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COMMERCE 4KF3 Lecture Notes - Planning Horizon, Function Point, Work Breakdown Structure


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Steve Way

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Chapter 5: Estimating Project Times and Costs
Page 1 of 10
Lecture Notes
Importance of Estimates
Support good decisions
Schedule work
o Make sure your team members can take on added work of project
Determine length of project and costs
o Projects can be cancelled because of lack of funds
Determine worth of project
Develop cash flow needs
Determine progress of project
Develop time-based budgets and establish project baseline
Factors Influencing Quality of Estimates
Planning horizon
o The farther away the deadline, the more uncertainty
Project duration
o People are hard to predict
o The number of people
o The skills people have
Project structure and organization
Padding estimates
Organizational culture
Other factors
Estimating Guidelines for Times, Costs, and Resources
Use several people to estimate
Normal conditions
Time units
o Plan your projects as if all of the task are separate and independent regardless
of if one might get backed up
Adding risk assessment to avoid surprises
o Most likely scenario vs. least likely scenario

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Chapter 5: Estimating Project Times and Costs
Page 2 of 10
Top-Down vs. Bottom-Up
Top-Down Approaches
Consensus Methods
Ratio Methods
Apportion Methods
Function Point Methods for Software and System Projects
Learning Curves See Appendix 5.1
Bottom-Up Approaches
Template approaches
Parametric procedures applied to specific tasks
Range estimating
Hybrid Approach
Phase Estimating
Types of Costs
Direct Costs
Direct Project Overhead Costs
General and Administrative Overhead Costs
Refining Estimates
Interaction costs hidden in estimates
Normal conditions do not apply
Things go wrong on projects
Changes in project scope and plans
Learning Curves
Each time the output quantity doubles, the unit labour hours are reduced at a constant
Studies have shown that human performance usually improves when a task is repeated

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Chapter 5: Estimating Project Times and Costs
Page 3 of 10
In general, performance improves by a fixed percentage each time production doubles
More specifically, each time the output doubles, the worker hours per unit decrease to a
fixed percentage of their previous value
That percentage is called the learning rate
The project manager should take the learning rate into account for any task where
labour is significant
Reading Notes
Estimating: the process of forecasting or approximating the time and cost of completing
project deliverables
o Top-down (senior management) or bottom-up (workers)
Project estimating becomes a trade-off, balancing the benefits of better accuracy against
the costs for securing increased accuracy
Factors Influencing the Quality of Estimates
Past experience is a good starting point for developing time and cost constraints
A typical statement in the field is to have a 95% probability of meeting time and cost
a) Planning Horizon
Estimates of current events are close to 100% accurate but are reduced for more
distant events
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