Estimating is a way of forecasting cost and time. Estimates are never truly accurate, but we want them to become more accurate the further we get into the project lifecycle. We will carry out estimates for things like, is the project value for money? Is it worthwhile? So, we would need to estimate cost and time. This would be important for our investment appraisals, important for our business case. It's essential for resource scheduling. How much will resources cost? Especially when we need to aggregate resources, add up how many resources we would need for, maybe, a day, a week or a month and calculate how much they would cost. Simply looking at budget, an estimate for cost, can we afford it? An estimate for time, is the timescale realistic? Estimates are never truly accurate but we want them to be as reliable as possible. So, they would be a starting point for risk analysis, for example, contingency plans. If we have a plan in place, something that we're not acting on now but will act on later, is that response proportional? Is it value for money? So, estimates will always be essential to the business case and planning.

Three main ways that we're going to discuss for creating estimates. First one is analogous, or comparative. Comparative estimating relies on projects of a similar nature that you can use as a basis for your current project. It's called analogous because you're relying on some kind of story, some kind of past event. So, it's quick to produce, but you do have to rely on similar projects. And it also relies on experts. The more accurate our source data is, for example, the previous projects, the more accurate our comparative estimating can be.

Parametric. Well, that's all about per metre squared, per unit sold. It's widely respected. It's good for estimating projects of varying sizes. It can also be more accurate when the information, or the source data, has been collected over a long period of time. Making sure we have accurate prices and timings, costs, for example. But again, it does rely on accurate source data and expert knowledge. And analytical, sometimes just called bottom-up.

Analytical is the most accurate but the most time-consuming form of estimating. It relies on an accurate assessment of our work packages. It relies on using the work breakdown structure. We take that work breakdown structure, we look at the lowest level of work packages, and then we estimate for each one working up through the work breakdown structure. Very accurate, very time consuming, relies on expert knowledge. But also, beware of contingency. If you've allowed contingency in each work package, it is quite possible to double up that contingency as you work your way up the work breakdown structure. So, those three areas that we've covered, comparative, parametric and analytical.

Methods of estimating

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