Effort hours must be estimated first, before duration and cost estimates can be prepared. Use the following process to estimate effort hours.

1. Determine how accurate your estimate needs to be.

Typically, the more accurate the estimate, the more detail you need to understand about the project, and perhaps the more time that is needed. If you are asked for a rough order of magnitude (ROM) estimate (-25% – +75%), you might be able to complete the work quickly, at a high level, and with a minimum amount of detail. Perhaps you can provide a ROM estimate based on knowledge in your head. On the other hand, if you must provide an accurate estimate within 10%, you need to spend more time and understand the work at a lower level of detail.

2. Create the initial estimate of effort hours

Estimate each activity and for the entire project, using techniques described in 2.2.1 Estimating Techniques.

3. (optional) Factor the effort hours based on the resources assigned

Your estimates are probably based on the effort it will take an average resource to do the work (or perhaps the estimates are based on the effort it would take if you did the work). Sometimes you also have knowledge of the exact resource or the type of resource that will be assigned. If you do, 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. Another set of activities may be estimated to take 200 hours. However, you know that you will hire an experienced contractor to do the work, so you may be comfortable reducing the estimate to 150 hours. Obviously, this step can only be performed if you have some sense for the actual resources to be applied to the project.

4. Add specialist resource hours

Make sure you have included hours for part-time and specialty resources. This could include freelance people, training specialists, administrative help, etc. These are people that may not be obvious at first, but you may need them for special activities.  Because they are typically in project support roles, you may have forgotten to include their activities in the original Work Breakdown Structure.

5. (optional) Add rework time

In a perfect world, all project deliverables would be correct the first time. On real projects, that usually is not the case. Schedules 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 already be 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 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 add rework to individual deliverables, add a block of time at the end of a phase for rework. This is basically adding a general budget and schedule buffer to help absorb the rework time associated with a group of deliverables. The effort and cost associated with the buffer could be based on individual rework estimates or just a percentage of the original deliverable development time.

6. Add project management time

Project management takes effort and there is an associated cost as well. You need to allocate effort hours to successfully and proactively manage a project. You should add 15% of the effort hours for project management. For instance, if a project estimate is 12,000 hours (7 – 8 people), then a full-time project manager (1800 hours) is needed. If the project estimate is 1,000 hours, the project management time would be 150 hours. This would not be enough for a full-time project manager, so the project manager would either be a part-time project resource or the project manager would also have non-project management activities assigned to him as well.

7. 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, your contingency may still be 10-25%. If you do not add a contingency amount, it would mean that you are 100% confident in your estimate. This may be the case if similar types of projects have been done before.

When you add contingency, the best approach is to include it as a separate line item. However, if your organization will not allow you to include a formal estimating contingency, you may have no choice but to include the estimating contingency by padding the estimates of all the underlying activities. This is not the preferred approach, but it is the natural reaction if your organization will not allow a formal estimating contingency budget to reflect estimating uncertainty.

8. Calculate the total effort

Add up the estimates for all the work components described above.

9. Review and adjust as necessary

Sometimes when you add up all the components, the estimate seems obviously high or low. If your estimate does not look right, go back and make adjustments to your estimating assumptions to better reflect reality. Also make sure that your estimating model is consistent and reasonable. For instance, if a repetitive activity is planned, you might initially calculate the total effort by multiplying the effort to complete one activity by the number of times the activity is executed. However, upon further evaluation, you may realize that the effort to complete the activity will decrease as it becomes routine. You should also make sure that similar activities have similar effort estimates and if they do not, adjust them as needed.

10. Document all assumptions

You will never know all the details of a project for certain. Therefore, it is important to document all the assumptions you are making along with the estimate.

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