CHAPTER 5:

Estimating Project Times

and Costs

5-1
Estimating Projects

5-2
 Objectives
 Estimate Project Time and Costs
 Identify
Critical factors that Influence Project
Time and Costs
 Develop Top-Down and Bottom-Up Estimates for
a Project
 IdentifyDifferent Types of Costs Associated
With a Project
 Refine Time and Cost Estimates of a Project

5-3
 Estimating Project Times and Costs
 Estimating
 The process of forecasting or approximating the time
and cost of completing project deliverables
 The task of balancing the expectations of stakeholders
and the need for control while the project is implemented

 Types of Estimates
 Top-down (macro) estimates: Done by senior
management; derive estimates from analogy, group
consensus, or mathematical relationships
 Bottom-up (micro) estimates: Done by functional
management; based on estimates of elements of the
work breakdown structure

5-4
 Importance of Time and Cost Estimation
• Estimates are needed to support good decisions.
• Estimates are needed to schedule work.
• Estimates are needed to determine how long the project
should take and its cost.
• Estimates are needed to determine whether the project is
worth doing.
• Estimates are needed to develop cash flow needs.
• Estimates are needed to determine how well the project is
progressing.
• Estimates are needed to develop time-phased budgets and
establish the project baseline.
EXHIBIT 5.1
5-5
Dilbert Corner

Estimating
Database
Templates
FIGURE 5.7

5-6
 Estimation and Trade-Off
 All stakeholders prefer accurate cost and time
estimates. But uncertainty is associated with each
estimate.
 Inaccurate estimates lead to false expectations and
client’s dissatisfaction.
 Accuracy can be improved by applying greater effort
that means costs.
 So, trade-off between benefits of better accuracy and
cost for improving accuracy needs to be done.

5-7
Accuracy of Estimating

5-8
 Estimation
 Cost, time, and budget estimates are used for
controlling the project.
 Estimates serve as the standard for comparison of
actual and plan throughout the life of the project.
 Project status reports depend on reliable estimates as
the major input for measuring variances and taking
corrective action.
 PM and other stakeholders including customer would
prefer to have a database of detailed schedule and cost
estimates for every work package in the project.

5-9
 Factors Influencing Estimation
 Past experience is a good starting point for developing
time and cost estimates.
 But estimates based on past experiences must be
always refined by other considerations to reach
satisfactory level.
 Factors related to the uniqueness of the project
(project, people, external factors, etc.) will have a
strong influence on the accuracy of estimates.
 Estimation is a complex process. But considering the
influencing factors can improve the accuracy of
estimation.

5-10
Factors Influencing the Quality of Estimates

Planning
Horizon

Other (Nonproject) Project

Factors Duration

Quality of
Organization Estimates People
Culture

Padding Project Structure

Estimates and Organization

5-11
 Planning Horizon
 Quality of the estimates depends on planning horizon.
 Estimates of the current events are close to 100%
accurate but are reduced for more distant events.
 For example, cost estimate of a party that would be
organized this weekend will be much more than a cost
estimate of a wedding that will take place after six
months.
 The accuracy of time and cost estimates would improve
as the project moves from conceptual phase to the point
where work packages are defined.
 Long-duration projects increase the uncertainty in
estimates.
5-12
 Project Duration, People
Project Duration:
 Usually errors in estimates are much higher in for long-
duration projects than in small-duration projects.
Sometimes, poorly written project scope specifications
results in errors in estimating times and costs.

People:
 The people factor can influence the quality of time and
cost estimates. For example, accuracy of estimates
depends on the skills of the people making the
estimates.

5-13
 Project Structure and Organization
 The type of project structure for managing projects
influences the time and cost estimates.

 Cost and time estimates made in a dedicated team

structure are highly accurate because of concentrated
focus and localized decision making. But, this accuracy
comes at the cost of tying up personnel full time.

 Project operating in a matrix environment may produce

less accurate estimates as it takes longer time to
complete projects but reduce costs by more efficiently
sharing resources.

5-14
 Padding Estimates
 In some cases, people are inclined to pad estimates.
 In case of project, little padding is done to increase the
probability of achieving the target and reduce the risk. If
everyone at all levels of the project adds a little padding
to reduce risk, the project duration and cost are
seriously overstated.
 This phenomena causes some PMs to call for a 10-
15% cut in time and/or cost for the project. But
sometimes, this might lead the estimator to pad the
estimate next time by 20% or more.

5-15
 Organization Culture
 Organization culture can significantly influence project
estimates.

 In some organizations, padding estimates is tolerated

and even encouraged. They believe detailed estimating
takes too much time and it is not worth the effort.

 Others, place a premium on accuracy and padding is

discouraged. They subscribe to the belief that accurate
estimates are very important and necessary for
effective project management.

5-16
 Other Factors
 Non-project factors also can impact the time and cost
estimates.

 Equipment down-time can alter time estimates.

 Holidays, vacations, legal matters, political situations,

etc. can influence project estimates.

 Project priority can influence resource assignment and

impact time and cost.

5-17
 Project Estimation
 Project estimating is a complex process. The quality of
time and cost estimates can be improved when the
variables that have just been discussed are considered
in making the estimates.

 Estimates of time and cost together allow the project

manager to develop a time-phased budget, which is
imperative for project control.

5-18
 Estimating Guidelines for Times, Costs,
and Resources
 It is imperative that time, cost, and resource estimate
must be accurate for effective project management
(planning, scheduling, and controlling).
 Poor estimates are a major contributor for project
failure.
 Therefore, every effort should be made to see that
initial estimate are as accurate as possible.
 Though every project has its own uniqueness, PM can
follow seven guidelines to develop useful work
package estimates.

5-19
 Estimating Guidelines for Times,
Costs, and Resources
1. Have people familiar with the tasks make the estimate.
2. Use several people to make estimates.
3. Base estimates on normal conditions, efficient
methods, and a normal level of resources.
4. Use consistent time units in estimating task times.
5. Treat each task as independent, don’t aggregate.
6. Don’t make allowances for contingencies.
7. Adding a risk assessment helps avoid surprises to
stakeholders.

5-20
 Responsibility
 Estimates should be made by person(s) most familiar and
experienced with the task.
 The people responsible for getting the job done on schedule
and within budget are usually first-line supervisors or
technicians.
 These people will not have some preconceived, imposed
duration for a deliverable in mind. They will give estimate
based on experience and best judgment.
 Moreover, they will “buy in” to seeing that the estimate
materializes when they implement the task.
 Finally, drawing on the expertise of team members who will
be responsible helps to build communication channels early.

5-21
 Use Several People to Estimate
 A reasonable and realistic time estimate can be made
when several people with relevant experience and/or
knowledge about the task are used in estimation.

 Each people bring different biases based on his/her

experience. Discussion of the individual differences in
their estimate leads to consensus and tends to
eliminate extreme estimate errors.

5-22
 Normal Conditions
 Estimates should be based on normal conditions,
efficient methods, and a normal level of resources.
 It is necessary to have a consensus in the organization
as to what normal conditions mean in a particular
project (eight hour shift, two shifts per day, usual level
of resources, etc.)
 Time and cost estimates should be based on normal
levels of resources available for the project.
 Possible conflict in demand for resources on parallel or
concurrent activities should not be considered in
estimation.
5-23
 Time Units
 Specific time units to be used should be selected in the
early stage. All task time estimates need consistent
time units.

 Estimates of time must consider whether normal time is

represented by calendar days, work days, workweeks,
person days, single shift, hours, minutes, etc.

 If the standard unit of time is a five-day work week and

the estimated activity duration is in calendar days, it
must be converted to the normal workweek.

5-24
 Independence
 Estimators should treat each task as independent of other
tasks that might be integrated by the WBS. Use of first-line
managers in estimation usually results in considering tasks
independently.
 Top managers are prone to aggregate many tasks into one
time estimate.
 If tasks are in a chain, it is best not to ask for all the time
estimates in the sequence at once to avoid the tendency to
look at the whole path at a time. This is done so that
uncertainties of individual activities are reflected in the time
estimates.
 Each time estimate should be considered independently of
other activities.

5-25
 Contingencies
 Work package estimates should not include allowances
for contingencies.

 The estimate should assume normal or average

conditions though every work package will not
materialize as planned.

 For this, top management needs to create an extra fund

for contingencies that can be used to cover unforeseen
events.

5-26
 Adding Risk Assessment
 Adding risk assessment to the estimate helps to avoid
surprise to stakeholders. It is obvious that some tasks
carry more time and cost risks than others.

 Simply identifying the degree of risk lets stakeholders

consider alternative methods and alter process
decisions.

 A simple breakdown by optimistic, most likely, and

pessimistic for task time could provide valuable
information regarding time and cost.

5-27
Dilbert Corner

Estimating
Database
Templates
FIGURE 5.7

5-28
 Top Down Vs Bottom Up
Top Down Bottom Up
This is derived from someone who This is derived from someone who
uses experience and information for has the actual experience of the
estimate task
These estimates are sometimes These estimates are made by front-
made by top managers line managers
These estimates are not done at the These estimates are done at the
work package level work package level
As these estimates come from the These estimates provides
top, these can influence people customers with an opportunity to
responsible to do what it takes to compare the low-cost, efficient
make the estimate method approach with any imposed
restrictions
Usually, these estimates are less Generally, these estimates are more
accurate accurate

5-29
Macro versus Micro Estimating
Conditions for Preferring Top-Down or Bottom-Up
Time and Cost Estimates

Condition Macro Estimates Micro

Estimates
Strategic decision making X
Cost and time important X
High uncertainty X
Internal, small project X
Fixed-price contract X
Customer wants details X
Unstable scope X
TABLE 5.1 5-30
 Estimating Projects:
Preferred Approach
 Make rough top-down estimates
 Develop the WBS/OBS
 Make bottom-up estimates
 Develop schedules and budgets
 Reconciledifferences between top-down
and bottom-up estimates

5-31
Methods for Estimating Project Times and Costs
 Macro (Top-Down) Approaches: This method is used
at the strategic level to evaluate proposals. As in the
initial phase, much information are not available for
accurate estimates, top-down methods are used.
 Consensus methods
Project Estimate
 Ratio methods Times
Costs
 Apportion method
 Function point methods
for software and
system projects
 Learning curves
5-32
Consensus methods:
 It uses the pooled experience of top and/or middle managers to
estimate time and cost.
 This typically involves a meeting where experts discuss, argue,
and ultimately reach a decision. Delphi method can also be
applied here.
 These estimates are only a rough-cut, occur in the conceptual
stage, and are helpful for initial development of a complete plan.
 These initial estimates are helpful in determining whether the
project warrants more formal planning.
 Such estimates are sometimes significantly off the mark. That’s
why these estimates should not be dictated to lower level
managers for acceptance.

5-33
Ratio methods:
 In this method, ratios are used to estimate project time
and cost.
 For example, contractors often used number of square
feet to estimate time and cost to build a house.
 Two other common examples are the cost for a new
plant estimated by capacity size, or a software product
estimated by features and complexity.
 This method is often used in the “concept” or “need”
phase of a project to get an initial time and cost
estimate.

5-34
Apportion methods:
 It is an extension to the ratio method. It is used when
projects closely follow past projects in features and costs.
 This method is very common in projects that are relatively
standard but have some small variation or customization.
 In this method, estimates can be made quickly with little
effort and reasonable accuracy using historical data.
 An analogous process is used by some companies that
apportion costs to deliverables in the WBS.

5-35
Example of Apportion methods:
 Anyone who has borrowed money from a bank to build a
house has been exposed to this process.
 Given an estimated total cost for the house, banks and the
FHA (Federal Housing Authority) authorize pay to the
contractor by completion of specific segments of the house.
 For example, foundation might represent 3 percent of the
total loan, framing 25 percent, electric, plumbing and
heating 15 percent, etc. Payments are made as these
items are completed.
 An analogous process is used by some companies that
apportion costs to deliverables in the WBS—given average
cost percentages from past projects.

5-36
Apportion Method of Allocating
Project Costs Using the Work
Breakdown Structure

FIGURE 5.1

5-37
Function point methods for Software and System
Projects:
 In the software industry, projects are frequently estimated using
weighted macro variables called “function points” or major
parameters such as # of inputs, # of outputs, # of inquiries, # of
data files, and # of interfaces.
 These weighted variables are adjusted for a complexity factor
and added.
 The total adjusted count provides the basis for estimating the
labor effort and cost for a project (usually using a regression
formula derived from data of past projects)
 Accuracy depends on adequate historical data, currency/unit of
data, and relevancy of the project/deliverable to past averages.

5-38
Example of Function point methods for Software and
System Projects:
 This method assumes adequate historical data by type
of software project for the industry-for example, MIS
systems.
 In the U.S. software industry, one-person month
represents on average five function points. A person
working one month can generate on average (across all
types of software projects) about five function points.
 Of course each organization needs to develop its own
average for its specific type of work. Such historical
data provide a basis for estimating the project duration.

5-39
Simplified Basic Function Point Count
Process for a Prospective Project or
Deliverable

TABLE 5.2

5-40
 Example:
Function Point Count Method

TABLE 5.3

5-41
Learning Curves:
 Some projects require that the same task, group of tasks, or
product be repeated several times. It is very common that the
time to perform a task improves with repetition.
 This phenomena is especially true for labor intensive tasks. In
these circumstances the pattern of improvement phenomenon
can be used to predict the reduction in time to perform the task.
 From empirical studies across all industries, the pattern of this
improvement has been quantified in the learning curve.
 As the difficulty level decreases, the expected improvement
also decreases. Proportion of physical labor in the task in
relation to machine-paced work needs to be considered.

5-42
Learning Curves:

5-43
Methods for Estimating Project
Times and Costs (cont’d)
 Micro (Bottom-Up) Approaches
 Template method
 Parametric procedures applied
to specific tasks
 Detailed estimates for the WBS
work packages
 Phase estimating: A hybrid

5-44
Template Methods:
 If the new project is similar to past projects, the costs from past
projects can be used as a starting point.
 Differences in the new project can be noted and past times and
costs adjusted to reflect these differences.
 For example, a ship repair dry-dock firm has a set of standard
repair projects (i.e., templates for overhaul, electrical, mechanical)
that are used as starting points for estimating the cost and duration
of any new project. Differences from the appropriate standardized
project are noted (for times, costs, and resources) and changes are
made.
 This approach helps to develop a potential schedule, estimate
costs, and a budget in a very short time span.
 Development of such templates in a database can quickly reduce
estimate errors.

5-45
Parametric Procedures Applied to Specific Tasks:
 This is similar to ratio methods for top-down approach.
Here, the technique is applied to specific tasks.

 For example, as part of an MS Office conversion

project, 36 different computer workstations needed
to be converted. Based on past projects, the PM
determined that on average one person could
convert 3 workstations per day. Therefore the task
of converting the 36 workstations would take 3
technicians 4 days.

5-46
Range Estimating:
 Range estimating works best when work packages have significant
uncertainty associated with the time and cost to complete the project. In
that scenario, it is a prudent policy to require three estimates – low,
average, and high. The low to high give a range within which the average
estimate will fall.
 Determining the low and high estimates is influenced by factors such as
complexity, technology, newness, familiarity, etc.
 Low, average, and high estimates determined by a cross functional group
may give best results. Group estimating tends to refine extremes by
bringing more evaluative judgments to the estimate and potential risks.
 Group range estimates gives the PM and owner an opportunity to assess
the confidence associated with time and cost.
 This approach helps to reduce surprise as project progresses and also
provides a basis for assessing risk, managing resources, and determining
the contingency fund.

5-47
SB45 Support Cost Estimate Worksheet

FIGURE 5.2

5-48
A Hybrid: Phase Estimating:
 This approach starts with a top-down estimate for the project and
then refines estimates for phases of the project (aerospace projects,
IT projects, New technology projects, Construction projects)
 It is used when an unusual amount of uncertainty surrounds a
project and it is impractical to estimate time and cost for the entire
project.
 It uses a two-estimate system. A detailed estimate is developed for
the immediate phase and a macro estimate is made for the
remaining phases.
 It is preferred by those working on projects where the final product is
not known and the uncertainty is very large. By phase estimating,
commitment to unrealistic future schedules and costs based on poor
information is avoided.

5-49
Benefits and Limitations of Phase Estimating:
 This progressive macro/micro method provides a
stronger basis for using estimate to manage progress
during each phase.
 But, project’s customer usually want an accurate
estimate at the very beginning. Moreover, the customer
may perceive phase estimate as a blank check as the
estimates are not firm.
 On the other hand, a major advantage for the customer
is the opportunity to change features, re-evaluate, or
even cancel the project in each new phase.

5-50
Phase Estimating Over Project Life Cycle:

5-51
Top-Down VS Bottom-Up

5-52
 Project Scope Management

6.3 Activity Duration Estimating

Inputs Tools and Outputs
1. Enterprise environmental Techniques 1.Act. duration
factors
1.Expert judgment estimates.
2. Organizational process assets
3. Project Scope Statement
2. Analogous est. 2. Activity
4. Activity List 3. Parametric Est. attributes
5. Activity Attributes 4. Three Point Est.* (updates)
6. Activity Res. Req. . 5. Reserve Analysis
7. Resource Calendar *Most Likely, Pess, Opt.
8. Project Management Plan
9. Risk Register – Cost est.

5-53
 Level of Detail
 Level of detail is different for different levels of management.
 Level of detail should be no more than is necessary and
sufficient.
 Level of detail in the WBS varies with the complexity of the
project, the need for control, the project size, cost, duration,
etc.
 Excessive detail is costly.
 Fosters a focus on departmental outcomes
 Creates unproductive paperwork
 Insufficient detail is costly.
 Lack of focus on goals
 Wasted effort on nonessential activities
 Participating units may expand their portion to meet
special needs.
5-54
 Level of Detail…..
 Top management – Interests usually center on the total
project and major milestone event that mark major
accomplishments.
 Middle management – Interests might center on one
segment of the project or one milestone.
 First line management – Interests may be limited to one
task or work package.

One of the beauties of WBS is the ability to aggregate

network information so each level of management can
have the information necessary for decision-making.

5-55
Three Views of Cost

FIGURE 5.5

5-56
 Types of Costs
 Direct Costs
 Costs that are clearly chargeable to a specific
work package.
o Labor, materials, equipment, and other
 Direct (Project) Overhead Costs
 Costs incurred that are directly tied to an
identifiable project deliverable or work package.
o Salary, rents, supplies, specialized machinery
 General and Administrative Overhead Costs
 Organization costs indirectly linked to a specific
package that are apportioned to the project

5-57
Contract Bid Summary Costs

Direct costs $80,000

Direct overhead $20,000
G&A overhead (20%) $20,000
Profit (20%) $24,000
Total bid $144,000

FIGURE 5.6

5-58
 Refining Estimates
 Detailed work package estimates are aggregated and “rolled up”
by deliverable to estimate the total direct cost of the project.
 Similarly, estimated durations are entered into the project network
to establish the project schedule and determine the overall
duration of the project.
 In many projects, the total estimates do not materialize and the
actual costs and schedule of some projects significantly exceed
original work package based estimates.
 Some project managers refine/adjust total costs by some multiplier
(i.e., total estimated costs * 1.20).
 There are a number of reasons for refining estimate and can be
traced to the estimating process and the inherent uncertainty of
predicting the future.

5-59
 Refining Estimates
 Reasons for Adjusting Estimates
 Interactioncosts are hidden in estimates.
 Normal conditions do not apply.
 Things go wrong on projects.
 Changes in project scope and plans.
 Overly optimistic
 Strategic misrepresentation

 Adjusting Estimates
 Time and cost estimates of specific activities are
adjusted as the risks, resources, and situation
particulars become more clearly defined.

5-60
 Interaction costs are hidden in estimates
 Each task estimate is supposed to be done independently.
 However, tasks are rarely completed in a vacuum. Work on
one task is dependent upon prior tasks, and the hand-offs
between tasks require time and attention.
 For example, people working on prototype development
need to interact with design engineers after the design is
completed, whether to simply ask clarifying questions or to
make adjustments in the original design.
 Similarly, the time necessary to coordinate activities is
typically not reflected in independent estimates.
 Time, and therefore cost, devoted to managing interactions
rises exponentially as the number of people and different
disciplines involved increases on a project.

5-61
 Normal conditions do not apply
 Estimates are supposed to be based on normal
conditions. But, it rarely holds true in real life.
 This is especially true when it comes to the availability
of resources. Resource shortages, whether in the form
of people, equipment, or materials, can extend original
estimates.
 For example, under normal conditions four bulldozers
are typically used to clear a certain site size in five days,
but the availability of only three bulldozers would extend
the task duration to eight days.

5-62
 Things go wrong on projects
 As one gets further and further into the project, a PM
obtains a better understanding of what needs to be
done to accomplish the project.
 This may lead to major changes in project plans and
costs.
 Unstable project scopes are a major source of cost
overruns.
 While every effort should be made up front to nail down
the project scope, it is becoming increasingly difficult to
do so in the rapidly changing world.

5-63
 Changes in project scope and plans
 Design flaws are revealed during the implementation
phase, extreme weather conditions occur, accidents
happen, and so forth.
 Although when estimating a particular task, it is not
planned that these risks would occur but the likelihood
and impact of such events need to be considered.

5-64
 Overly optimistic
 There is solid research indicating that there is a
tendency in people to overestimate how quickly they
can get things done and underestimate how long it will
take them to complete tasks.
 This would be especially true in organizational cultures
where padding is not the norm.

5-65
 Strategic misrepresentation
 There is growing evidence that some project promoters
underestimate the costs of projects and overestimate
project benefits in order to win approval.
 This appears to be particularly true for large-scale public
works projects which have a notorious habit of coming
in way over budget.

5-66
 Refining Estimates (cont’d)
 Contingency Funds and Time Buffers
 Are created independently to offset uncertainty
 Reduce the likelihood of cost and completion time
overruns for a project
 Can be added to the overall project or to specific
activities or work packages
 Can be determined from previous similar projects

 Changing Baseline Schedule and Budget

 Unforeseenevents may dictate a reformulation of the
budget and schedule.

5-67
 Summary of Refining Estimates
 The reality is that for many projects not all of the information
needed to make accurate estimates is available, and it is
impossible to predict the future.
 The challenge is further compounded by human nature and
the political dynamics associated with gaining project
approval.
 The dilemma is that without solid estimates, the credibility of
the project plan is eroded.
 Effective organizations adjust estimates of specific tasks
once risks, resources, and particulars of the situation have
been more clearly defined.
 Estimates generated from a detailed estimate based on the
WBS are just the starting point.

5-68
 Adjusting Estimates
 For example, when PM realize that only three instead of four
bulldozers are available to clear a site, he/she adjusts both
the time and cost of that activity.
 Estimates are adjusted to account for specific actions to
mitigate potential risks on the project.
 For example, to reduce the chances of design code errors,
the cost of independent testers are added to the schedule
and budget.
 Finally, organizations adjust estimates to take into account
abnormal conditions.
 For example, if soil samples reveal excessive ground water,
then foundation costs and times are adjusted.

5-69
 Creating a Database For Estimating
 The best way to improve estimates is to collect and archive
data on past project estimates and actual. Saving historical
data—estimates and actual—provides a knowledge base for
improving project time and cost estimating.
 Some organizations have large estimating departments of
professional estimators—e.g., Boeing, IBM—that have
developed large time and cost databases.
 Others collect these data through the project office. This
database approach allows the project estimator to select a
specific work package item from the database for inclusion.
 The estimator then makes any necessary adjustments
concerning the materials, labor, and equipment.
 The quality of the database estimates depends on the
experience of the estimators, but over time the data quality
should improve.
5-70
Creating a Database for Estimating

Estimating
Database
Templates

FIGURE 5.7

5-71
Dilbert Corner

5-72
 Key Terms
Apportionment methods Overhead costs
Bottom-up estimates Padding estimates
Contingency funds Phase estimating
Ratio methods
Delphi method
Template method
Direct costs Time and cost
Function points databases
Interaction costs Top-down estimates
Learning curves

5-73
 Problem 5.1
Mrs. Tolstoy and her husband, Serge, are planning
their dream house. The lot for the house sits high
on a hill with a beautiful view of the Appalachian
Mountains. The plans for the house show the size of
the house to be 2,900 square feet. The average price
for a lot and house similar to this one has been $120
per square foot. Fortunately, Serge is a retired
plumber and feels he can save money by installing
the plumbing himself. Mrs. Tolstoy feels she can
take care of the interior decorating.

5-74
 Problem 5.1
What is the estimated cost for the Tolstoy’s house if
they use contractors to complete all of the house?
 
Estimated total cost for the house is $348,000 (2,900 sq. ft.
x $120 per foot).

5-75
 Problem 5.1
Estimate what the cost of the house would be if the
Tolstoys use their talents to do some of the work
themselves.
 24 % Excavation and framing complete
 8 % Roof and fireplace complete
 3 % Wiring roughed in
 6 % Plumbing roughed in
 5 % Siding on
 17 % Windows, insulation, walks, plaster, and garage complete
 9 % Furnace installed
 4 % Plumbing fixtures installed
 10 % Exterior paint, light fixtures installed, finish hardware installed
 6 % Carpet and trim installed
 4 % Interior decorating
 4 % Floors laid and finished

5-76
 Problem 5.1
Estimate what the cost of the house would be if the
Tolstoys use their talents to do some of the work
themselves.
Estimated savings of Serge’s plumbing work and Mrs. Tolstoy’s interior
decorating:
 Plumbing roughed in 6% x $348,000 = $20,880
Plumbing fixtures installed 4% x $348,000 = $13,920
Interior decorating 4% x $348,000 = $13,920
Total saving = $48,720
 
Estimated total cost for the completed house using their talents is
$299,280 ($348,000 - $48,720).

5-77
 Problem 5.1
Below is a project WBS with cost apportioned by percents. If the total project cost
is estimated to be $600,000, what are the estimated costs for the following
deliverables?
 

5-78
 Problem 5.1
Below is a project WBS with cost apportioned by percents. If the total
project cost is estimated to be $600,000, what are the estimated costs
for the following deliverables?

What weaknesses are inherent in this estimating approach?

 
a. Requires good, realistic historical data.
b. If total cost estimate is off, all other costs will be off.
c. Project must be very similar to past projects for subdeliverables to be useful.

5-79