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Career development 6 Types of Estimation You Can Use in Project

Management

6 Types of Estimation You Can Use

in Project Management
Andrew Juma
Updated February 4, 2023

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Project managers oversee projects from conception

through completion to ensure they succeed. Using project
estimation techniques helps them develop accurate
budgets and proposals. If you're interested in a career as a
project manager , understanding estimation can help
you align and optimize your projects.

In this article, we explain what project estimation is, list six

common project estimation techniques to consider,
discuss what areas you can focus on when developing
estimates and provide the beneAts of doing so.

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What is estimation in project

management?
Project estimation is a method of analyzing data to
develop a forecast of the resources, time or budget a team
might need to complete a project. To do this, they often
start by segmenting their major tasks into smaller ones
and identifying what they need for each task. Project
managers often use these estimates to communicate
expectations with a client, stakeholder or their team. For
example, project managers may create an estimate to
determine how much a project may cost or when they
expect to complete the work.

Developing an estimation also can help project managers

determine the scope of the project to ensure they have
enough resources and set realistic goals. While project
managers typically develop estimates at the beginning of a
project, they may also adjust their estimates throughout
the project life cycle. Project managers also gather
feedback and information from multiple team members to
help them develop more realistic estimates for their
projects.

Related: What Is Project Management? Everything You

Need To Know

6 types of project estimation

techniques
The primary methods you can use for project estimation
include:

1. Bottom-up

The bottom-up approach involves segmenting the entire

project into smaller components and estimating each
individually. This technique begins with creating a list of
every task a team needs to perform to complete a project.
Then, the project manager groups related tasks together
to develop phases and create a realistic timeline. Finally,
the project manager uses this information to establish the
deadline.

They may also use this method to determine what

resources they need for each phase of the project to
complete it successfully. This type of estimation is like a
function point analysis because it considers the amount of
work in each smaller task separately. This process helps to
discover potential problems and bottlenecks early and
create ways to avoid them.

Read more: What Is Bottom-Up Estimating? (And How It

DiLers From Top-Down)

2. Top-down

A top-down estimation establishes the deadline a team

needs to complete a project by Arst. Then, the project
manager reviews the resources they need and the tasks
the team can perform to complete the project. Finally, they
use this information to break the project into smaller
phases. Doing this establishes project milestones to make
it easier to track the team's progress. Project managers
often use the top-down estimation technique if there's a
speciAc date their client needs the project completed. This
approach often includes several estimations, including
requirements, modules and tasks within those modules.

Read more: Top-Down Estimating: DeOnition, BeneOts

and Examples

3. Analogous

The analogous estimation technique is like the top-down

method, but it uses data from previous projects to develop
a more accurate assessment. Some project managers call
this a comparative estimation, and they use this technique
to determine how long a project may take to complete. For
example, if the project they're planning for is like one they
did in the past, they can determine what the average
duration of the previous projects was. They then can apply
that information to the current project to create a realistic
timeline.

Related: Analogous Estimation: DeOnition, Uses and

Examples

4. Parametric

The parametric model also uses past project data, but it

accounts for key diLerences in each project. Although
using this model for large projects may include creating
advanced algorithms, it can provide a more accurate and
eMcient estimation.

For example, if you work for a landscaping company, you

can use the parametric model to determine how many
hours a project may take by identifying the total number of
hours for previous projects and their combined square
footage. Then, you might divide the total number of hours
by the total square footage to determine how long it takes
on average to complete 1 square foot of landscaping. Once
you understand this metric, you can multiply it by the
square footage of future projects to estimate how long
they may take to complete.

Read more: Parametric Estimating in Project

Management (Plus BeneOts)

5. Three-point

Project managers often use three-point estimation with

the bottom-up technique to develop more accurate
estimates. Whereas the bottom-up method focuses on
establishing one estimated outcome, the three-point
method predicts three outcomes, which are the most
optimistic, the most pessimistic and the most likely. For
example, if you're developing an estimate for how soon
your team can complete a project, you might use this
method to establish the soonest possible date, the latest
possible date and the most likely date. Once you
determine what these points are, you can average them to
develop a more accurate estimation and set your deadline.

Read more: Three-Point Estimating: DeOnition, Formula

and Example

6. Expert judgment

Expert judgment estimations rely on the expertise of the

project manager and their team. In these estimations, the
team uses its knowledge and experience to estimate what
they need to complete a project and determine a
reasonable deadline. This estimation technique is popular
with experienced project managers because it can be
simple and fast to use, especially if the project they're
planning is like one they've done before. They also can use
this method with the top-down or bottom-up methods to
create even more accurate estimations.

Related: Top 10 Agile Estimation Techniques (Plus Tips)

What aspects of a project can

you estimate?
Project managers typically assess these areas of a project
when creating accurate estimates:

Cost

Project managers often estimate how much a project may

cost to develop a price quote for the client. This often
comprises the cost to develop, produce and deliver the
product or service, such as labor materials and other
factors. Estimating cost can help inform your budgeting,
planning and decision-making processes. This helps them
establish an accurate budget and ensures they charge
their client the correct amount.

Read more: Project Cost Estimation: 7 Steps for Success

(Plus FAQs)

Time

Estimating how long a project may take to complete can

help project managers develop a project schedule for their
team. It can also help them establish a realistic project
deadline. These estimates can be in hours, days, weeks,
months or years. Project managers use several procedures
to help them estimate time, such as the critical path
method, the critical chain method or other Agile
development methodologies.

Related: What Is a Budget Estimate? (Plus 5 Common

Types and Importance)

Quality

Estimating the level of quality your client expects can help

when determining whether a team might need additional
time, money or resources to meet their requirements. It
also helps determine how much money they can spend on
quality assurance and quality control. Quality estimation is
an important part of business projects because it helps the
project manager make informed decisions. If they're
working on a project that has strict safety or
environmental regulations, estimating the quality level of
the project may be especially important.

Related: Types of Estimators (With Examples and

Applications)

Risk

Risk estimation is identifying and quantifying any risks that

might occur in a project. Risk estimation is the Arst step in
risk management and is a vital part of project planning
because it helps project managers determine how much
time and money to budget for mitigating risks. Project
managers estimate risk by assessing what challenges their
team might encounter throughout the project, which can
help them plan for potential challenges and develop
strategies to overcome them.

Related: What Is Risk Analysis? 6 Steps To Determine a

Project's Risk

Scope

Estimating scope involves looking at the speciAc tasks

your team needs to accomplish to complete the project.
Project managers use the process to determine the size
and complexity of a project and the resources they need to
complete it. This type of estimation also can be useful
when projecting the time and cost of a project. Knowledge
of similar projects and experience with similar
technologies can help when making this estimate because
it can allow project managers to have the right materials
and team members to complete the project successfully.

Related: What Is Project Scope Management? (And Why

It's Important)

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Bene9ts of using estimation

techniques
Developing an accurate project estimation is important
because it can ensure you have the resources, budget and
time to complete it successfully. Understanding how to use
diLerent project estimation techniques can beneAt you by
ensuring you choose the best one for your speciAc
project. Estimations also provide a way of measuring
progress against expectations. If things don't go according
to the original plan, you can make quick changes to ensure
the project stays on schedule. These estimation
techniques also can help:

Assess the cost and scope of a project

Allocate resources successfully

Develop accurate proposals and budgets

Forecast better project deadlines

Communicate expectations with clients

Provide updates for project stakeholders

Business project management occupations

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