How Estimating Techniques Evolve Through Project Phases
Accurate estimates are the backbone of successful project management—providing a roadmap that ensures resources, time, and budgets are aligned with project objectives. However, estimating is not a one-size-fits-all exercise. The techniques used to estimate a project’s requirements and scope evolve significantly throughout its lifecycle, adapting to the increasing availability and accuracy of information in each phase.
From the broad strokes of the conceptual phase to the intricate details refined during execution, understanding how estimating techniques transform is essential for project success.
This guide unpacks these techniques, offering insights into how they progress as a project progresses. For an expert breakdown of different estimate types, read Zebel’s blog at https://zebel.io/types-of-estimates-in-construction/.
The Conceptual Phase: High-Level Estimating for Initial Scope Definition
Information is scarce at the project’s outset, and the scope is usually undefined. Yet, estimates are still needed to determine whether a project is feasible and worth pursuing. This is where high-level estimating techniques come into play.
Analogous Estimating
A commonly used method during the conceptual phase is analogous estimating, or “top-down estimating.” This technique leverages data from past projects to approximate costs, timelines, or resources.
For example, if your team has completed a project of comparable scope and complexity, you can use its data as a benchmark to develop initial estimates for the new project.
While analogous estimating is fast and requires minimal information, it’s not always accurate. Minor differences between the existing and planned projects (like variations in scale or technology) can have significant impacts on the actual outcome. However, speed and feasibility assessment often outweigh the need for precision in this phase.
When to Use Analogous Estimating:
- Early project discussions or feasibility studies
- Stakeholder presentations requiring quick ballpark figures
- When there is limited information about the project’s scope
Order-of-Magnitude Estimates
Another common high-level approach is the order-of-magnitude (OOM) estimate, usually defined within a margin of error (e.g., -25% to +75%). This technique is ideal for the earliest stages of project decision-making, where stakeholders simply need a “yes or no” on whether to proceed.
Together, these estimating techniques provide just enough guidance to kick off a project—laying the groundwork for a deeper analysis in later phases.
The Planning Phase: Moving Toward Detailed, Data-Driven Estimating
The project enters the planning phase once the green light has been given. The scope, objectives, and requirements become more defined at this point. This allows for more detailed and data-driven estimating techniques, which improve accuracy and reliability.
Parametric Estimating
A standout method in this phase is parametric estimating, which uses statistical and mathematical models to forecast project costs or durations based on historical data. For example, if previous data shows that producing one unit costs $1,000 and you’re planning to produce 100 units, parametric estimating helps determine the total project cost as $100,000.
This technique is beneficial for industries like construction or manufacturing, where standardized tasks and materials allow for reliable metrics. Tools like historical databases and cost estimation software make parametric estimating faster and more accurate.
Bottom-Up Estimating
If you want to maximize precision, bottom-up estimating is the go-to approach. This method involves breaking the project into its smallest components—tasks, deliverables, or work packages—and estimating each individually. The estimates are then rolled up into a comprehensive total.
For example, in a software development project, you might estimate how many hours your team would take to complete tasks like UI design, database integration, and testing. The sum of these individual estimates gives you a more accurate picture of the overall timeline and budget.
Benefits of Bottom-Up Estimating:
- High level of accuracy for detailed planning
- Helps identify potential bottlenecks or resource shortages
- Provides a clear breakdown for stakeholders
Despite its precision, bottom-up estimating requires substantial effort, time, and detailed information, so it’s rarely used during early project phases.
Contingency Planning
The planning phase is also when contingency reserves are added to estimates. Project managers recognize that uncertainties still exist and build buffers into budgets and timelines to prepare for risks or unexpected changes.
Together, parametric and bottom-up estimating transform abstract ideas into actionable plans, ensuring the project is set up for success before execution begins.
The Execution Phase: Refining and Managing Estimates in Real-Time
By the time the execution phase begins, the project is in full swing, and estimates must evolve into tools for monitoring, controlling, and adapting to real-world variables. At this stage, estimating is not just about prediction—it’s about management.
Rolling Wave Planning and Estimates at Completion (EAC)
During execution, many project managers turn to rolling wave planning, a technique that refines estimates incrementally as new data becomes available. Essentially, the initial high-level estimates created earlier are updated to reflect actual progress and conditions.
For example, after completing the first two phases of a construction project, any deviations in costs, timelines, or resources are analyzed to adjust estimates for the remaining phases. This iterative process ensures that the project stays aligned with reality.
Similarly, Estimates at Completion (EAC) are continuously recalculated. This allows project managers to predict the total cost or duration of the project based on its current trajectory—providing invaluable insights for decision-making.
Earned Value Management (EVM)
One of the most sophisticated tools for managing estimates during execution is Earned Value Management (EVM). EVM integrates cost, schedule, and scope data to assess a project’s performance and forecast its outcomes. This allows project managers to stay proactive, identifying variances and taking corrective actions before small issues snowball.
Key EVM concepts include:
- Cost Performance Index (CPI): A ratio of earned value to actual cost, showing how efficiently the project uses its budget.
- Schedule Performance Index (SPI): A ratio of earned value to planned value, highlighting whether the project is ahead or behind schedule.
Real-Time Communication and Adaptive Techniques
Finally, execution-phase estimating relies on effective communication. Real-time reporting and dashboards powered by collaboration tools like Jira or MS Project allow teams to adjust estimates quickly in response to new developments.
By maintaining this dynamic approach, teams can ensure that estimates remain relevant, helping to meet project goals on time and within budget.
Evolving Estimates for Project Success
The transition from conceptual to detailed estimating is not just a technical necessity—it’s a strategic advantage. By adapting techniques to align with each project phase, teams can strike a balance between ambition and reality while staying aligned with objectives.
Accurate estimates build trust, drive efficiency, and increase the likelihood of delivering successful outcomes. Whether through high-level order-of-magnitude estimates or granular bottom-up analysis, mastering the art of evolving estimates adds certainty to an uncertain world.
