PTM Phase 3 – Estimating Resources

Submitted by coleen.yan@edd… on Wed, 07/27/2022 - 13:20

Resources required for a project vary depending on the size and type, but they usually include people, materials, equipment, funding, facilities and supplies. In this project time management (PTM) phase, you need to estimate the type and amount of resources required throughout the project’s life cycle.

The required deliverables from this phase are the documentation of the estimated resources and the project budget or cost breakdown. An RBS may also be prepared. Because there is a direct link between the amount of work needed and the time that this work may take, there may be an overlap for cost estimation between Phase 3 and Phase 4: Costs estimated in Phase 3 may be confirmed in Phase 4.

By the end of this topic, you will understand:

Phase 3 inputs and outputs
Commonly used estimating methods
Documentation for project resources and cost estimates.

Sub Topics

Inputs used for resource estimation include:

Activity list
Activity attributes
Project risk register (prepared during Phase 2 of the project management process)
Resource calendars (calendars showing the availability of key project team members, contractors, etc.; equipment, facilities, etc.)
Activity cost estimates where available
Relevant organisation processes and preferences
Items/assets available within the organisation.

Outputs of resource estimation include the type, number and skill level of human resources, facilities for the team, and equipment and supplies for the work. This information is needed to estimate costs and durations for each activity.

Tips for resource estimation:

For projects involving new technology or where the organisation has less experience, brainstorm alternative approaches, such as finding new ways of doing something, determining the best mix of resources and skill sets or procuring deliverables instead of developing them in-house.
Document any assumptions made for estimations along with the basis on which estimates were made.
Some industries publish guides for costs or labour that can be useful input for tasks such as construction and renovation.

The five most commonly used methods for estimating work time include:

A diagram depicting estimating work time

Bottom-up estimating

Larger tasks are broken or decomposed into detailed, smaller tasks or activities, and the time needed to complete each one is estimated. The estimation from each task is then totalled for the whole plan.

This method is often used when the requirements for discrete, smaller work tasks are known and added together for the whole project.

The commitment from the people to meet timelines relies on team members feeling free to negotiate and accurately estimate a time that is fair and reasonable, rather than have the time forced on them.

Advantages	Disadvantages
The estimate of time for each smaller task is likely to be more accurate than analogous or parametric estimates It can be used in any industry People in the project feel involved, take ownership and are more likely to commit in full as they work on their small part of the whole to confirm their estimates	People in the project feel involved, take ownership and are more likely to commit in full as they work on their small part of the whole to confirm their estimates The project manager needs to wait until they know who will be on the project team before starting bottom-up estimating The underlying assumption is the project consists of the sum of all the tasks. Integration of tasks or overarching tasks may be ignored The cost estimation is based on the duration estimation – both rely on resourcing. An error in resourcing estimation would flow over to inaccurate time and cost estimates

Advantages

Disadvantages

The estimate of time for each smaller task is likely to be more accurate than analogous or parametric estimates
It can be used in any industry
People in the project feel involved, take ownership and are more likely to commit in full as they work on their small part of the whole to confirm their estimates

People in the project feel involved, take ownership and are more likely to commit in full as they work on their small part of the whole to confirm their estimates
The project manager needs to wait until they know who will be on the project team before starting bottom-up estimating
The underlying assumption is the project consists of the sum of all the tasks. Integration of tasks or overarching tasks may be ignored
The cost estimation is based on the duration estimation – both rely on resourcing. An error in resourcing estimation would flow over to inaccurate time and cost estimates

Top-down estimating

Major elements of the projects are identified, and an estimate of the work and resourcing for each is made, enabling the development of an overview of the expected timeline.

Then high-level chunks are estimated and decomposed into smaller chunks or work packets with estimated times based on information from previous similar tasks or projects, experiences or expert judgement.

Data from completed projects, including mitigated and unmitigated risks and scope creep, is considered. This minimises the risk of overlooking costs, resources or work activities.

Top-down estimates are generally used in the initial stages of a project until the WBS are clearly set down, and schedules and budgets are then clearly defined from this.

This method is often used in tandem with bottom-up estimating. Where the results of these two techniques agree, a level of confidence in the accuracy of the estimates by the project sponsor and other persons involved usually occurs.

Advantages	Disadvantages
Useful for an overview of estimates, strategic decision making and in the initial stages of projects to develop accurate duration and cost estimates, where the information to make informed decisions is not available Useful for validation purposes Generally, it takes less time and effort to produce	Tasks are not clearly defined Less reliable duration and cost estimates

Analogous estimating

Analogous estimation is when the time it took to complete a similar task/s in another project or how a problem was dealt with is used to estimate the time for the current situation. It compares current projects with past projects to estimate time and cost.

The project manager’s and team’s experience and judgment are used to estimate time and cost.

It is a common technique during the initial stages of a project

Advantages	Disadvantages
Simple, fast and quick technique without the heavy amount of calculations Less costly and not time-consuming Accurate—it is based on historical data from previous projects an organisation may have been involved in Useful for projects where estimates are required, but there is not an abundance of information, and decisions have to be made on whether a project is worth undertaking	Project manager does not record the cost, duration and other project parameters at the end of the project Less accurate than other techniques

business woman sitting at desk working with computer

Parametric estimating

Estimating time is based on previous experience, available data, metrics and statistics. Parametric estimating uses the relationship between variables to calculate the cost or duration.

It enables tracking the final estimate and how it might change depending on the initial parameters. It also helps to analyse the estimated deviation from the average to see its effect.

The parametric estimate is determined by taking one deliverable (the unit cost or duration) and multiplying it by the number of units (deliverables) required for the project or activity.

There are often published rates for specific tasks that project managers might use. This is common in the construction industry

Advantages	Disadvantages
More accurate than analogous estimation Less impact on the project	Published rates may not be widely accepted or published The measurement must be scalable to be accurate Time-consuming as a need to calculate units

Three-point estimating or PERT (Program Evaluation and Review Technique)

Three-point estimating is a technique where three estimates are calculated:

Optimistic –for the best scenario or the fastest an activity can be completed
Pessimistic –for the worst scenario, that is the longest time for the activity or the amount of work if the negative factors were taken into account
Most Likely –for the most likely case or the required delivery date (or BG – Best Guess).

Team members provide their best guess for all three – optimistic, pessimistic and most likely for their deliverables.

Estimated time is calculated using the 3-point formula: E = (O + ML + P)/3

E = Expected amount of time or cost,
O = Optimistic estimate
ML = Most likely estimate
P = Pessimistic estimate.

The formula for calculating the weighted mean or PERT estimate is E = (O + 4ML + P)/6

This reflects the amount of risk in the task and the severity of the impact of the optimistic and pessimistic risks.
The four is derived as there is more chance of the most likely happening.
Dividing by 6 to find the average is arrived at by adding the 4 from the ML and the 2 other parts of the formula (P and O)

If the variance is to be calculated, the formula used is P – O/6

Once each task has a time value, they are added up for the whole project

Advantages	Disadvantages
Provides increased accuracy over a one-point estimate The estimate considers the risk in the task or activity and therefore provides a better commitment from team members – shows the project manager and team have considered the amount of time the task will take, given there are risks involved Provides useful information concerning risk for each task and enables an opportunity for corrective action before work on the task commencing	May provide inaccurate estimates if the assumptions the data is based on are inaccurate, or the information is subjective Can be time-consuming as it is quite detailed Can be confusing if different people see optimistic, most likely and pessimistic in different ways Requires detailed information that may not be available at the beginning of the project Often the duration is underestimated rather than accurately estimated or overestimated, leading to project problems such as project falling behind, or budget being unable to cope with extended deadlines or increased resourcing

Advantages

Disadvantages

Provides increased accuracy over a one-point estimate
The estimate considers the risk in the task or activity and therefore provides a better commitment from team members – shows the project manager and team have considered the amount of time the task will take, given there are risks involved
Provides useful information concerning risk for each task and enables an opportunity for corrective action before work on the task commencing

May provide inaccurate estimates if the assumptions the data is based on are inaccurate, or the information is subjective
Can be time-consuming as it is quite detailed
Can be confusing if different people see optimistic, most likely and pessimistic in different ways
Requires detailed information that may not be available at the beginning of the project
Often the duration is underestimated rather than accurately estimated or overestimated, leading to project problems such as project falling behind, or budget being unable to cope with extended deadlines or increased resourcing

Resource

Read the following article to learn more about estimating time accurately in a project:

‘Estimating Time Accurately’ from Mind Tools

Documentation produced in Phase 3 in PTM includes:

An LRC or RACI chart
An RBS
A budget or cost breakdown for the project.

LRC and RACI Charts

Watch

Similarities between the LRC and RACI charts are explained in the following two videos:

‘What Is a Linear Responsibility Chart? PM in Under 5’ by Online PM Courses - Mike Clayton on YouTube.

‘What Is a RACI Chart? Project Management in Under 5’ by Online PM Courses – Mike Clayton on YouTube.

Resource Breakdown Structures (RBS)

An RBS lists all required resources, numbered to match the work breakdown structure (WBS). It can be developed using word processing or project management software.

Preparing an RBS can help you to check that all resources have been determined for all required project tasks.

Resource

Visit the following links to read about estimating resources:

‘Estimate Activity Resources’ from Project Management Knowledge

‘Estimate Activity Resources’ from O’Reilly Media

‘Activity Resource Estimating [Process]’ from Project Management Knowledge

‘Activity Resource Estimation Outputs for the PMP Certification Exam’ from Dummies

Having estimated the required resources, you are ready to estimate project costs. Additional information may come from estimating activity durations in PTM Phase 4.

Watch

Watch the following video for information on estimating project costs:

‘How to Estimate Project Costs: A Method for Cost Estimation’ by Online PM Courses - Mike Clayton on YouTube.

Estimating methods

There are six methods for estimating project costs:

Method	Description
Order of magnitude	Analyse tasks starting with the most detailed and estimate the completion time.
Past projects	Use past projects or experience to develop a rough estimate of the expected timeline This method can be compared with bottom-up estimating.
Parametric estimating	Use timings from similar tasks on other projects to estimate timings for the current project.
Bids, tenders, contracts	Estimate the time required to complete one deliverable or piece of work and multiply this by the number of deliverables involved.
Catalogues and pricing schedules	Calculate the best-case, worst-case and most likely estimate. Although this involves three estimations, it can be used to determine realistic expectations.
A sample, pilot or prototype	Base the estimate on the costs of resources used for the sample. This method may need contingency.

Tips for estimating costs:

Always add a contingency – look at different work streams and levels of uncertainty and add relevant contingencies in different places.
Remember to include the cost of your work as project manager.
Build a cash flow and perhaps a business case when you have all the estimating information.

Activity 4A: Estimating activity resources for FF

Case study

Families First Relocation Project – Part 4

The Families First (FF) director has approved your network diagram. You have agreed to estimate the resources needed for the relocation and discuss these with her at your next meeting.

Read the case study ‘Families First Relocation Project – Part 4’. In a separate document or on a piece of paper, prepare the following for review and approval by the FF director:

An LRC or RACI chart
A project budget.

Activity 4B: Estimating activity resources for your project

In a separate document or on a piece of paper, prepare the following for your project from previous learning activities:

An LRC or RACI chart
A project budget or cost breakdown structure.

Module Linking

M00316A

M00316ACL

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