Seminar V Estimating Project Times and Costs

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
1) The process of forecasting or approximating the time and cost of completing project
deliverables is called

A) budgeting.
B) predicting.
C) estimating.
D) planning.
E) guesstimating.

2) In practice, estimating processes are frequently classified as

A) top down/bottom up.

B) rough/polished.
C) precise/order of magnitude.
D) draft/final.
E) broad/specific.

3) What is the relationship between organizational culture and estimating?

A) There is no relationship.
B) Cultural norms affect the accuracy of estimates.
C) Culture determines whether estimates are made.
D) Estimating alters cultural norms.
E) Estimating and culture are independent.

Version 1 1
4) A good starting point for developing time and cost estimates is

A) past experience.
B) work packages.
C) task analysis.
D) time and motion studies.
E) work breakdown structure.

5) Which of the following is NOT one of the factors that need to be considered to improve
quality of estimates for project times and costs?

A) planning horizon
B) people
C) padding estimates
D) profit
E) project structure

6) A project manager is looking over the actual results of projects and comparing them to
what was estimated. She notices that the projects that took six months or longer to complete were
noticeably more off the estimates. Which of the following factors is she recognizing?

A) Padding estimates
B) Planning horizon
C) Project structure
D) People

Version 1 2
 E) Organization culture

7) A project leader is forecasting how much money his department needs to support a new
project. He estimates that two people and $25,000 in expenses will cover his needs. Because
management typically insists on reducing forecasts by 20 percent, he increases his estimates to
allow for that reduction. Which of the following factors is illustrated in this situation?

A) Padding estimates
B) Planning horizon
C) Project structure
D) People
E) Organization culture

8) Which of the following is a good condition for top-down estimating?

A) Cost and time important

B) Fixed price contract
C) Customer wants details
D) Internal, small project
E) Large scale project involving several subcontractors

9) Which of the following is a good condition for bottom-up estimating?

A) When the project involves strategic decision making

B) When the project is internal and small
C) When there is a fixed price contract

Version 1 3
 D) When there is high uncertainty involved in the project
E) When there is an unstable scope

10) A home builder is collecting estimates for a house that he will have the funding to build
in 12 months. Which of the following factors does he need to consider in regard to the quality of
these estimates?

A) Padding estimates
B) Planning horizon
C) Project structure
D) People
E) Project duration

11) Which of the following does NOT help describe a bottom-up estimating approach?

A) They are made by someone who uses experience and/or information from someone
else to determine overall project cost and duration.
B) They establish low-cost, efficient methods for completing activities.
C) They typically come from the people actually doing the work and who are most
knowledgeable about the task at hand.
D) Estimates are made at the work package level and then "rolled up" to determine
estimates for major deliverables and for the project itself.
E) They can take place after the project has been planned in detail.

12) Which of the following methods is NOT considered a top-down approach to estimating
project time and cost?

Version 1 4
 A) Ratio
B) Template - Template methods are used in bottom-up approach to estimating.
C) Apportion
D) Function point
E) Learning curve

13) A construction estimator is forecasting project time and cost for constructing a new
building by multiplying the total square footage by a given dollar amount. Which of the
following methods is he using?

A) Ratio
B) Template
C) Apportion
D) Function point
E) Learning curve

14) A project manager is forecasting the time and cost of developing a customized software
program by looking at the number of inputs, outputs, inquiries, files, and interfaces. Which of the
following methods is he using?

A) Ratio
B) Template
C) Apportion
D) Function point
E) Learning curve

Version 1 5
15) A project leader is estimating the time and cost of developing an intranet for a new
customer. Her department has completed six such intranets for customers during the last two
years. Although the proposed system is about the same size as the others, she estimates that it
will take about 10 percent less time and money. Which of the following methods is she using?

A) Ratio
B) Template
C) Apportion
D) Function point
E) Learning curve

16) Learning curves are more likely to be applied in situations where most of the costs are

A) materials.
B) labor.
C) overhead.
D) evenly spread over materials, labor, and overhead.
E) labor and materials.

17) Which of the following describes the consensus method?

A) Should be used only for projects that require the same task, group of tasks, or
product to be repeated several times
B) Uses several people with relevant experience regarding the task at hand to make time
and cost estimates
C) Uses pooled experience of senior and/or middle managers to estimate the total
project duration and cost
D) Uses the number of square feet to estimate the total cost and time of the project
E) Uses weighted macro variables or major parameters such as the number of inputs or
outputs to estimate the total cost and time of the project

Version 1 6
18) Which of the following is NOT one of the bottom-up approaches to estimating project
time and cost?

A) Parametric procedures applied to specific tasks

B) Estimates for the WBS work packages
C) Learning curve
D) Template method
E) Range estimates

19) Which of the following would be the best method for projects where the final product is
not known and the uncertainty is very large?

A) Function point
B) Template
C) Learning curve
D) Phase estimating
E) Apportion

20) A scrum master is responsible for estimating a work package that has a significant
amount of uncertainty associated with the time and cost to complete. Due to the uncertainty
involved he will be making a low, an average and a high estimate. He is using which estimating
approach?

A) Parametric procedures applied to specific tasks

B) Template method
C) Apportion method
D) Range estimating

Version 1 7
 E) Learning curve

21) Which of the following is NOT true in regard to the level of detail estimates should
contain?

A) It will vary with the complexity of the project.

B) Detailed estimates are crucial to project success; therefore, an effort should be made
to make estimates as detailed as possible for all projects.
C) The more detailed the estimate is the more the estimate will cost to create.
D) Inadequate detail might lead to estimates that fall short of their intended purpose.
E) Excessive detail means unproductive paperwork and unnecessary expenditures.

22) The salary of the project manager would be an example of what type of cost found in a
project?

A) Labor
B) Direct
C) Direct project overhead
D) General and administrative overhead
E) Salary

23) Typical kinds of costs found in a project include all of the following EXCEPT

A) direct costs.
B) project overhead costs.
C) general and administrative overhead costs.

Version 1 8
 D) labor.
E) All of these are examples of costs found in a project.

24) Accounting would be an example of which of the following costs typically found in a
project?

A) Labor
B) Direct
C) Direct project overhead
D) General and administrative overhead
E) Salary

25) Which of the following would best represent direct project costs?

A) Only labor
B) Only materials
C) Only equipment
D) Both labor and materials
E) Labor, materials and equipment

26) Which of the following is NOT one of the recommended guidelines for developing useful
work package estimates?

A) Estimates should be made by those responsible for the work.

B) Use several people to estimate the same work.
C) Estimates should be based on normal conditions.

Version 1 9
 D) Estimates should include a normal level of contingency.
E) Estimates should be independent of other projects.

27) Companies are using which of the following for improving the estimating process for
future projects?

A) Adjusting estimates based on individual forecasting abilities

B) Benchmarking and using the experience of other companies
C) Using time and motion studies
D) Creating historical databases of previous projects
E) Establishing an estimating training course for all employees

28) Reasons why estimating time and cost are important include all of the following
EXCEPT

A) to schedule work.
B) to determine how long the project should take and cost.
C) to develop cash flow needs.
D) to determine how well the project is progressing.
E) to help establish a project selection process.

29) The bottom-up approach for estimating times and costs that uses costs from past projects
that were similar to the current project is known as

A) detailed WBS work package estimates.

B) template method.

Version 1 10
 C) function point method.
D) time-phased cost estimates.
E) phase estimating.

30) Which of the following top-down methods is used when projects closely follow past
projects in regard to features and costs of those features, and result in costs being assigned by
percentages to major segments of the project?

A) Apportion
B) Function point
C) Phase estimating
D) Learning curve
E) Consensus

31) Refining estimates may be necessary for a number of reasons. For example, resource
shortages, in the form of people, equipment, or materials, can extend original estimates. This is a
good example of

A) hidden interaction costs.

B) things going wrong on a project.
C) normal conditions not applying.
D) changes in project scope.
E) the customer not being clear about their expectations.

32) Refining estimates may be necessary for a number of reasons. For example, people
working on prototype development needing time to interact with the design engineers after the
design is completed is a good example of

Version 1 11
 A) hidden interaction costs.
B) things going wrong on a project.
C) normal conditions not applying.
D) changes in project scope.
E) the customer not being clear about their expectations.

33) Refining Estimates may be necessary for a number of reasons. For example, a manager
getting further into a project and obtaining a better understanding of what needs to be done to
accomplish a project and meet the needs of the customer is an example of

A) hidden interaction costs.

B) things going wrong on a project.
C) normal conditions not applying.
D) changes in project scope.
E) there is never a good reason to refine estimates.

34) Refining estimates may be necessary for a number of reasons. For example, design flaws
being revealed after the fact, extreme weather conditions, and accidents occurring are good
examples of

A) hidden interaction costs.

B) things going wrong on a project.
C) changes in project scope.
D) normal conditions not applying.
E) uncertain, unstable requirements.

Version 1 12
35) Large projects that have long time horizons and a very high complexity can be referred to
as

A) mega projects.
B) high risk.
C) white elephants.
D) mega projects or white elephants.
E) None of these alternatives is correct.

36) While it may be true that Mega Projects are by nature extremely difficult to estimate,
another factor identified in the consistent pattern of estimating difficulties is:

A) unidentified risks.
B) deception.
C) economic downturn.
D) Both unidentified risks and economic downturn.
E) None of these alternatives is correct.

37) An external view of a Mega Project based upon the outcome of similar projects
undertaken in the past is known as:

A) Pareto Charting.
B) The Monte Carlo Method.
C) Reference Class Forecasting.
D) Big Data Analysis.
E) White elephant.

Version 1 13
38) Benefits of Reference Class Forecasting include

A) acts as a reality check.

B) helps to avoid unsound optimism.
C) provides a basis for contingency funds.
D) leads to improved accountability.
E) All of these alternatives are correct.

39) The pattern of improvement identified from a worker having performed a task multiple
times is known as a

A) reduced failure rate.

B) optimistic estimate.
C) learning curve.
D) successive improvement.
E) both reduced failure rate and successive improvement.

40) Estimating can be challenged by

A) human nature.
B) political dynamics.
C) difficulty in predicting the future.
D) size of the project.
E) All of these alternatives are correct.

Version 1 14
41) When work package estimates are made by individuals most knowledgeable about the
work being performed and these estimates are then "rolled up" to find estimated costs for major
deliverables and the project itself, ____________ estimating is being used.

A) top-down
B) analogous
C) bottom-up
D) reference class
E) professional estimation

42) When someone uses experience and/or information from others to determine the project
duration and total cost, ____________ estimating is being used.

A) top-down
B) experiential
C) bottom-up
D) reference class
E) professional estimation

43) The estimating factor that considers the decreasing accuracy of estimates as one forecasts
activities that are further into the future is known as ____________.

A) project complexity
B) planning horizon
C) people
D) organizational culture
E) padding estimates

Version 1 15
44) The estimating factor that considers the skill level of participants doing the estimating is
known as the ___________ factor.

A) project complexity
B) planning horizon
C) people
D) organizational culture
E) padding estimates

45) The estimating factor that considers the tendency to overestimate project time and cost in
order to improve the likelihood of meeting the estimates is known as the ___________ factor.

A) project complexity
B) planning horizon
C) people
D) organizational culture
E) padding estimates

46) The estimating factor that considers the prevailing belief in some firms that detailed
estimating takes too much time and is not worth the effort is an example of the ___________
factor.

A) project complexity
B) planning horizon
C) people
D) organizational culture

Version 1 16
 E) padding estimates

47) The preferred method for situations involving strategic decision making, projects with a
high degree of uncertainty, and projects with an unstable scope is the ___________ approach to
estimating project time and costs.

A) top-down
B) experiential
C) bottom-up
D) reference class
E) professional estimation

48) The preferred method for situations where the cost and time estimates are important, in a
fixed contract situation, and when the customer wants a lot of detail is the ___________
approach to estimating project time and costs.

A) top-down
B) experiential
C) bottom-up
D) reference class
E) professional estimation

49) The information necessary to conduct a bottom-up estimate of project time and cost starts
with the ___________.

Version 1 17
 A) level 4 elements of the WBS
B) milestones
C) work package
D) planning horizon
E) level 5 elements of the PBS

50) Project managers typically use ________, also called analogous estimating or the ______
method when there is a past history of similar projects and rough-cut estimates are needed for
strategic purposes two-to-five years out because, as estimating methods go, it is faster and less
expensive.

A) top-down, apportion
B) bottom-up, range estimating
C) bottom-up, learning curve
D) top-down, phase estimating
E) top-down, range estimating

51) A project estimator is working on estimates for a project that is very similar to a previous
project, in that it has many of the same features and those features have similar costs. Each
feature or deliverable will represent the same percentage of the total cost as it did for the
previous project. He is using the _________ method of top-down estimating.

A) ratio
B) consensus
C) apportion
D) function point
E) learning curves

Version 1 18
52) The top-down method for estimating project time and cost that uses weighted variables
based on major parameters and is frequently used in the development of software is known as the
____________ method.

A) ratio
B) consensus
C) apportion
D) function point
E) learning curves

53) The top-down method of estimating project time and costs that is useful for projects
requiring the same task, group of tasks, or product repeated several times, especially if it is labor
intensive, is the ______________.

A) ratio
B) consensus
C) apportion
D) function point
E) learning curves

54) The bottom-up method of estimating where work package time and costs for past projects
are used as a starting point for a new project and adjustments are made based on differences in
the new project is known as the ___________.

A) range estimating
B) parametric procedure
C) template method
D) phase estimating method
E) WBS method

Version 1 19
55) The top-down method of estimating when the pooled experience of senior and/or middle
managers are used to estimate the total project duration and cost is the _________ method.

A) ratio
B) consensus
C) apportion
D) function point
E) learning curves

56) The approach to estimating project time and cost that begins with an overall estimate for
the project and then refines estimates for various stages of the project as it is implemented is
known as ____________.

A) range estimating
B) parametric procedure
C) template method
D) phase estimating method
E) WBS method

57) The estimating approach that is best to use on projects where there is an unusual amount
of uncertainty surrounding the project and when it is impractical to estimate times and costs for
the entire project is known as ___________.

A) range estimating
B) parametric procedure
C) template method
D) phase estimating method

Version 1 20
 E) WBS method

58) A way to improve estimates on future projects is to collect and archive data on past
project estimates and actuals. Creating ___________ for estimating is a way to achieve this goal.

A) time and cost databases

B) history databases
C) estimating and forecasting databases
D) structured databases
E) Any of these alternatives are correct.

59) Project costs such as labor and materials are typically classified as ___________ costs.

A) general and administrative overhead

B) direct
C) direct project overhead
D) fixed
E) interaction

60) The salary of the project manager and temporary rental space for the project team would
be classified as __________ costs.

A) general and administrative overhead

B) direct
C) direct project overhead
D) fixed

Version 1 21
 E) interaction

61) Estimates should be made based on ___________ conditions, efficient methods, and a
normal level of resources.

A) abnormal
B) above normal
C) standard
D) normal
E) average

62) Costs that are associated with time devoted to the coordination in meetings and briefings
as well as time necessary to resolve disconnects between tasks are known as ____________
costs.

A) direct
B) interaction
C) general and administrative (G&A) overhead costs
D) things go wrong
E) coordination

63) Costs that are not directly related to a specific project, such as advertising, accounting,
and senior management's salary, are classified as _____________ costs.

A) general and administrative overhead

B) direct

Version 1 22
 C) direct project overhead
D) fixed
E) coordination

64) A(n) __________ is something that is a valuable but burdensome possession.

A) mega-project
B) white elephant
C) yacht
D) vacation home
E) concorde

65) Mega projects are large-scale, complex ventures that typically cost _______ or more and
take many ______ to complete.

A) $1 million, months
B) $10 million, quarters
C) $1 billion, years
D) $10 billion, years
E) $500,000, months

66) Consider a five-mile-long railroad tunnel. Tunnel experts and advocates estimate the total
cost to be $200 million. What is the reference class for this project? But reference class projects
in this area have been over-budget by 30%. So, what should the actual revised budget number be
for this proposed five-mile tunnel project?

Version 1 23
 A) Past bridge projects, $230 million
B) Past tunnel projects, $260 million
C) Past highway projects, $200 million
D) Past building projects, $230 million
E) Past construction projects, $230 million

67) The best way to __________________ is to collect and archive data on past projects.

A) train estimators
B) assist project managers
C) improve estimates
D) forecast project duration
E) estimate project costs

68) Top-down methods are used for all but which of the following intended usages?

A) Feasibility/conceptual phase
B) Rough time/cost estimate
C) Budgeting and scheduling
D) Fund requirements
E) Resource capacity planning

PART II

SHORT ANSWER. Write the word or phrase that best completes each statement or
answers the question.
1) Identify and briefly describe the two major classifications of estimating project time and
cost

Version 1 24
Top-Down -> made by top management

Bottom-Up -> made work package level workers

2) List and briefly describe four reasons why estimating time and cost are important to
project management

 support good decisions

 schedule work
 to determine how long the project should take and its cost
 to determine whether the project is worth doing

3) Identify and briefly describe three out of the six factors that should be considered to
improve the quality of estimates for project times and costs.

 Planning horizon;
 Project duration;
 People;

4) Under what conditions would the top-down approach to estimating project times and
costs be the best choice?

 high uncertainty
 small internal projects,
 projects with an unstable scope.

5) Under what conditions would the bottom-up approach to estimating project times and
costs be the best choice?

 low-cost
 efficient estimates are needed

Version 1 25
  time and cost are important
 working on a fixed price contract
 the customer wants detail

6) Describe the ideal approach for a project manager to develop optimal estimates for a
project's time and costs.

Estimating project costs is one of the most fundamental components of the project management
process. If inaccurately measured, the project will soon find itself riddled with budgetary constraints and
mis-allocated resources. The best practices often come from those who have experienced troubled
projects and can offer first-hand advice.

Plan through completion.

PM must differentiate between "current estimated cost" - project-specific and should be

determined by a project-specific cost risk analysis.

and "cost project to completion" - take into account price escalation and future market
conditions, latent conditions, design error and estimates for the effects of extension of project
time.

Steps. One step at a time

Boston-based Software Product Development Leader Gary Rucinski advises breaking the project
down into three steps, which we translated to be broadly applicable, beyond software projects:

1. Estimate the major modules that need to be developed

Translation: Estimate the major components of the project that need to be produced from scratch
(engineering schematics, design specs, models, published materials, etc.).

2. Find existing software modules with functionality and complexity similar to the modules
required for development

Translation: Find analogous, comparable components from completed projects that have similar
parameters.

3. Use historical data to find out how much the existing modules took to develop or reverse
engineer the cost/effort using a software cost estimation model

Version 1 26
Translation: Almost the same as above - use actual cost and time information from completed
project components to create a model to estimate the resources required for the planned project.

Having a cost model like this would allow you to do "what if" analysis to assess risk, changes in
scope, etc Tap your project peers/expect setbacks.

A PM that does not maximize available information from others working on the project are not
only wasting time estimating costs, but are likely to witness more project setbacks than those
who take advantage of the information from their peers.

7) Estimates should be based on normal conditions, efficient methods, and a normal level of
resources. Explain.

8) Describe phase estimating. When should it be used and how is it different from all other
top-down and bottom-up methods of estimating?

9) Identify the drawbacks to an excessive detail in estimating project times and costs.

10) Identify the three major categories of project costs and give an example of each.

11) List and briefly explain two reasons why estimates may need to be refined.

Version 1 27
12) Beyond scope and complexity, what do mega projects have in common? Name at least
three common characteristics.

13) When is it best to use a top-down estimate? When is a bottom-up estimate most
appropriate?

14) Suppose you have entered into a fixed-price contract and the customer wants details as to
how much each work package will cost, how long each work package will take time wise; in this
case which approach would you use—bottom up or top down and why? Explain.

15) Two to five years prior to actual execution of a project, companies need rough-cut
estimates as to total duration and cost of each of the projects they are considering from a
strategic perspective. For these projects they have prior experience doing similar projects in the
past. Which method will they use—top down or bottom up and why? Explain.

Version 1 28
16) A project to return Americans to the moon has been estimated to cost $100 billion and
take five years to complete, but past similar projects have cost 30% more and taken 20% longer.
What should the revised estimates for cost and time be? Because of the long duration, the effects
of the time value of money should be taken into consideration—what does this do to the
estimated budget and duration. Assume a 3% annual inflation rate.

17) Thinking holistically, suppose a never-before-done project is being estimated in which

there is unstable scope. There is high uncertainty in the duration and cost of each work package.
What impact will this have on the project schedule and budget? A bottom-up detailed estimate of
total project duration, project schedule, project budget and cost is needed immediately prior to
execution of the project. What method will you use, assuming a rough-cut top-down estimate of
duration and cost already has been determined (perhaps months, years ago) for the entire project?

18) Thinking holistically, suppose a new, unique project is being estimated in which there is
unstable scope. There is high uncertainty in the duration and cost of each work package.
Uncertainty as to which work packages to include/exclude is abundant. A project of this type has
never been done before and the customer is uncertain of what they want. There are no previous
similar projects or a history data base of work package durations and costs to work from. Top-
down estimates of total project cost and duration do not exist. You have a dedicated team of ten
seasoned project professionals working for you. You worked hard to develop a well-structured
WBS for the project. Each work package (there are ten) has been assigned (by you as project
manager) to exactly one project professional to develop and complete. You wish to do a bottom-
up definitive determination of overall project duration and cost. The customer wants cost and
duration details. Under such circumstances, how would you proceed? What assumptions would
you have to make? How would you come up with estimates as to duration and cost for each work
package?

Version 1 29
Version 1 30