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Job Aid: Estimating Project Costs and Durations

There are three main methods for estimating project costs and timeframe: analogous estimating, parametric estimating, and bottom-up estimating.

Method type Description Advantages Disadvantages

Analogous estimating Use estimates from a Quick and easy to carry out. Small differences between
previous, similar project as the projects being compared
the basis for your current may result in inaccurate
one. estimates.

Parametric estimating Use similar, repeatable More accurate than Changing one variable will
variables to estimate the analogous estimating. impact others.
project duration or cost.
Once you know precisely the
duration or cost of one
variable, then scale it up for
the project as a whole.

Bottom-up estimating Divide the project into small, The most accurate method; Very time-consuming to
manageable activities or useful for larger or more carry out.
deliverables. Then create an complex projects.
estimate for each activity or
deliverable and add up all
the individual estimates to
get your total project
estimate.

Once you’ve estimated the duration for each project task or deliverable, determine the flow of activities using a project network diagram. Then enter the durations beside each
task and add up the durations in each path. The path with the highest total duration is the critical path, which is also the total length of the project.

Next, create your schedule. Start by adding start and finish dates for each activity, and add the project start date to the first activity. You then have two options. You can either
use a calendar to figure out what task should be completed on each succeeding date or use project management software that will automatically fill in each subsequent task’s
start and finish date.

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To get your project budget, calculate a contingency reserve for each task. Add the contingency reserve to the original estimate to get a total for each task. Finally, aggregate all
work activity totals to calculate the total project budget.

Example
Here's an example of a cost breakdown for a project to build of a new equipment storage site for a construction firm. The project must be completed in 20 weeks; the due date
that has been established is August 6.

Cost baseline for new factory build project

Work activity Start date Cost Contingency Total

reserves

Request bids from March 21 $3,000 $150 $3,150

contractors

Complete contract April 1 $1,000 $50 $1,050

Consents April 7 $10,000 $500 $10,500

Preliminary design April 14 $4,000 $200 $4,200

Construction design April 19 $8,000 $400 $8,400

Foundation July 27 $35,000 $1,750 $36,750

Walls and roof August 2 $90,000 $4,500 $94,500

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Work activity Start date Cost Contingency Total

reserves

Internal August 4 $50,000 $2,500 $52,500

construction

Total cost   $201,000 $10,050 $211,050

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