Published on May 7, 2014
Estimations In Project Management Intaver Institute Inc. 303, 6707, Elbow Drive S.W, Calgary, AB, Canada Tel: +1(403)692-2252 Fax: +1(403)459-4533 www.intaver.com
Estimations in Project Management “The Father of the Bride”: wrong estimations of the cost.
George Banks Mental Errors 1. 1. He wanted to spend as little as possible and therefore was motivated to come up with an unrealistically cheap estimate. He ignored all evidence that would have suggested the true cost of the wedding (expensive cake, large number of guests, etc.) when he did his rough estimate. 2. 2. He used a reference point (the cost of a house) to come up with the estimate. It was completely irrelevant to a wedding and therefore was nonsensical for this particular estimate (though good for the movie). This is a classis example of anchoring. 3. 3. He was overconfident. Weddings are a one-day event and it will take place in his house, so he thought the amount of money required would be manageable.
What Should Have George Banks Done to Avoid a Nervous Breakdown ?1. Ask some other people how much the wedding would cost and use this number as a reference point. 2. Make a rough estimate by summing up all known expenses without ignoring any items. 3. Make necessary contingency plans by continually asking, “What else could happen?”
Politics of Psychology? Flyvbjerg Curve
Examples of Wrong Estimation Project type Number of cases Average cost escalation Rail 58 44.7% Fixed-link (bridges and tunnels) 33 33.8% Roads 167 20.4% All projects 258 27.6%
Psychology of Estimations • Rule of PI: Actual duration (cost) of an activity will be about PI (3.1415…) bigger than the original estimate, even if the estimator was aware of this rule. • Planning fallacy and the optimism bias • Student syndrome: many people will start to fully apply themselves to task just in the wake of a deadline. • Confirmation Bias
Availability Heuristic Simple Psychological Exercise 1. Take three seconds to try to recall all of the projects or large activities you were involved during the last year. 2. Now repeat step 1, but take 15 seconds. 3. Repeat steps 1 and 2 taking up to three minutes for each step, and write down the results.
“What I see is what I want to see.” Planners or project managers sometimes cease to review data as soon as they find something that supports their estimate. They can also discard evidence that contradicts their estimates. Selective Search of Evidence
Other Explanations Of Problems With Estimation · There is no established project estimation process. · Inaccurate data is used, or historical data may not be complete. · The forecasting techniques and tools are inefficient. · There is no ability to track actual project performance, which can be used to refine estimates. · The project planners are inexperienced.
Simple Remedies • Never make a wild guess • Collect Relevant Historical Data • Reality checks • Independent Assessment
Example of Reality Check 500 1000 1500 2000 2500 Mission Cost ($ mln) 0 0 20 40 60 80 100 120 140 160 180 MissionDuration(mo) HEAD Magillan Landsat 7 URAS LISA CGRO Chandra (AXAF) Galileo Terra HST GOES I-M Aqua NASA’s LISA Project cost estimation
Estimating Probabilities 1. Subjective judgment 2. Relative frequency approach 3. Combination of both
Method of Eliciting Judgment • Direct assessment of an event’s probability • Ask the experts two opposing questions: “What is the probability that the project will be canceled?” and “What is the probability the project will be completed?” • Probability wheel 25% No problem with the component 35% Full replacement of the component 40% Repair of the component
Probability Method Low estimate High Estimate 11 intervals How many instances per each interval
Building Consensus • Come back to original questions • Visualize range on opinions • People usually good in technical estimations but not good about cost • Separation of compound events
Sensitivity to Probability Maj. Ernest Y. Wong and Lt. Col. Rod Roederer of the U.S. Military Academy (2006) reviewed the decision to attack Iraq from a decision theory point of view. To make their point, they hypothetically assumed that the decision to attack Iraq was based only on one criterion: the existence of a stockpile of weapons of mass destruction (WMD). They performed analysis using methods that we have discussed in this book. They demonstrated that outcome of the decision to attack Iraq is very sensitive to uncertainty in assessment of probability of Iraq having WMD at this time. If probability is greater than a certain break even number (say 75%), the decision may be correct; and vice versa. However, if the probability is expressed as a range (from 60% to 90%), and the break even point is within this range, it is very hard to tell what course of actions should have been taken.
Future Reading Lev Virine and Michael Trumper Project Decisions: The Art and Science Management Concepts, Vienna, VA, 2007 Lev Virine and Michael Trumper Project Think: Why Good Managers Make Poor Project Choices Gower, 2013
How organisms adapt and survive in different environment.
Aplicación de ANOVA de una vía, modelo efectos fijos, en el problema de una empres...
Libros: Dra. Elisa Bertha Velázquez Rodríguez
In this talk we describe how the Fourth Paradigm for Data-Intensive Research is pr...
Project Estimation Methods; Estimation chapter from "Applied Software Project Management" (PDF) The Dynamics of Software Projects Estimation; Estimations ...
Estimating Time Accurately ... Accurate time estimation is a crucial skill in project management. ... the above guidance to optimise the effort estimation ...
Estimations in Project Management. Simple Remedies. Modern project management techniques offer a number of methods and tools that you can use to improve ...
Estimations in Project Management. The Way We Think When We Make Estimations. Let’s go back to the original conversation between the programmer and the ...
Here are the top 24 Estimations, Project Management profiles on LinkedIn. Get all the articles, experts, jobs, and insights you need.
Estimations, Inc. Estimations, Inc. is an Alaskan firm formed in 1994 to provide construction management support services to the design community with an ...
Project Cost estimation is a big and important part of Project Cost Management. It includes the processes involved in planning, estimating, budgeting, and ...
Accurate project estimation is one of the most challenging aspects of a project. Project estimation becomes increasingly difficult as the project’s ...
Software development effort estimation is the process of predicting the most realistic amount of ... Expert estimation: Project management software, ...