Estimating Project Times and Cost

Seminar V Estimating Project Times and Costs MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. The process of forecasting or approximating the time and cost of completing project 1) deliverables is called A) B) C) D) E) 2) In practice, estimating processes are frequently classified as A) B) C) D) E) 3) budgeting. predicting. estimating. planning. guesstimating. top down/bottom up. rough/polished. precise/order of magnitude. draft/final. broad/specific. What is the relationship between organizational culture and estimating? A) B) C) D) E) There is no relationship. Cultural norms affect the accuracy of estimates. Culture determines whether estimates are made. Estimating alters cultural norms. Estimating and culture are independent. 4) A good starting point for developing time and cost estimates is A) B) C) D) E) past experience. work packages. task analysis. time and motion studies. work breakdown structure. 5) Which of the following is NOT one of the factors that need to be considered to improve quality of estimates for project times and costs? A) B) C) D) E) planning horizon people padding estimates profit project structure 6) A project manager is looking over the actual results of projects and comparing them to what was estimated. She notices that the projects that took six months or longer to complete were noticeably more off the estimates. Which of the following factors is she recognizing? A) B) C) D) Padding estimates Planning horizon Project structure People E) Organization culture 7) A project leader is forecasting how much money his department needs to support a new project. He estimates that two people and $25,000 in expenses will cover his needs. Because management typically insists on reducing forecasts by 20 percent, he increases his estimates to allow for that reduction. Which of the following factors is illustrated in this situation? A) B) C) D) E) 8) Which of the following is a good condition for top-down estimating? A) B) C) D) E) 9) Padding estimates Planning horizon Project structure People Organization culture Cost and time important Fixed price contract Customer wants details Internal, small project Large scale project involving several subcontractors Which of the following is a good condition for bottom-up estimating? A) When the project involves strategic decision making B) When the project is internal and small C) When there is a fixed price contract D) When there is high uncertainty involved in the project E) When there is an unstable scope 10) A home builder is collecting estimates for a house that he will have the funding to build in 12 months. Which of the following factors does he need to consider in regard to the quality of these estimates? A) B) C) D) E) 11) Padding estimates Planning horizon Project structure People Project duration Which of the following does NOT help describe a bottom-up estimating approach? A) They are made by someone who uses experience and/or information from someone else to determine overall project cost and duration. B) They establish low-cost, efficient methods for completing activities. C) They typically come from the people actually doing the work and who are most knowledgeable about the task at hand. D) Estimates are made at the work package level and then "rolled up" to determine estimates for major deliverables and for the project itself. E) They can take place after the project has been planned in detail. 12) Which of the following methods is NOT considered a top-down approach to estimating project time and cost? A) B) C) D) E) Ratio Template - Template methods are used in bottom-up approach to estimating. Apportion Function point Learning curve 13) A construction estimator is forecasting project time and cost for constructing a new building by multiplying the total square footage by a given dollar amount. Which of the following methods is he using? A) B) C) D) E) Ratio Template Apportion Function point Learning curve 14) A project manager is forecasting the time and cost of developing a customized software program by looking at the number of inputs, outputs, inquiries, files, and interfaces. Which of the following methods is he using? A) B) C) D) E) Ratio Template Apportion Function point Learning curve 15) A project leader is estimating the time and cost of developing an intranet for a new customer. Her department has completed six such intranets for customers during the last two years. Although the proposed system is about the same size as the others, she estimates that it will take about 10 percent less time and money. Which of the following methods is she using? A) B) C) D) E) 16) Learning curves are more likely to be applied in situations where most of the costs are A) B) C) D) E) 17) Ratio Template Apportion Function point Learning curve materials. labor. overhead. evenly spread over materials, labor, and overhead. labor and materials. Which of the following describes the consensus method? A) Should be used only for projects that require the same task, group of tasks, or product to be repeated several times B) Uses several people with relevant experience regarding the task at hand to make time and cost estimates C) Uses pooled experience of senior and/or middle managers to estimate the total project duration and cost D) Uses the number of square feet to estimate the total cost and time of the project E) Uses weighted macro variables or major parameters such as the number of inputs or outputs to estimate the total cost and time of the project 18) Which of the following is NOT one of the bottom-up approaches to estimating project time and cost? A) B) C) D) E) Parametric procedures applied to specific tasks Estimates for the WBS work packages Learning curve Template method Range estimates 19) Which of the following would be the best method for projects where the final product is not known and the uncertainty is very large? A) B) C) D) E) Function point Template Learning curve Phase estimating Apportion 20) A scrum master is responsible for estimating a work package that has a significant amount of uncertainty associated with the time and cost to complete. Due to the uncertainty involved he will be making a low, an average and a high estimate. He is using which estimating approach? A) B) C) D) Parametric procedures applied to specific tasks Template method Apportion method Range estimating E) Learning curve 21) Which of the following is NOT true in regard to the level of detail estimates should contain? A) It will vary with the complexity of the project. B) Detailed estimates are crucial to project success; therefore, an effort should be made to make estimates as detailed as possible for all projects. C) The more detailed the estimate is the more the estimate will cost to create. D) Inadequate detail might lead to estimates that fall short of their intended purpose. E) Excessive detail means unproductive paperwork and unnecessary expenditures. 22) The salary of the project manager would be an example of what type of cost found in a project? A) B) C) D) E) 23) Labor Direct Direct project overhead General and administrative overhead Salary Typical kinds of costs found in a project include all of the following EXCEPT A) direct costs. B) project overhead costs. C) general and administrative overhead costs. D) labor. E) All of these are examples of costs found in a project. Accounting would be an example of which of the following costs typically found in a 24) project? A) B) C) D) E) 25) Labor Direct Direct project overhead General and administrative overhead Salary Which of the following would best represent direct project costs? A) B) C) D) E) Only labor Only materials Only equipment Both labor and materials Labor, materials and equipment 26) Which of the following is NOT one of the recommended guidelines for developing useful work package estimates? A) Estimates should be made by those responsible for the work. B) Use several people to estimate the same work. C) Estimates should be based on normal conditions. D) Estimates should include a normal level of contingency. E) Estimates should be independent of other projects. 27) Companies are using which of the following for improving the estimating process for future projects? A) B) C) D) E) Adjusting estimates based on individual forecasting abilities Benchmarking and using the experience of other companies Using time and motion studies Creating historical databases of previous projects Establishing an estimating training course for all employees 28) Reasons why estimating time and cost are important include all of the following EXCEPT A) B) C) D) E) to schedule work. to determine how long the project should take and cost. to develop cash flow needs. to determine how well the project is progressing. to help establish a project selection process. 29) The bottom-up approach for estimating times and costs that uses costs from past projects that were similar to the current project is known as A) detailed WBS work package estimates. B) template method. C) function point method. D) time-phased cost estimates. E) phase estimating. 30) Which of the following top-down methods is used when projects closely follow past projects in regard to features and costs of those features, and result in costs being assigned by percentages to major segments of the project? A) B) C) D) E) Apportion Function point Phase estimating Learning curve Consensus 31) Refining estimates may be necessary for a number of reasons. For example, resource shortages, in the form of people, equipment, or materials, can extend original estimates. This is a good example of A) B) C) D) E) hidden interaction costs. things going wrong on a project. normal conditions not applying. changes in project scope. the customer not being clear about their expectations. 32) Refining estimates may be necessary for a number of reasons. For example, people working on prototype development needing time to interact with the design engineers after the design is completed is a good example of A) B) C) D) E) hidden interaction costs. things going wrong on a project. normal conditions not applying. changes in project scope. the customer not being clear about their expectations. 33) Refining Estimates may be necessary for a number of reasons. For example, a manager getting further into a project and obtaining a better understanding of what needs to be done to accomplish a project and meet the needs of the customer is an example of A) B) C) D) E) hidden interaction costs. things going wrong on a project. normal conditions not applying. changes in project scope. there is never a good reason to refine estimates. 34) Refining estimates may be necessary for a number of reasons. For example, design flaws being revealed after the fact, extreme weather conditions, and accidents occurring are good examples of A) B) C) D) E) hidden interaction costs. things going wrong on a project. changes in project scope. normal conditions not applying. uncertain, unstable requirements. 35) as Large projects that have long time horizons and a very high complexity can be referred to A) B) C) D) E) mega projects. high risk. white elephants. mega projects or white elephants. None of these alternatives is correct. 36) While it may be true that Mega Projects are by nature extremely difficult to estimate, another factor identified in the consistent pattern of estimating difficulties is: A) B) C) D) E) unidentified risks. deception. economic downturn. Both unidentified risks and economic downturn. None of these alternatives is correct. 37) An external view of a Mega Project based upon the outcome of similar projects undertaken in the past is known as: A) B) C) D) E) Pareto Charting. The Monte Carlo Method. Reference Class Forecasting. Big Data Analysis. White elephant. 38) Benefits of Reference Class Forecasting include A) B) C) D) E) acts as a reality check. helps to avoid unsound optimism. provides a basis for contingency funds. leads to improved accountability. All of these alternatives are correct. The pattern of improvement identified from a worker having performed a task multiple 39) times is known as a A) B) C) D) E) 40) reduced failure rate. optimistic estimate. learning curve. successive improvement. both reduced failure rate and successive improvement. Estimating can be challenged by A) B) C) D) E) human nature. political dynamics. difficulty in predicting the future. size of the project. All of these alternatives are correct. 41) When work package estimates are made by individuals most knowledgeable about the work being performed and these estimates are then "rolled up" to find estimated costs for major deliverables and the project itself, ____________ estimating is being used. A) B) C) D) E) top-down analogous bottom-up reference class professional estimation 42) When someone uses experience and/or information from others to determine the project duration and total cost, ____________ estimating is being used. A) B) C) D) E) top-down experiential bottom-up reference class professional estimation 43) The estimating factor that considers the decreasing accuracy of estimates as one forecasts activities that are further into the future is known as ____________. A) B) C) D) E) project complexity planning horizon people organizational culture padding estimates 44) The estimating factor that considers the skill level of participants doing the estimating is known as the ___________ factor. A) B) C) D) E) project complexity planning horizon people organizational culture padding estimates 45) The estimating factor that considers the tendency to overestimate project time and cost in order to improve the likelihood of meeting the estimates is known as the ___________ factor. A) B) C) D) E) project complexity planning horizon people organizational culture padding estimates 46) The estimating factor that considers the prevailing belief in some firms that detailed estimating takes too much time and is not worth the effort is an example of the ___________ factor. A) B) C) D) project complexity planning horizon people organizational culture E) padding estimates 47) The preferred method for situations involving strategic decision making, projects with a high degree of uncertainty, and projects with an unstable scope is the ___________ approach to estimating project time and costs. A) B) C) D) E) top-down experiential bottom-up reference class professional estimation 48) The preferred method for situations where the cost and time estimates are important, in a fixed contract situation, and when the customer wants a lot of detail is the ___________ approach to estimating project time and costs. A) B) C) D) E) top-down experiential bottom-up reference class professional estimation 49) The information necessary to conduct a bottom-up estimate of project time and cost starts with the ___________. A) B) C) D) E) level 4 elements of the WBS milestones work package planning horizon level 5 elements of the PBS 50) Project managers typically use ________, also called analogous estimating or the ______ method when there is a past history of similar projects and rough-cut estimates are needed for strategic purposes two-to-five years out because, as estimating methods go, it is faster and less expensive. A) B) C) D) E) top-down, apportion bottom-up, range estimating bottom-up, learning curve top-down, phase estimating top-down, range estimating 51) A project estimator is working on estimates for a project that is very similar to a previous project, in that it has many of the same features and those features have similar costs. Each feature or deliverable will represent the same percentage of the total cost as it did for the previous project. He is using the _________ method of top-down estimating. A) B) C) D) E) ratio consensus apportion function point learning curves 52) The top-down method for estimating project time and cost that uses weighted variables based on major parameters and is frequently used in the development of software is known as the ____________ method. A) B) C) D) E) ratio consensus apportion function point learning curves 53) The top-down method of estimating project time and costs that is useful for projects requiring the same task, group of tasks, or product repeated several times, especially if it is labor intensive, is the ______________. A) B) C) D) E) ratio consensus apportion function point learning curves 54) The bottom-up method of estimating where work package time and costs for past projects are used as a starting point for a new project and adjustments are made based on differences in the new project is known as the ___________. A) B) C) D) E) range estimating parametric procedure template method phase estimating method WBS method 55) The top-down method of estimating when the pooled experience of senior and/or middle managers are used to estimate the total project duration and cost is the _________ method. A) B) C) D) E) ratio consensus apportion function point learning curves 56) The approach to estimating project time and cost that begins with an overall estimate for the project and then refines estimates for various stages of the project as it is implemented is known as ____________. A) B) C) D) E) range estimating parametric procedure template method phase estimating method WBS method 57) The estimating approach that is best to use on projects where there is an unusual amount of uncertainty surrounding the project and when it is impractical to estimate times and costs for the entire project is known as ___________. A) B) C) D) range estimating parametric procedure template method phase estimating method E) WBS method 58) A way to improve estimates on future projects is to collect and archive data on past project estimates and actuals. Creating ___________ for estimating is a way to achieve this goal. A) B) C) D) E) 59) time and cost databases history databases estimating and forecasting databases structured databases Any of these alternatives are correct. Project costs such as labor and materials are typically classified as ___________ costs. A) B) C) D) E) general and administrative overhead direct direct project overhead fixed interaction 60) The salary of the project manager and temporary rental space for the project team would be classified as __________ costs. A) B) C) D) general and administrative overhead direct direct project overhead fixed E) interaction 61) Estimates should be made based on ___________ conditions, efficient methods, and a normal level of resources. A) B) C) D) E) abnormal above normal standard normal average 62) Costs that are associated with time devoted to the coordination in meetings and briefings as well as time necessary to resolve disconnects between tasks are known as ____________ costs. A) B) C) D) E) direct interaction general and administrative (G&A) overhead costs things go wrong coordination 63) Costs that are not directly related to a specific project, such as advertising, accounting, and senior management's salary, are classified as _____________ costs. A) general and administrative overhead B) direct C) direct project overhead D) fixed E) coordination 64) A(n) __________ is something that is a valuable but burdensome possession. A) B) C) D) E) mega-project white elephant yacht vacation home concorde 65) Mega projects are large-scale, complex ventures that typically cost _______ or more and take many ______ to complete. A) B) C) D) E) $1 million, months $10 million, quarters $1 billion, years $10 billion, years $500,000, months 66) Consider a five-mile-long railroad tunnel. Tunnel experts and advocates estimate the total cost to be $200 million. What is the reference class for this project? But reference class projects in this area have been over-budget by 30%. So, what should the actual revised budget number be for this proposed five-mile tunnel project? A) B) C) D) E) 67) The best way to __________________ is to collect and archive data on past projects. A) B) C) D) E) 68) Past bridge projects, $230 million Past tunnel projects, $260 million Past highway projects, $200 million Past building projects, $230 million Past construction projects, $230 million train estimators assist project managers improve estimates forecast project duration estimate project costs Top-down methods are used for all but which of the following intended usages? A) B) C) D) E) Feasibility/conceptual phase Rough time/cost estimate Budgeting and scheduling Fund requirements Resource capacity planning PART II SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 1) Identify and briefly describe the two major classifications of estimating project time and cost Top-Down -> made by top management Bottom-Up -> made work package level workers List and briefly describe four reasons why estimating time and cost are important to 2) project management support good decisions schedule work to determine how long the project should take and its cost to determine whether the project is worth doing Identify and briefly describe three out of the six factors that should be considered to 3) improve the quality of estimates for project times and costs. Planning horizon; Project duration; People; Under what conditions would the top-down approach to estimating project times and 4) costs be the best choice? high uncertainty small internal projects, projects with an unstable scope. Under what conditions would the bottom-up approach to estimating project times and 5) costs be the best choice? low-cost efficient estimates are needed time and cost are important working on a fixed price contract the customer wants detail Describe the ideal approach for a project manager to develop optimal estimates for a 6) project's time and costs. Estimating project costs is one of the most fundamental components of the project management process. If inaccurately measured, the project will soon find itself riddled with budgetary constraints and mis-allocated resources. The best practices often come from those who have experienced troubled projects and can offer first-hand advice. Plan through completion. PM must differentiate between "current estimated cost" - project-specific and should be determined by a project-specific cost risk analysis. and "cost project to completion" - take into account price escalation and future market conditions, latent conditions, design error and estimates for the effects of extension of project time. Steps. One step at a time Boston-based Software Product Development Leader Gary Rucinski advises breaking the project down into three steps, which we translated to be broadly applicable, beyond software projects: 1. Estimate the major modules that need to be developed Translation: Estimate the major components of the project that need to be produced from scratch (engineering schematics, design specs, models, published materials, etc.). 2. Find existing software modules with functionality and complexity similar to the modules required for development Translation: Find analogous, comparable components from completed projects that have similar parameters. 3. Use historical data to find out how much the existing modules took to develop or reverse engineer the cost/effort using a software cost estimation model Translation: Almost the same as above - use actual cost and time information from completed project components to create a model to estimate the resources required for the planned project. Having a cost model like this would allow you to do "what if" analysis to assess risk, changes in scope, etc Tap your project peers/expect setbacks. A PM that does not maximize available information from others working on the project are not only wasting time estimating costs, but are likely to witness more project setbacks than those who take advantage of the information from their peers. 7) Estimates should be based on normal conditions, efficient methods, and a normal level of resources. Explain. 8) Describe phase estimating. When should it be used and how is it different from all other top-down and bottom-up methods of estimating? 9) Identify the drawbacks to an excessive detail in estimating project times and costs. 10) Identify the three major categories of project costs and give an example of each. 11) List and briefly explain two reasons why estimates may need to be refined. 12) Beyond scope and complexity, what do mega projects have in common? Name at least three common characteristics. 13) When is it best to use a top-down estimate? When is a bottom-up estimate most appropriate? Suppose you have entered into a fixed-price contract and the customer wants details as to 14) how much each work package will cost, how long each work package will take time wise; in this case which approach would you use—bottom up or top down and why? Explain. 15) Two to five years prior to actual execution of a project, companies need rough-cut estimates as to total duration and cost of each of the projects they are considering from a strategic perspective. For these projects they have prior experience doing similar projects in the past. Which method will they use—top down or bottom up and why? Explain. 16) A project to return Americans to the moon has been estimated to cost $100 billion and take five years to complete, but past similar projects have cost 30% more and taken 20% longer. What should the revised estimates for cost and time be? Because of the long duration, the effects of the time value of money should be taken into consideration—what does this do to the estimated budget and duration. Assume a 3% annual inflation rate. 17) Thinking holistically, suppose a never-before-done project is being estimated in which there is unstable scope. There is high uncertainty in the duration and cost of each work package. What impact will this have on the project schedule and budget? A bottom-up detailed estimate of total project duration, project schedule, project budget and cost is needed immediately prior to execution of the project. What method will you use, assuming a rough-cut top-down estimate of duration and cost already has been determined (perhaps months, years ago) for the entire project? 18) Thinking holistically, suppose a new, unique project is being estimated in which there is unstable scope. There is high uncertainty in the duration and cost of each work package. Uncertainty as to which work packages to include/exclude is abundant. A project of this type has never been done before and the customer is uncertain of what they want. There are no previous similar projects or a history data base of work package durations and costs to work from. Topdown estimates of total project cost and duration do not exist. You have a dedicated team of ten seasoned project professionals working for you. You worked hard to develop a well-structured WBS for the project. Each work package (there are ten) has been assigned (by you as project manager) to exactly one project professional to develop and complete. You wish to do a bottomup definitive determination of overall project duration and cost. The customer wants cost and duration details. Under such circumstances, how would you proceed? What assumptions would you have to make? How would you come up with estimates as to duration and cost for each work package?