Project Management Tips and Techniques - How to Estimate Effort
Tom Mochal

Each month, Tom Mochal presents a set of project management tips and techniques for handling various aspects of planning and managing a project. Tom has over 23 years of IT experience. He has developed a comprehensive, scalable project management process called TenStep (www.TenStep.com). He has also developed PMOStep (www.PMOStep.com), which is focused on building, implementing and supporting project management methodology through a Project Management Office. Tom also has a comprehensive application support methodology called SupportStep (www.SupportStep.com). 

Typically, the more accurate the estimate, the more detail is needed, and perhaps the more time that is needed. If you are asked for a rough order of magnitude (ROM) estimate, 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 might need to spend quite a bit more time and understand the work at a low level of detail. Use the following process to estimate effort for a project.

1. Create the initial estimate of effort hours, using one or more estimating techniques such as analogy, modeling, work-breakdown-structure, expert opinion, etc. 

2. Factor the effort hours based on the resources assigned (optional). Your estimates are probably based on the effort it will take an average resource to do the work. Sometimes you also have knowledge of the exact resource, or the type of resource that will be assigned. If you do, then you may want to factor the estimate up or down. For instance, you may estimate an activity to take 40 effort hours. However, you also know that the person who will do the work is an inexperienced trainee. In this case, you may want to double the estimate to 80 hours. 

3. Add specialist resource hours. Make sure you have included hours for part-time and specialty resources. For instance, will you need any freelance people? Will you need training specialists? Administrative help? These are people and skills that may not be obvious at first, but you realize you need them for special activities. 

4. Consider rework (optional). In a perfect world, all project deliverables would be correct the first time. On real projects, that usually is not the case. Workplans that do not consider rework can easily end up underestimating the total effort involved with completing deliverables. This is not to be confused with scope changes. If you produce a deliverable that does not meet all the original requirements, or has a quality problem, then rework may be required. If the original deliverable is not acceptable because of additional requests for new features, functions or requirements, then scope change management should be utilized. There are a number of ways to factor in the effort and time associated with rework.

   • Add into the original estimate. This is probably the most typical approach. If you think that a deliverable will take 50 hours to complete, you may be mentally considering the work required for one set of corrections, or maybe two.
      
   • Add as separate activities. In this approach, you estimate the effort of completing the deliverable the first time, and then you add a second set of activities, effort and duration for making corrections and recycling a second (and third) time through.
      
   • Add as blocks of time. Rather than associate rework with individual deliverables, add a block of time at the end of a phase for rework. This is really adding a general budget and schedule pad to help absorb the rework time associated with a group of deliverables. The effort and time associated with the block could be based on individual rework estimates, or just a percentage of the original development time.
      

5. Add project management time. That is the effort required to successfully and proactively manage a project. This takes effort and there will be an associated cost. In general, add 15% of the effort hours for project management. For instance, if a project estimate is 12,000 hours (7-8 people), a full-time project manager (1800 hours) is needed.

6. 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, contingency may be 10-25%. Not adding contingency would mean that you are 100% confidence in your estimate. This may be the case if similar types of projects have been done before. When you add contingency, include it as a separate line item. Do not add contingency by padding the estimates of all the underlying activities.

7. Calculate the total effort by adding up all the detailed pieces.

8. Review and adjust as necessary. Sometimes when you add up all the pieces, the estimate seems obviously high or low. Go back and make adjustments to your estimates to better reflect reality. Also make sure that your estimating model is consistent and reasonable. For instance, if a repetitive activity is planned, it may be that the effort to complete it will decrease as it becomes routine. Also make sure that similar activities have similar effort estimates.

9. Document all assumptions. All the details of a project cannot be known for certain up front. Therefore, it is important to document all the assumptions you are making along with the estimate.

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