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Bruce F. Broussard, Jr., <a href=Insurity" />
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Maintaining Credibility in Project Estimation: Beware the Fudge Factor

Project managers should focus on four key areas in order to successfully navigate the delicate balance between practical and preposterous project estimating.

Scope, schedule, and cost are the key dimensions of any project, providing the most basic lens through which success or failure will ultimately be judged. While a project manager (PM) is accountable for overseeing each dimension throughout the life of the project, the foundation for success is laid during the estimating process.

Bruce Broussard, Insurity
Bruce Broussard, Insurity

Given the high stakes associated with project results, it’s prudent for project managers to incorporate reasonable contingency into their estimates to cover the inevitable surprises that arise in every project. However, including excessive contingency can inflate the schedule and costs, potentially undermining the PM’s credibility and threatening project support.

Here are four areas of focus that will help project managers successfully navigate the delicate balance between practical and preposterous project estimating:

1. One View of Scope

Effectively defining the scope and documenting reasonable assumptions around uncertainties is a critical aspect of credible project estimating. Project scope details are never fully defined at the start, but establishing boundaries around areas of uncertainly is essential. Without a clear and consistently understood scope, individual project members will estimate using inconsistent assumptions, creating a long list of challenges that will be revealed in the plan and during project execution.

2. Distinguish Effort from Duration

Ensure team members supplying estimates for project segments are clear in distinguishing between effort and duration. When someone estimates a task will take a week, do they mean one person for 40 hours, one person for 15 effort hours over a one week duration, or is it 4 people working full-time for a week resulting in a 160 hour effort? A lack of clarity on details can destroy the schedule and cost expectations.

[Related: Tadepalli's 10 Rules of Project Management .]

Task estimating must be performed consistently across the team, with effort, duration, and resources specified for each task. With this information, the PM can confidently connect estimates from multiple sources to create a coherent plan.

3. Beware of Compounding Fudge Factors

As task estimating is distributed across the team, it is natural for each person in the chain to want to add contingency to each task. The PM may then apply another layer of contingency, unaware of what is already included. The compounding effect of these fudge factors can destroy the credibility of the plan – and of the PM submitting it. To establish a consistent estimating mindset, team members should estimate based on what would allow them to successfully complete the task four out of five times. If the estimates are such that they can be easily completed 100% of the time, then they may be too conservative.

4. Apply Contingency Surgically

Once the compounded fudge factors have been eliminated or avoided, contingency can be applied surgically where needed. Contingency should not be distributed evenly across the entire plan. The focus should be limited to key risks and the critical path. The PM should look at the most significant risks to the project schedule and cost, and add contingency to the tasks where the likelihood of the risk occurrence and the magnitude of the risk impact is the greatest.

Once the key risks have been addressed, the tasks on and near the critical path need a closer look. Confidence in those effort and duration estimates should be verified, as well as the availability of the resources needed to complete them, making adjustments as needed to align to risk tolerance.

Every Project Manager wants to deliver the project within the approved schedule and budget. While there will always be project surprises, following these recommendations will help protect the PM from hidden and compounding fudge factors, and allow the PM to maintain control of the contingency included in the plan. Protecting the integrity and credibility of the project plan, and that of the project manager will not only increase the chances of the project’s success, but will give the decision makers the confidence to put the next critical project into the safe hands of this proven project manager.

About the Author: Bruce F. Broussard, Jr. is VP, business development and strategic partnerships at Hartford-based Insurity. He is responsible for the vendor’s Insurance Enterprise View product, as well as the relationships with Insurity’s network of integration and product partners.

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