Chapter5 - MGT 4730 Project Management - Estimating Project Times and Costs

Practice flashcards covering the key concepts of project time and cost estimation, including top-down and bottom-up methods, types of costs, and factors influencing estimate quality.

Estimating

The process of forecasting or approximating the time and cost of completing project deliverables.

Top-down (macro) estimates

Estimates usually derived from analogy, group consensus, or mathematical relationships, often made by top managers with limited knowledge of the processes.

Bottom-up (micro) estimates

Detailed estimates of elements of the work breakdown structure (WBS) derived from people most knowledgeable about the work package level.

Padding Estimates

The practice of adding extra time or cost to an estimate to avoid the risk of being late or exceeding the budget.

Planning Horizon

A factor influencing the quality of estimates based on whether the project tasks are in the near or distant future.

Apportion Method

A top-down approach for allocating project costs using the WBS, where costs are assigned as a percentage of the total project budget (e.g., Design $20\%$, Program $30\%$).

Function point methods

A top-down estimating method used for software and system projects based on the number of inputs, outputs, inquiries, files, and interfaces.

Phase estimating

A hybrid approach that uses a macro estimate for the entire project life cycle while developing detailed (micro) estimates for the immediate phase.

Template methods

A bottom-up method that uses the structure and data from past similar projects as a starting point for current estimates.

Range estimates

A bottom-up technique used for WBS work packages when there is high uncertainty, typically identifying a low, average, and high estimate.

Direct Costs

Costs that are clearly chargeable to a specific work package, including labor, materials, and equipment.

Direct (Project) Overhead Costs

Costs directly tied to an identifiable project deliverable or work package, such as salary, rents, supplies, and specialized machinery.

General and Administrative (G&A) Overhead Costs

Organizational costs indirectly linked to a specific package that are apportioned to the project, such as advertising, accounting, and senior management.

Top-Down Accuracy

This estimating approach typically has an accuracy range of $-20\%$ to $+60\%$.

Bottom-Up Accuracy

This estimating approach typically has an accuracy range of $-10\%$ to $+30\%$.

Top-Down Preparation Cost

The cost to prepare these estimates is typically $1/10$ to $3/10$ of a percent of the total project cost.

Bottom-Up Preparation Cost

The cost to prepare these estimates is typically $3/10$ of a percent to $1.0\%$ of the total project cost.

White Elephant

A term in project management referring to a project that is a burden to its owner and provides little value, despite potential high costs.

Interaction Costs

Hidden costs that are not always apparent in initial estimates and often necessitate refining estimates as the project progresses.