Project Estimation Techniques Business Analysts Should Know About

In developing a business case or a feasibility study, many activities are associated with inherent uncertainties and therefore, estimating the resources required to complete such project activities can be a challenging task for the business analyst.

The uniqueness of the project alone creates the uncertainties that ultimately make the project costs and duration difficult to estimate; this is because each project has different requirements and activities. At the point of project execution, teams can only predict the future by making educated guesses. Wrong estimations mean that deadlines will be missed and budgets broken – both characteristics of failed projects. Great project estimation commonly involves applying one or more techniques in arriving at time and cost estimations, some of which are discussed below:

Expert judgement

Across various fields, expert judgment is a common concept that describes the use of experts to produce valuable information or scientific data. It involves engaging people who understand the project and its deliverables. Another group decision-making technique that can be explored is brainstorming, where team members are directly involved in the estimation of project activities. See Introduction To Expert Judgment for more on this.

Analogous / Top-down estimation

This entails applying the data and the work breakdown structure from past projects, adding the estimates for each high-level work category in the project and also using expert judgment to determine the total costs, time and effort that a project will need. With this technique, you compare the difference between the previous project and the current one to arrive at a comparison factor. This factor for example, can be 0.5, if the current project is assumed to consume half the resources of the previous. This method does not however, provide for a detailed analysis but is suitable for quickly assessing a project’s viability for the very first time.

Bottom-up estimation

This technique uses a work breakdown structure that is more detailed and therefore requires a lot of commitment. It takes a greater amount of detail to produce accurate results. There is an individual assessment of each task and the individual estimates are totalled to give the complete estimation for the project. Estimates are created for each part of the activity, as depicted in the work breakdown structure. Bottom-up estimating can however, take more time and requires that the project be completely defined and well-understood for estimation to be correct.

The more collaborative the exercise is, the higher the quality of estimation that will be produced, as a result.

Parametric estimation

This is a more accurate scientific method which uses detailed data for project estimation. It is applied by auto-calculating estimates with data arrived at from previous projects. It examines the relationships between variables to calculate time or cost estimates – for example time per line of code. The time taken to write one line of code can then be multiplied by the lines of code that need to be written based on comparison with past projects. It is costly and also requires a considerable amount of time to produce accurate estimates.

Understanding how to arrive at time or cost estimations is essential for a business analyst since the amount of resources needed to complete a project can assist stakeholders in making important project decisions.