Estimating a project, whether about the cost, the duration, or the benefit of it, is a crucial part of that can determine the success of the project. This article will respond to some of the questions regarding estimates inaccuracies, whether it is underestimating or overestimating a project. Here, the article will consider the arguments from Griffin (2015) about how we can create an accurate estimates.

What is worse: underestimating or overestimating a project?

In my experience, underestimating is worse when we try to estimate the duration and cost of a project. While overestimating is worse when we try to estimate the benefit of a project. Both cases typically lead to losses, which can be catastrophic.

While overestimating the duration and cost of a project also have drawbacks, it is usually more manageable and safer compared to underestimating them. This is why Griffin (2015) prefers to add 15% for scope management to the total estimate. We can also see this urgency in a large project, which typically includes a 5% to 10% contingency of the total estimated cost to deal with unforeseen expenses (Nieto-Rodriguez, 2021). It is also common for initial cost estimates in project contracts to be deliberately overestimated. It is set to be quite high to provide more room for negotiation and rebidding (Pinto, 2019). Avoiding an underestimate is crucial in evaluating project scope.

Nevertheless, the best estimate is the most realistic estimate which addresses all factors of uncertainties. In some cases where we have little experience, we can look for people with more experience to provide their estimates and ask them to list all sources of uncertainties related to the project. Then, we can create an optimistic estimate and a pessimistic estimate as complements to the most realistic one.

Also read about: The Value of a Robust Project Management Approach

How to combat the tendency to underestimating or overestimating a project

Griffin (2015) provides two general ways to solve the issue: scope to time and time to scope. However, I think both ways are still subject to bias. Even if we can accurately determine all the scopes, estimating the time for each scope will still be influenced by bias. Human nature will try to avoid presenting projects that are likely to fail, and instead, we tend to present our figures in a way that encourages success (Nieto-Rodriguez, 2021). Griffin (2015) addresses this using three methods: utilizing a middle timescale historical data, asking multiple people to estimate, and scaling up or down. I think these methods can be an effective approach to reducing bias.

The next thing I want to emphasize is to build a healthy corporate culture that encourages honesty and transparency and allow people to make mistake. Pinto (2019) criticizes firms that use punishment policies for project schedule slippage, noting that it will grow further bias that can lead to deceit. In some other firms, people feel safe to intentionally hiding information about the progress of a project or misleading top management with false estimates. This is how organizational culture influences project planning processes such as estimated cost and schedule (Pinto, 2019).

Since estimating duration and cost is usually an uncertain process, it is common for some people to set much higher estimates to give themselves as much time as possible. On the other hand, projects usually get lower funding than the estimated cost because the top management is assured that the project team is intentionally increasing their estimates to get excessive funding (Pinto, 2019). These phenomena usually are more of a result of a culture that prefers poor estimates and poor planning than to being late with project deliverables. This issue will not appear if there is a culture of trust and truthful interaction that encourage honest assessment without worrying about punishment for a mistake.

Approaches to mitigate inaccuracies

The most effective approach in the article is to reach across the aisle, which is to encourage good open client communication (Griffin, 2015). Project managers should build open and truthful interactions with the client or the top management from the beginning. They can list all uncertainties to be considered and what is the plan to tackle the unfavorable situations. This approach will establish a more collaborative relationship and prevent adversarial behavior (Griffin, 2015). It can also establish mutual trust between project managers and the client, which is a very important thing that can prolong collaboration for future projects.

While the most ineffective approach, in my opinion, is to use middle timescales (days and weeks) to conceptualize the time scope of the project. I think people should be given more flexibility to use the most suitable timescale for their estimate. For instance, a project to launch a spaceship or a probe into the outer solar system may require a bigger timescale.

References

Griffin, M. (2015, June 18). The Art of Creating Accurate Estimates. A List Apart.  http://alistapart.com/column/creating-accurate-estimates/

Pinto, J. K. (2019). Project Management: Achieving Competitive Advantage, Global Edition (5th ed.). Pearson.

Nieto-Rodriguez, A. (2021). Harvard Business Review Project Management Handbook: How to Launch, Lead, and Sponsor Successful Projects (HBR Handbooks). Harvard Business Review Press.

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