Stephen Wise Bloghttps://integrationprofessionals.com/BlogHow confident are you with the project forecast?https://integrationprofessionals.com/Blog/how-confident-are-you-with-the-project-forecast5EstimatingFri, 30 Mar 2012 16:01:33 GMTthe accuracy of the forecast should always increase<p><span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;">As every project progresses through it's lifecycle, the team’s forecast will evolve. The forecast value may move up or down, however, the accuracy of the forecast should always increase. The basis for increasing accuracy is that all estimates are forecasts with some level of uncertainty and as the project progresses the unknowns/uncertainty will decrease. This holds for forecasting any of duration, work effort, or cost.</span></span></span> <span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;">There are two important concepts in the below figure: </span></span></span> <span style="color:#000000;font-family:Calibri;font-size:medium;"> </span><span style="color:#000000;"><span style="font-family:Calibri;font-size:medium;">1)</span>      <span style="font-family:Calibri;"><span style="font-size:medium;">We see the team’s forecast (solid middle line) moves up and down as time progresses; and,</span></span></span> <span style="color:#000000;font-family:Calibri;font-size:medium;"> </span><span style="color:#000000;"><span style="font-family:Calibri;font-size:medium;">2)</span>      <span style="font-family:Calibri;"><span style="font-size:medium;">the range in value between the High</span></span></span></p> <p><span style="color:#000000;"><span style="font-family:Calibri;"><span style="font-size:medium;"> and Low Estimate decreases in steps at each phase.</span></span></span></p> <p><span style="color:#000000;font-family:Calibri;font-size:medium;"><a href="https://blog.inprof.com/wp-content/uploads/2012/03/estimatedvalueprogress42.png"><img alt="Estimated Value Progress Stephen Wise" class="aligncenter size-full wp-image-162" src="/Portals/0/Images/inprof/Blog/estimatedvalueprogress42.png?ver=2019-06-03-152912-403" style="height: 315px; width: 468px;" title="estimatedValueProgress4" /></a></span> </p> <p><span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;">A key action for the Project Manager is to communicate to all stakeholders that early estimates have higher uncertainty. As part of communication with management and finance stakeholders, I usually ask for a reserve to be added onto my estimates based on the higher uncertainty of estimates and potential negative impact of risks. This amount can be progressively reduced and “given back” as the project progresses over time.</span></span></span> <span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;">Some types of projects inherently have high uncertainty during initiation and planning. For example, integration of custom software. When faced with projects involving high level of unknown, the Project Manger should use “Three-Point Estimating”. This technique will include the full range of possible values of the estimate and</span></span></span></p> <p><span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;"> reduces bias that can lead to a highly optimistic or pessimistic estimate.</span></span></span></p> <p><span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;"><a href="https://blog.inprof.com/wp-content/uploads/2012/03/3point2.png"><img alt="" class="aligncenter size-full wp-image-166" src="/Portals/0/Images/inprof/Blog/3point2.png?ver=2019-06-03-152911-667" style="width: 468px; height: 99px;" title="3point" /></a></span></span></span> </p> <p><span style="font-size:medium;"><span style="font-family:Calibri;">I usually create custom fields within Microsoft Project 2010 to capture and calculate the three point estimates. The approach is also called PERT. The formula is PERT Estimate = (Optimistic Estimate + 4 X Most Likely Estimate + Pessimistic Estimate) / 6.</span></span> <span style="color:#000000;font-family:Calibri;font-size:medium;"> </span><span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;">Other project teams that work on a high number of similar projects will develop good enterprise knowledge for making estimates. An example would be an energy and gas company that knows 2 resources can lay pipe at 20 metres per hour and the material cost is $150 dollars per foot. Estimates in these situations can be very accurate, from an early stage.</span></span></span> <span style="font-size:medium;"><span style="color:#000000;"><span style="font-family:Calibri;">A Project Manager may have little control of the level of uncertainty or risk when handed a new assignment. However, appropriate application of the concepts above will lead to successfully managing and quantifying estimates of duration, effort, and cost.</span></span></span> </p> <h4><span style="color:#000000;font-family:Calibri;font-size:medium;">Stephen Wise</span></h4> <h4><span style="color:#000000;font-family:Calibri;font-size:medium;"><a href="http://www.IntegrationProfessionals.com">www.IntegrationProfessionals.com</a> </span></h4>