optimistic and best guess estimates. The Three point estimation technique is regarded as the most accurate estimation process and is commonly used in bottom up estimation.

Example

Consider a simple web design project which is categorized into following three deliverables.

  1. Designing of the website which will include selecting a layout, designing graphics and approving design
  2. Project content which will include selecting the content writers, writing the content and inserting the content on web pages.
  • Development which will include setting up the website in test environment, performing test, approving website and setting it up in a live environment.

Now that the project tasks are divided, the next step would be to estimate the cost and time required by these tasks. The project team is composed of graphic designer, content writer and web developer. Graphic designer will charge at $30 per hour and will require 18 hours to complete the project. Similarly, content writers are hired for writing the web content at the rate of $18 per hour to complete in 10 hours. Web developer was also hired for the development and has charged $25 per hour for 40 hours of work. Now, the following table describes that how the whole project cost would be estimated. All the three contributors of the website project will work for average 8 hours per day excluding the weekend.

Task Cost                                               Duration
Designing $540 3 days
Writing $180 2 days
Development $1000 5 days
Total cost $1720 10 days/2 weeks

 

This mean that this web development project will be completed in 10 days approximately which will be equal to 2 weeks as one week has 5 working days. Similarly, the total project will cost $1720.

  • Parametric estimation

In parametric estimation, the project is divided into small deliverables or units. Then, on the basis of research and historical data the cost and schedule of each deliverable is determined and is finally aggregated to determine estimate the whole project’s cost and schedule. In parametric estimation, the measurement is usually scalable. Consider a simple example that if it took three hours to fix a single machine by an electrician last week, so now he had to fix two machines which will require six hours.

Parametric estimation requires less time as compared to bottom up estimation. In large projects, like construction of a building or a bridge, parametric estimation is used to calculate the cost and time of the project by using the historical data which is available from reliable sources i.e. the time and cost of the previous and similar projects are considered and scaled accordingly.

Example

  1. ABC Company aims at constructing a six floor building in a specific area. The company wants to estimate the time and cost required by this project using parametric estimation. The company has divided the project into these deliverables
  • Foundation which will include tasks like formation, pouring concrete and blocks.
  • Rough construction which includes framing, draining and supply pipes.
  • Finish construction which will include wiring, fixtures, trimming and cleaning up.

After a thorough research, the company has found that a similar project a three floor building was constructed in the past by another company at the same place and the cost and time incurred were given on the website of that company which is as follows:

Deliverables Cost Schedule
Foundation $400,000 1 month
Rough construction $ 425,000 5 months
Finish construction $75000 2 months

 

On the basis of above historical data of a three floor building ABC has determined the cost and schedule of its six floor building like this:

Deliverables Cost Schedule
Foundation $800,000 2 months
Rough construction $850,000 10 months
Finish construction $150,000 4 months

 

  1. ii) Consider another project where students have to arrange a singing competition in their school. This project is divided into three tasks i.e. registration of the participants, marketing and finally the coordination.

Marketing: For marketing 150 brochures are to be printed at $1 per brochure. Last year it took 4 days for the printing of the brochures, therefore, it is estimated that it will also require 4 days this year.

Registration: Last year it took 7 days to register the participants, therefore, 7 days are estimated for registration process this year.

Coordination: Three persons were hired for coordination at $15 per hour. Last year each coordinator worked for 3 days for average 7 hours per day. Therefore, by using the parametric estimation, cost is determined $15*21= $315.

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