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Top-Down Estimates

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  1. Estimates worldwide

use the actual cost of a previous, similar project as the basis for estimating the cost of the current project.

Top-Down estimates are most reliable when the previous projects are similar in fact not just in appearance.

This technique requires

l good deal of expert judgment and

l is generally less costly than others are,

l but it is also less accurate.

3.1 Cost Estimating Techniques

Bottom-Up Estimates

Bottom-up estimates involve estimating individual work items or activities and summing them to get project total.

It is some times referred to as Activity Based Costing.

If a detailed WBS is available, the project manager could have each person responsible for a work package

Develop his or her own cost estimate for that work package, or at least an estimate of the amount of resources required.

3.1 Cost Estimating Techniques

Parametric Modeling

Parametric modeling uses project characteristics (parameters) in a mathematical model to estimate project costs.

Parametric models are more complicated and most reliable when

l the historical information that was used to create the model is accurate,

l the model is flexible in terms of the size of the project.

3.1 Cost Estimating Techniques

In practice,many people find that using a combination or hybrid approach involving top-down, bottom-up and/or parametric modeling provides the best estimates.

3.1 Cost Estimating Techniques

Problems with IT Cost Estimates

Estimates are done too quickly

Lack of estimating experience

Human beings are biased toward underestimation

Management desires accuracy

3.1 Cost Estimating Techniques

Sample Cost Estimate

There is a WBS for the project, as shown below:

Project Management

Hardware

Handheld devices

Servers

Software

Licensed software

Software development

Testing

Training and Support

Reserves

3.1 Cost Estimating Techniques

3.2 Cost Budgeting

Project team could use the

l cost estimate,

l project schedule, and

l other information


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