Top-down estimation, however, is ideal for duplicate projects, recurring assignments, or work that needs to be completed ASAP. Bottom-up estimation is typically not done in a hurry and is therefore incompatible with last-minute projects or work that has a short timeline. The underlying assumption is that the project estimate consists of the sum of its pieces.
You must thoroughly analyze and evaluate everything required to complete the project with the given constraints. It is essential to have a well-defined work breakdown structure to implement this technique successfully. In bottom-up estimating, you follow a three-step process, working from the lowest level of detail in the work breakdown structure . You begin bottom-up estimating by developing a detailed work package to go with the WBS. In the work package, you detail the scope and major deliverable that each team member will produce. You describe its cost and duration as well as the risks that affect the task.
Why Use Bottom-up Estimating Technique?
Because actively involved team members typically perform bottom-up estimates, their conclusions are often very accurate. When those with practical knowledge contribute to defining the overall project scope, elements like expenditures, personnel and timeline factors are less likely to be overlooked. These estimates provide detailed analysis of all project components, which can allow project team members to take ownership of key elements.
Then, the sum of these estimates and task dependencies within each work package determine the total cost and timeline for the project schedule. Bottom-up estimating is the most accurate approach to estimating the cost and duration of project tasks. This estimating technique gives the entire project team the opportunity to take part in developing the estimates used to measure their work. As a result, bottom-up estimating tends to develop a higher level of project team commitment than other types of estimates .
TOPIC: Using the Bottom-up and Analogous estimating
We will discuss what it is when it is done, how to do it, why it is different from other estimation techniques, and its pros and cons. Part of a project manager’s work is to come up with estimates from as early as the planning stage.
- Bottom up estimating is the project management technique of estimating individual tasks and then combining them into an overall project estimate.
- Once the WBS is up, assign the different tasks to the team members, clearly indicating who will take care of a given task.
- Bottom-up estimating helps a project manager in the resource planning for their project.
- The project team can go forward, react swiftly and properly to market demands, and move forward since they accepted the risk.
- As a result, you need to estimate the cost and schedule for each feature in your project.
- At this stage, I don’t know the full detailed scope, but I know I need people and a budget to complete the project.
- The amounts for the decomposed elements are calculated and summed to estimate the amount for the larger unit.
This technique is also known as deterministic or detailed estimating. Most people also consider it the definitive estimate as it has an accuracy of between -5% and +10%, as provided by the Project Management Institute. All estimates are approximations, so you should choose the one that comes closest to meeting your needs.
Example of bottom-up estimating
Eventually, you are better positioned to manage the risks and handle the different situations. When you are segmenting the project, there are several aspects that you need to consider. Breaking down the project into various phases and parts will also help you define the scope. However, it is challenging to identify the exact budget, resources, and timeline for any project.
For example, a company is estimating the cost of a new website development project. The project manager will first estimate the cost of each individual task that needs to be completed, such as designing, coding, or testing the website. The cost of each task is then aggregated up to the next level, which in this case would be the development phase. The cost of each development phase is then aggregated up to the next level, which would be the project as a whole.
Benefits of bottom-up estimating
These are then aggregated to a total estimate for the entire project. It is often referred to as one of the most accurate ways of estimating.
What does TAM mean in sales?
Total Addressable Market (TAM) – represents revenue opportunity at 100% market share, as if no competition exists. Serviceable Available Market (SAM) – represents the portion of the TAM that can be served by a company's products and services.
The challenge is in all those pesky details that impact your project. Even if reliable historical data is available for estimation, the bottom-up estimating technique requires estimating each activity; therefore, it is not scalable. It would be unreasonable to say how long it will take to write a whole book without considering the time required to complete each activity. Therefore, the book’s contents are decomposed into chapters, paragraphs, sentences, and even words. The duration of each discrete unit is estimated, then added up the quantities to give an estimate for writing the entire book. The first crucial difference is how the project is broken down into phases. In the bottom-up technique, the estimate is a sum of more minor phases.
The top-down approach to defining project tasks involves starting with the project goal or final deliverable and breaking it down into smaller planning chunks. Each of these work packages or “chunks” is further refined into greater detail, and then work items are assigned to team members. It requires proper planning and time to perform bottom-up estimates, therefore it cannot be used in projects that have duration constraints. It will also ensure that nothing circles back to the project manager; everyone determines the overall cost and resources for their particular area of expertise. You don’t have to depend on a single person or their ability to manage the entire project.
This process is long, and can be even more so when a large amount of work or complex work is involved. bottom up estimating Lance is a construction project manager who needs to change his approach to estimating.
Pros and cons of a bottom-up approach in project management
This article describes how to display both bottom-up estimates and top-down estimates on the Gantt chart in Microsoft https://online-accounting.net/ Project 2013 for comparison. Looking for a way to compare bottom-up estimates with top-down estimates?
Estimate cost and duration of the lowest level tasks .• The work breakdown structure provides the framework for a bottom-up estimate. It is now crucial to understand how to implement this project management technique in real-world calculations. There are several steps involved, and we will discuss these in detail. You can keep making the necessary adjustments to the cost and delivery timelines, thus ensuring your project cost or timelines are not affected. In this way, you never go over budget and can manage your scope within the timeline defined. A project manager is responsible for managing the project documentation, handling the costs, and defining the estimates.
Handling Demands to Cut the Project Duration – Video
This is when project work is broken down, or decomposed, into smaller components and an estimate is assigned to each component. This technique is often used when detailed information is available about lower-level activities. It can be especially useful when estimating projects that are similar to ones that were completed in the past. Bottom-up estimating is a technique that involves estimations on a granular level for parts of a project.
You will need to calculate the actual cost of buying fence posts and setting them up. If you set up 20 posts to cover the entire place, you will need to multiply the per post cost by the total posts. The top-down approach is the best fit for an overview of estimates; however, if you want to get a more detailed insight, you might go for a bottom-up approach.