Barbara just received the good news: She was assigned as theproject manager for a project that her company won as part ofcompetitive bidding. Whenever a request for proposal (RFP) comesinto Barbara’s company, a committee composed mainly of seniormanagers reviews the RFP. If the decision is made to bid on thejob, the RFP is turned over to the Proposal Department. Part of theProposal Department is an estimating group that is responsible forestimating all work. If the estimating group has no previoushistory concerning some of the deliverables or work packages and isunsure about the time and cost for the work, the estimating teamwill then ask the functional managers for assistance withestimating. Project managers like Barbara do not often participatein the bidding process. Usually, their first knowledge about theproject comes after the contract is awarded to their company andthey are assigned as the project manager. Some project managers arehighly optimistic and trust the estimates that were submitted inthe bid implicitly unless, of course, a significant span of timehas elapsed between the date of submittal of the proposal and thefinal contract award date. Barbara, however, is somewhatpessimistic. She believes that accepting the estimates as they weresubmitted in the proposal is like playing Russian roulette. Assuch, Barbara prefers to review the estimates. One of the mostcritical work packages in the project was estimated at twelve weeksusing one grade 7 employee full time. Barbara had performed thistask on previous projects and it required one-person full time forfourteen weeks. Barbara asked the estimating group how they arrivedat this estimate. The estimating group responded that they used thethree-point estimate where the optimistic time was four weeks, themost likely time was thirteen weeks, and the pes-simistic time wassixteen weeks. Barbara believed that the three-point estimate wasway off of the mark. The only way that this work package could everbe completed in four weeks would be for a very small projectnowhere near the complexity of Barbara’s project. Therefore, theestimating group was not con-sidering any complexity factors whenusing the three-point estimate. Had the estimating thetriangular distribution where each of the three estimates had anequal likelihood of occurrence, the final estimate would have beenthirteen weeks. This was closer to the fourteen weeks that Barbarathought the work package would take. While a difference of 1 weekseems small, it could have a serious impact on Barbara’s projectand incur penalties for late delivery.
Barbara was now still confused and decided to talk to Peter, theemployee that was assigned to do this task. Barbara had worked withPeter on previous projects. Peter was a grade9 employee andconsidered to be an expert in this work package. As part of thediscussions with Barbara, Peter made the following comments:
I have seen estimating data bases that include this type of workpackage and they all esti-mate the work package at about 14 weeks.I do not understand why our estimating group prefers to use thethree point estimate.
“Does the typical data base account for project complexity whenconsidering the esti-mates?” asked Barbara. Peter responded:
Some data bases have techniques for considering complexity, butmostly they just assume an average complexity level. Whencomplexity is important, as it is in our project, analogyestimating would be better. Using analogy estimating and comparingthe complexity of the work package on this project to the similarworks packages I have completed, I would say that 16–17 weeks iscloser to reality, and let’s hope I do not get removed from theproject to put out a fire somewhere else in the company. That wouldbe terrible. It is impossible for me to get it done in 12 weeks.And adding more people to this work package will not shorten theschedule. It may even make it worse.
Barbara then asked Peter one more question:
Peter, you are a grade 9 and considered as the subject matterexpert. If a grade 7 had been assigned, as the estimating group hadsaid, how long would it have taken the grade 7 to dothe job?
“Probably about 20 weeks or so,” responded Peter.
QUESTIONS
It defines the concept of "managing the costs of aproject", develops its important elements, comments on itsimportance.
What is the problem presented in the case study and whatimplications does it have for the company mentioned in thecase?
What estimation techniques are discussed in the case? Explainthem
What criteria should the project manager use to say which estimateto use?
Argue about what is most important, whether to finish the projectmeeting the objectives set, even if the cost estimates are not met,or whether to meet the costs, even if this represents not meetingany goal, define your answer.
Remember to disclose the references used.
