Kul UPPAL en Directors and Executives, IT - Information Technology, Engineers and Technicians Senior Cost Engineering Consultant to Oil & Gas Industry • Conquest Consulting 27/9/2016 · 2 min de lectura · 1,7K

Pitfalls of Early Estimates

Pitfalls of Early Estimates

Early estimates, by their very nature, are based on sketchy data and will not have a high degree of accuracy. By comparison, estimates prepared late in the development project life cycle are based on a much wider set of information and thus are more accurate. In other words, early estimates are inaccurate and difficult to make, yet they become the basis for project comparison and for developing guidelines for the final project funding.

When the project is in its inception phases, only a small amount of information is available about the specifics of the project, and yet an estimate is needed to make a decision on the viability of the project and the profitability of the resulting product. It bears repeating that, even though an estimate is needed at that time, those who use the estimate must be made aware of its inaccuracies and shortcomings.

Some organizations hold the project managers to the early estimates of the project. Progressive organizations allow systematic and logical changes to the project estimated cost throughout the project life cycle.

Given that the project manager will make the estimate as accurate as possible considering the data available, the project stakeholders should keep the limitations or pitfalls of early estimates in mind when selecting projects based on them and during the cost management process, particularly if the project is selected for implementation based on the early estimates. Nonetheless, a preliminary estimate is needed for making project decisions, even though it will have to be made before project objectives are clarified, project scope is defined, requirements are fully spelled out, functions are clearly defined, and project constraints have been fully formulated.

During the early stages (Project Management Process) of the project, and in the absence of extensive and detailed information about it, project managers use a variety of tools and techniques in formulating the project estimate. These usually are based on models that have proven to be successful during previous estimating efforts, in this project or in others. These models use mathematical expressions, from the very simple to the very complex, or a multitude of assumptions to estimate the cost, duration, and resource demands of a single activity, an assembly, or the entire project as a function of one or more input variables.

PCE Activities in the Conceptual Phase (Same as AACEI Class 5)

The primary PCE activity in this phase is developing an estimate or estimates for the purpose of determining project feasibility. Conceptual phase estimates have the least amount of detail available. Because of this, the estimates are usually scaled from historical costs and adjusted for location, schedule, business conditions, and similar factors. Much of the information available in this phase is based on assumptions. The main project cost/schedule control activities in the conceptual phase include:

• developing the initial work breakdown structure (WBS);

• preparing a plan for controlling FEL cost controls; and

• developing the overall project timetable and key milestones.

The main database activities in this phase include collecting industry and pricing data.

PCE Activities in the Analysis Phase (Same as AACEI Class 4)

The primary activity in this phase is developing an estimate or estimates for the purpose of selecting preferred project options. Also, an assessment of the uncertainties and risk associated with the estimate is done through the use of risk weighted estimating. Analysis phase estimates have a greater level of detail than conceptual phase estimates. At this phase, estimates are usually factored estimates incorporating more definition and data than during the conceptual phase. The main project cost/schedule control activities in this phase include:

• refining the initial work breakdown structure (WBS);

• Set-up to control FEL costs;

• preparing a plan for controlling execution phase costs;

• defining a control schedule for FEL; and

• refining an overall project schedule and key milestones.

The main database activities in this phase include collecting front end loading cost data, collecting the conceptual Phase estimate data, along with industry and pricing data.


Ben Pinto 27/9/2016 · #2

Dear @Kul UPPAL, Wow, this is timely for me in many ways. Thank you and we'll layed out. Check it out @Christine Andola.

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Donna-Luisa Eversley 27/9/2016 · #1

@Kul UPPAL wow another great post...wish I knew you ten years ago..estimates are based on assumptions ...the more relevant information available, the greater your accuracy, however contingencies are always needed , just in the event of...

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