Estimating is one of the most important parts of the planning process. Effort hours (man hours) must be estimated first, before duration and cost estimates can be prepared. Use the following ten steps to estimate effort hours.
1. Determine how accurate your estimate needs to be
Typically, the more accurate the estimate, the more detail you need to understand about the project, and perhaps the more time that is needed. If you are asked for a rough order of magnitude (ROM) estimate (-25% – +75%), you might be able to complete the work quickly, at a high level, and with a minimum amount of detail. On the other hand, if you must provide an accurate estimate within 10%, you need to spend more time and understand the work at a lower level of detail.
2. Create the initial estimate of effort hours
Estimate the work of the project using one or more estimating techniques (analogy, prior history, PERT, modeling, etc.). (These techniques will be described in a separate Tips email).
3. (optional) Factor the effort hours based on the resources assigned
Your estimates are probably based on the effort it will take an average resource to do the work (or perhaps the estimates are based on the effort it would take if you did the work). Sometimes you also have knowledge of the exact resource or the type of resource that will be assigned. If you do, you may want to factor the estimate up or down based on that resource.
4. Add specialist resource hours
Make sure you have included hours for part-time and specialty resources. This could include freelance people, training specialists, administrative help, etc. These are people that may not be obvious at first, but you may need them for special activities. Because they are typically in project support roles, you may have forgotten to include their activities in the original Work Breakdown Structure.
5. (optional) Add rework time
In a perfect world, all project deliverables would be correct the first time. Rework is the result of flaws in your quality management process. It means that a deliverable that you thought was complete turns out to need more work. Some projects add in effort hours for rework, although this should be minimized.
6. Add project management time
Project management takes effort. A rule of thumb is to add 15% of the effort hours for project management. For instance, if a project estimate is 12,000 hours (7 – 8 people), then a full-time project manager (1800 hours) is needed.
7. Add contingency hours
Contingency is used to reflect the uncertainty or risk associated with the estimate. If you are asked to estimate work that is not well defined, you may add 50%, 75% or more to reflect the uncertainty. If the estimate was required on short notice, a large contingency may be required. Even if you have time to create a reasonably accurate estimate, your contingency may still be 10-25%. If you do not add a contingency amount, it would mean that you are 100% confident in your estimate. This may be the case if similar types of projects have been done before.
8. Calculate the total effort
Add up the estimates for all the work components described above.
9. Review and adjust as necessary
Sometimes when you add up all the components, the estimate seems obviously high or low. If your estimate does not look right, go back and make adjustments to your estimating assumptions to better reflect reality.
10. Document all assumptions
You will never know all the details of a project for certain. Therefore, it is important to document all the assumptions you are making along with the estimate.