Saturday 27 November 2021

Methods to estimate project costs

You are faced with the task of planning a project and successfully bringing it to completion. But to do this, first estimate how much effort, time and cost will be needed for all the processes.

However, it is very difficult to do this, because there is nothing to take an example from: there are no absolutely identical projects. What works great in one case may not work at all in any other case, even with the same data, team and budget. Moreover, it is possible to conduct an assessment in advance even according to the best methods, but this will not guarantee the successful completion of the project.

However, every manager should know: the better the assessment, the higher the chances of completing the project and saving the budget.

Project Evaluation Methods

Before conducting an assessment, carefully draw up a detailed project plan. If you have thought everything through and painted everything from the very beginning, it will be easier for you to manage tasks and bring them to an end. From the project plan, it should be clear what goals are set for it.

Then you can take up the assessment. It is important not only for determining the cost, but also for other parameters, for example, to determine the completion date. The described techniques can be used in any methodology, whether it is the Cascade model (it is also called the "Waterfall" model - a calque from the English name Waterfall model), or the Agile methodology(English Agile).

Below are 4 assessment methods. Managers should know them as well as tips for project management.

Analog method

In English, it is called analogous estimate. The method is used in cases where there is not enough information or documentation about the project.

To evaluate a current project, a similar project or projects that have been completed in the past are taken. Of course, a greater degree of efficiency will be achieved if your current project is evaluated by the same people who were involved in previous similar projects.


There is a task - to develop 5 new marketing landing pages. Your team has already dealt with similar tasks, and it took them 5 working days. Accordingly, you take the same number of days to evaluate new tasks. Therefore, if you have 10 landings in development, multiply 5 days by 2 and get 10 working days per task, etc.

  • Advantages:quick counting; not requiring a lot of documentation.
  • Disadvantages:Not an accurate estimate compared to other methods.
  • Accuracy: lowest.


Parametric evaluation

In English – Parametric estimate. At its core, this method is very similar to the previous one. But in some cases, it gives more accuracy due to the fact that the entire project is broken down into parts. In turn, the parts that directly affect the project are identified that can be measured.

As with the analog method, there is also an emphasis on information and data from previous projects. It's important to determine which part of the project might affect the project, and then examine it thoroughly.

The difference from the analog method is that this method has statistical data that can be relied on when evaluating.


Again, let's go back to the example with landings. To evaluate a project, you need to find similar ones. We search, for example, on the Internet and find that with more, the development of one such landing requires 10 hours. We need to develop 5. Therefore, multiply 10 by 5 and get 50 hours.

  • Advantages:quick counting; quick search for information is possible.
  • Disadvantages:low accuracy (but higher than in the case of the first method).
  • Accuracy: higher than that of the analog method.

Score on 3 points

In English, this method is called 3-point estimate. You can also find the Project Evaluation and Review Technique, abbreviated as PERT.

Here, as in the following technique, the Work Breakdown Structure is used, which implies a breakdown into smaller tasks. The manager and his team then assess them and identify the risks.

Why are 3 points mentioned in the title? That's how the assessment happens. There is a better course of events, which is called optimistic (let's call O for short), the most probable (M) and the worst – pessimistic (R). Obviously, M has the most weight.

Without going into details, we note that the assessment can be made according to 3 formulas.

The simplest: (O+M+W)/3

More accurate: (O+4M+P)/6

Showing standard deviations:(P-O)/6.




Using the example of landing, we will show the simplest version of events. So, to develop landing pages according to the optimistic scenario (O), we need 40 hours. According to the most probable (M) - 45. The pessimistic scenario gives us 55 hours.

According to the calculations of the second formula, it turns out (40 + 4 * 45 + 55) / 6 = 46 hours.

Advantages:considered one of the most accurate techniques; allows you to remove the most optimistic and the longest-lasting scenarios from the assessment.

Disadvantages:It takes a long time to evaluate tasks across three parameters.

Accuracy:Very close to the highest point.

Bottom-up method


In English, it is called Bottom-up estimate. The Hierarchical Work Structure (Work Breakdown structure mentioned above) is used in the assessment. Here, a project or task is broken down into smaller tasks until it is possible to evaluate each one individually.

Thus, knowing how much time, effort, resources and money is required for a certain task, the manager sums them all up and gets an estimate of the entire project. At the same time, the more small parts, the more detailed the assessment will be.

The method requires a lot of time, but gives the most accurate results.


Again, our landings. Break the whole process into smaller parts. If you do not delve into the details, then for this you will need to write a text, develop a design, interface and more. After that, you should summarize the assessment of all tasks, which will give an assessment of the entire project.

  • Advantages:the highest level of accuracy; breaking into small parts will allow you not to miss the details when evaluating.
  • Disadvantages:It takes the most time compared to other techniques.
  • Accuracy:highest.

The methods described above are widely used in the evaluation of the project. For best results, it is advisable to own all the techniques. You can also trust the tools for project management.

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