PM DQR Week 4

In responding to your peers, consider whether one process would result in more accuracy than another and discuss why.

Completing a cost estimate is an important part of ensuring that a project remains on track when it comes to spending. There are several ways to complete a cost estimate including both top-down and bottom-up estimates.

According to the Project Management Institute, “Top-down approach is practical for the initial stage of strategic decision-making and in situations where the information required to develop accurate duration and costs estimates is not available in the initial phase of the project,” (Project Management Institute, 2018). This method looks at an estimated time of how long the project is expected to take, then breaks out each of the various tasks to determine a cost estimate per task. One version of this type of method includes analogous estimating. “Analogous estimating refers to the use of historical information and knowledge from experienced practitioners as a basis for estimating future activities.” (MindEdge, 2014). This includes looking at other similar projects to the one being considered to and utilizing a estimating the time frame based on on that experience. This is a faster way to complete an estimate, especially when the projects are very close in nature. If this is the case, that the estimates can be fairly accurate. There are some downsides to be considered as well, which include having the necessary expertise to compare the projects and their activities. Also, if the project only appear to be similar, but are ultimately not close enough as they progress, the cost estimates can be inaccurate, and should be considered “rough” and adjusted as the project progresses or more information is gathered. (MindEdge Inc, 2014).

Bottom-up cost estimating works in the opposite way of top-down estimating. “Bottom-up estimating compiles costs at the lowest levels of a project and aggregates those costs upwards to estimate the total cost for the project,” (MindEdge Inc, 2014). This method looks at how long each lower level or subtask that is required of the project will take, then roles that up into the overall estimate. It encompasses all aspects of the project. This method tends to be more accurate when teams are developing cost estimate. It utilizes the expertise and knowledge of folks who work closely within the project to get a closer estimate. It also takes into account every individual task or activity, so if the project changes, the estimate can easily be adjusted. (MindEdge Inc, 2014). Although it can take longer to complete and be more time-consuming to create depending on the amount of tasks, it tends to provide more accurate and reliable than top-down estimating.

References:

MindEdge Inc (2014) Project Management, Retrieved from: https://snhu.mindedgeonline.com/content.php?cid=87553

Project Management Institute (2018) Top-Down & Bottom Up Estimate Comparisons, Retrieved from: https://www.projectmanagement.com/wikis/510124/Top-Down—Bottom-Up-Estimates-Comparison-