1. LSU 07/25/2004Estimating Costs1 Estimating Project Costs & Time Project Management Unit, Lecture 5

2. LSU 07/25/2004Estimating Costs2 Cost & Schedule Estimates As previously mentioned the principal measures of a project are cost, time (schedule) and performance For a given project one or more of these measures may be constrained –For LA ACES your launch opportunity has a fixed date and you must have a payload ready by this date Initial estimates on cost and schedule are essential to determine if your plan is realistic –May need to plan for (or implement) trade-offs according to established priorities Cost and schedule needs to be monitored throughout the project life-cycle

3. LSU 07/25/2004Estimating Costs3 Factors affecting the estimate Task Definition: The completeness of your project definition will determine if all tasks have been taken into account. People Productivity: People do not focus on a task with 100% efficiency. The difference between “calendar time” and effort must be considered. Project Structure: A dedicated project team will be able to focus its effort on completing the project effectively. Padding: People may increase estimates to take into account unknown risks and this may force an unnecessary trade-off. Culture: What is deemed acceptable behavior by the organization (e.g. padding vs. accuracy) will affect estimates. Downtime: Equipment repairs, holidays, vacations, exam schedules can all affect the time estimate.

4. LSU 07/25/2004Estimating Costs4 Categories of estimates The Macro or Top-Down approach can provide a quick but rough estimate –Done when the time and expense of a detailed estimate are an issue –Usually occurs during conception stage when a full design and WBS are not available –Requires experienced personnel to do the estimate –Can be highly inaccurate A Micro or Bottom-Up approach can provide a fairly accurate estimate, but is time consuming –Takes into account the project design and a “roll-up” of WBS elements –May require multiple personnel and time to complete –If done properly, a bottom-up estimate can yield accurate cost and time estimates

5. LSU 07/25/2004Estimating Costs5 Steps to developing the estimates Start with a Macro estimate then refine with a Micro estimate Develop the general project definition Perform a macro cost and time estimate Develop the detailed project definition and WBS Roll-up the WBS elements as part of a micro estimate Establish the project schedules Reconcile differences between the macro and micro estimates

6. LSU 07/25/2004Estimating Costs6 Macro Estimates Scaling: Given a cost for a previous project then an estimate for a new project can be scaled from the known cost. E.g NASA, at times, uses spacecraft weight to estimate total cost. Apportion: Given a similar previous project, costs for major subunits of the new project would be proportional to similar subunits in the previous project. Weighted Variables: Certain types of projects can be characterized by specific parameters (e.g. number of inputs, number of detector channels). Historical costs & times for single units of these parameters are weighted by the numbers required for the new project. Learning Curve: If the same task is repeated a number of times there will be a cost / time savings relative to the first time the task is done.

7. LSU 07/25/2004Estimating Costs7 Micro Estimates Template: Uses historical data to establish detailed costs and schedules for project subunits. A new project composed of some combination of these subunits can then be quickly estimated. Ratio: Similar to the Macro ratio method but applied to specific tasks associated with project subunits. For example, if it takes 1 day to build & test a particular sensor unit, then an instrument with 10 sensors would take 2 technicians, 5 days to complete. WBS Roll-up: Times and costs associated with the lowest level WBS work packages are estimated and then these are added or rolled-up to yield the costs for higher level units. This method provides the most accurate estimates at the expense of time devoted to developing the estimate.

8. LSU 07/25/2004Estimating Costs8 Phased Approach On a phased project, details over the entire life-cycle may not be immediately available. During the each phase details for the remaining phases are refined, modified or changed. In this case an alternate approach may be appropriate. 1.Develop the general project definition 2.Perform a macro cost and time estimate for all phases 3.Develop a detailed definition and WBS for the immediate phase 4.Roll-up the WBS elements as a micro estimate for the immediate phase 5.Establish a detailed schedule for the immediate phase 6.Reconcile differences between previous macro & current micro estimates 7.Refine the macro cost and time estimate for the remaining phases 8.Refine the schedule for the remaining phases 9.Repeat items 3-8 just prior to next phases for the entire life-cycle

9. LSU 07/25/2004Estimating Costs9 Guidelines for Estimates Estimates should be done by the person most familiar with the task If possible obtain estimates from several people and use the variance for risk assessment (lecture 7) Multiple estimates should be done independently to avoid “GroupThink” (lecture 1) Base the estimates upon normal conditions. Use consistent units when estimating task time. Work package estimates should not include contingencies Use a separate risk assessment (lecture 7) for estimating the affect of abnormal conditions and contingencies.