APM – ACostE Estimating Guide

Association for Project Management (APM)

• Éditeur: Association for Project Management (APM)
• Année: 2019
• ISBN:
  9781903494851
• Sujet: Commerce
• Sous-sujet: Gestion de projet

Everything you need to know about estimating in one essential guide. Estimates are critical to project professionals; vital when making informed decisions about projects across the different stages of the entire project life cycle to ensure successful project delivery.A cooperation between the Association for Project Management (APM) and the Association of Cost Engineers (ACostE) this guide is vital for project professionals across various sectors, as well as anyone who needs to understand cost estimation.Created by collaborators with real-life experiences, Estimating Cost will help you understand and diligently apply the core values of estimating cost to improve the clarity and robustness of an estimate for better decision making.Key features include:practical advice with a focus on cost estimating approaches, such as top-down, bottom-up, and 'ethereal';guidance on the various estimating methods including analogy, parametric and trusted source;applicability to the private sector and on a wide range of projects;key figures, diagrams and frameworks you can build on and apply to your estimates.

1

Developing the
estimating plan

This section sets out what needs to be in place to construct a valid cost estimate: an understanding of who it is for, its scope, the information required and who needs to be involved. The degree of planning required will be scalable and flexible depending on the purpose of the estimate and the likely value or the strategic importance of the project, e.g. multiple conceptual studies for comparison purposes will not be planned with the same level of detail as an estimate committing multi-billions of pounds.

Estimates are based on whatever data is available, produced by using a range of tools, techniques and expertise. Estimating is an iterative process and estimates should be refined throughout the project life cycle as information matures and evolves. See Figure 0.1: Estimating framework.

1.1 Stakeholder engagement and mobilisation

1.1.1 Stakeholder commitment

The first activity in creating any cost estimate is to identify and engage with key stakeholders of the estimate to define their interests and roles. Roles are often identified using the RACI methodology, which classifies them as responsible, accountable, consult and inform. This will normally include senior management, the estimate owner or other people of influence over the estimating requirements. There are significant benefits to engaging with this group early, such as ensuring there is enough senior commitment to the process and requirements, and gaining an early understanding of the true objectives of the estimate to plan the estimating strategy.

1.1.2 Responsibility assignment matrix (RAM)

The responsibilities for the work can be documented using a responsibility assignment matrix (RAM) which is a “diagram or chart showing assigned responsibilities for elements of work” – (APM, 2019). For estimating, the focus should be on what the roles and responsibilities are to support the estimating process and who is to provide the appropriate information.

The estimating RAM will be an extension of the organisation or project RAM. It is a key document that needs to be collated or defined as early as possible, and needs to consider the estimating activities and support of estimating specific to the cost estimate. The RAM will identify all stakeholders who are considered responsible or accountable. These stakeholders may include technical leads, engineers, project managers, schedulers, risk managers, finance, commercial, and senior organisation and project leaders. Essentially, this means anyone impacted by the estimate, who has any data, information, interest or influence over the estimate.

1.1.3 Interpretation of stakeholder objectives and targets

One of the benefits of engaging early with key stakeholders is to understand the overarching objectives of the estimate, including its intended use and the audience to which the estimate will be presented. In addition, this is an opportunity to identify key dates, resource limitations, operating assumptions and other influences that may limit or assist the estimating process. For example, it enables the estimator to test the knowledge, understanding and interpretation of the intended requirements with key stakeholders.

1.2 Understanding the estimate scope

1.2.1 Scoping the estimate

The scope of the estimate can be determined using a blend of methods appropriate for the estimate purpose. Initially a product, service, work or organisational breakdown structure (PBS/SBS/WBS/OBS) can be used to understand the broad scope of the estimate. Depending on the purpose for which the estimate is required, requirements definition documents can be used to understand the scope. In conjunction with stakeholder validation, a picture can be compiled describing the purpose of the estimate and how best to approach its creation. For a simple estimate, this pictorial view may be sufficient. However, for more complex projects or products, with many interfaces and dependencies, a more formalised method may be required. This could include systems engineering and enterprise architecture methods, both of which are powerful tools to help define the scope. The drawback with these methods is that they are labour intensive so need to be tailored to the size and complexity of the estimate.

In addition to the basic scope it is essential to understand and capture the assumptions that underpin it, any internal or external dependencies, risks, opportunities and exclusions. This can be referred to as ADORE, (Shermon D, 2017).

Assumptions: The assumptions underpinning the estimate need to be determined up front. These will be documented, which will help to clarify areas of uncertainty in the scope of the estimate. Assumptions are statements that are taken to be true for the purpose of the estimate but may be unknown in reality, and are used to bound uncertainty in the estimate. For example, the level of future escalation may be unknown, but an agreed rate of escalation might be used. The project or organisation should have a method of capturing assumptions; there will usually be a master data assumptions list (MDAL) or a cost data and assumptions list (CDAL). These need to be closely managed and maintained within the wider assumptions management process.

Dependencies: These are a special class of assumptions that require prior information or an activity to have been completed in order for the estimate to be valid. For example, if an activity is scheduled to be completed on a specific date, and requires delivery of a product or information, in an agreed condition, then failure to meet this requirement may affect the cost and/or schedule.

Dependencies can take many forms and a structured approach is needed to ensure no key issues are missed. Frameworks such as PESTLE (political, economic, social, technological, legal and environmental) are used, but dependencies can often include the transactional supply of information or goods. These may apply to a greater or lesser extent depending on the estimate purpose or scope. Once the dependencies have been identified, they can be treated as interfaces and managed accordingly. It is important to define what impact these dependencies have on the estimate and process, including whether the cost of these interfaces should be captured within the estimate.

Particular consideration should be given to external dependencies between the contractor and the client/customer organisations, as well as those situations outside the control of both organisations, but which impact on the validity of the cost estimate assumptions. In these circumstances, it is advisable that there are appropriate contractual arrangements that define the responsibilities and expectations, and any recourse mechanisms.

If the dependencies are internal to the contractor organisation, or within their sphere of control through the supply chain, then such dependencies might be better considered as risks or opportunities to the project. Their potential effects might then be reflected in the schedule critical path and any consequential impacts evaluated in terms of cost and schedule performance.

Opportunities and Risks: A risk is something that may or may not occur but if it does occur, it is detrimental to the project. An opportunity is a positive risk; i.e. if it does occur it is beneficial to the project. NB: some organisations define a risk as negative, whereas others see it as positive or negative, and refer to a negative risk as a threat.

There are two types of risks and opportunities that need to be considered: those that impact on the project, and those that impact on the development of the estimate. The latter is concerned with the risks and opportunities of conducting the estimating process, including the assumed scope of work. As an example, a risk in this area could mean that a team is incorrectly sized for the level of work expected.

Exclusions: These are a specific type of assumption which state that the activity or event are out of the project’s scope for the purpose of the estimate.

Any exclusions to the estimate are just as important as the inclusions and dependencies. Exclusion to the estimate could be made for a variety of reasons, including accounting, commercial or technical reasons. For each exclusion, it is important to identify the authority for that exclusion and ensure that they understand the reasons for the decision.

The scope of the estimating, including the ADORE list, should be shared and discussed with all stakeholders, giving them the opportunity to review and comment before the estimate is generated. This should avoid criticism of the cost estimate when completed.

1.2.2 Understanding the estimate maturity requirements

Maturity refers to the robustness of the estimating practices used to develop the estimate, including the data sources, tools, people and processes employed. In general, mature estimates are expected to be more accurate than immature estimates, although the robustness of the data can affect the precision. Precision is expressed using three points: the minimum, most likely, and maximum; this is known as a 3-point estimate. The term minimum does not necessarily refer to the absolute minimum value, but a credible (evidence-based) minimum – i.e. the true value is unlikely to be less than the stated minimum. The same applies for maximum, but at the other end of the distribution.

The maturity requirement of an estimate is predominantly driven by the intended use of the estimate. If the estimate is needed for a budget, then human nature is to look for ...