The Lottery of Project Estimation

November 16, 2021

In our last post, we have clarified the gist of the Business Analysis Process. While Business Analysis is strictly reserved for project development, estimation is something we, as people, all contribute to in our everyday lives. Coming up with the shortest route to work, calculating the expenses of holidays, or even planning out our meals all leave us with something we estimated.

Today, we have interviewed Piotr Tomaszewski, WORKITNOW’s CTO and our project estimation expert. We have broadened our knowledge about the importance of such a process. What exactly is needed to prepare the high-quality estimation? How does it affect the client and the crew? How to master it? Is it that important? Find out about Piotr’s answers down below!

What exactly is a project estimation?

Project estimation is “the process of analyzing available data to predict the time, cost and resources needed to complete a project”. It is a vital part of the software development process. “In IT, (when it comes to the fixed price model) estimates at the time of signing a contract transform into commitment” says Piotr. Project estimations include scope, time-frames, budget, and risks.

What does the estimator need to get and prepare to form an adequate estimation?

“In order to estimate anything, it is crucial to get data on which to base the estimates” – states Piotr – “the less information we have, the less accurate the estimation is. The more data we have, the higher the level of accuracy is”.

Usually, clients turn to estimators with some sort of concept or idea that they want their product to base on. Piotr says that those are the most difficult estimates:

“We can translate the concept into our idea of how it will look like. We have our vision, and we can put it together from our perspective”.

The more client gives from their point of view, the better they have developed and specified their idea, the more precise the initial valuation is. The project estimator divides the concept into smaller pieces that are easier to analyze.

What does the project estimator exactly estimate?

  1. Project scope – a key component of the project estimation
    Project scope is essentially a huge part of project planning. It is a detailed outline of all aspects of a project including resources, timelines, related activities, etc. as well as general information such as what the project is about. A scope statement is the documentation of the scope. This documentation gets the project team focused and on point.
  2. Budget
    The ground component of the Project Development Process is the project’s price. Both twos ides – the client and the development team are aware of the importance of the expenses – “Cost is only one dimension of estimation. It is not about pumping up the price because it pays to be honest. The market competition is always present - clients can talk to the representatives of competition companies” –tells Piotr. Project estimators often base their predictions on their past projects: “We are aware of the number of patterns that come from our experience, and we know more or less how much specific kinds of projects cost”.
  3. Time-frame
    Project scope does make a job easier when it comes to calculating specific time-frames.As Piotr said, it is crucial to divide the concept into smaller pieces that are easier to work with. This way the estimator can calculate needed time in greater detail: “You need to include the time needed for developers to learn about the particular project. It is necessary to have that in your estimation”.
  4. Resources
    “There are many implicit factors that are not always mentioned but have to be included in the estimation” declares Piotr. The content of each project includes necessities such as staff, equipment, vendors, or contractors. Without even one of these, the estimation lacks reliability. Piotr adds that the basic error in the project estimation is the narrow thinking – that it is only the time spent on programming: “Do not forget the time needed to understand the task, the time to prepare the workstation and the time to build the initial elements”.
  5. Risks
    When calculating the shopping expenses, it is crucial to overestimate the final receipt because of the possibility that something is more expensive now than it was (for example) a month ago. This is called calculating the risk factor – making sure to have enough money to cover everything. In every action there are risks:“You have to think about all the scenarios” says Piotr. “The better the estimator, the more they come up with”. The more estimates the project estimator prepares, the more likely they are to have bigger confidence and cognitive error.

How do the estimations differentiate based on cooperation models?

Project estimation changes whether clients choose a fixed-price model or a time-and-material model. Fixed-price projects clients get their project estimation sup front. It is possible to price only particular fragments, but it all comes down to one thing. In order to change the part of the project, it is essential to price everything again from scratch. “Fixed-price projects are artificially agile. You can divide them into sprints and show the stages of work to the developers, but that’s not the point. A fixed-price project does not allow you to make a turn. It does not go hand in hand with real agile” says Piotr. In time-and-material projects the valuation is calculated for time spent. It is possible to turn around and change a decision. To find out more about the differences between these two cooperation models, check out our “Fixed Price or Time &Material?” article!

How to become a skilled estimator?

Piotr Tomaszewski has a lot of tips to share with both clients and project estimators.

“Good practice for the valuation of projects that are very general, not detailed and there is not much information is to submit a range (e.g., “this will take 20/30hours because it can go either way”). It is important in the estimation to precise which units are used (whether we’re talking about days, hours, or sprints)”. Piotr mentions the fun way in which developers can communicate the“size” of the given project between each other: “I have even seen cards with fruit. The pineapple is going to hurt and if it is a raspberry then good because it is small”.

The final estimations based on the analysis should be prepared by people who will be programming the product.

“Ultimately, the developer should have a say, because they will develop the product. On the basis of the analysis, that is, as we go through the process of clarifying the concept of the product with the client, where the result is usually documented in various types of documentation(stories, analysis), we get such comfort that we can refine the estimate. The developer can estimate the project independently so that there is no impact from the initial estimation. Then we collide these valuations and analyze them”.

It is not that easy to estimate a project. A lot is at stake – one of the most important factors is the experience of the estimating employee. It can take hours of research and contemplating to get satisfactory results especially when the client is not sure about what exactly they want to achieve.

“We have a number of patterns resulting from the experience, that give us the ability to predict how much something is going to cost and how much time is needed to complete it” adds Piotr.

Project estimators learn from previous estimations.Projects repeat and most systems are similar.

“When we present the initial estimation based on our assumptions, we welcome our clients to discuss it further. It is not crucial to immediately decide whether the client is eager to go forward. We leave a proposal to perform an analysis. Initial estimation is a stage of our work – the customer engages and forms a relationship with us”.

Why is it so important?

Project estimation is a crucial part of project development. Without even one of the aforementioned contents, the development process becomes longer and flimsy, which results in wasting time and money.

In this field of work, it is especially valued to have experience and a good understanding of the client’s area and the problem.

“Minimization of risk, avoiding estimating alone, the confrontation of the valuations are crucial parts to construct the estimation of a high standard” says Piotr Tomaszewski. “Estimation is still a kind of a lottery. You need a lot of practice to result in a win-win situation”.

Were you aware of the importance of the project estimation? Let us know your thoughts.

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