Four Types of Estimation Techniques - PMP Exam Tips

Hello and welcome back to Examspm's PMP Exam Tips series. In this video, we are going to cover the 4 types of estimation techniques. When you're planning your project, you may not know all the information that you need upfront, so you need to create cost and schedule estimates that may be far off at the start of your project. We're going to look at the estimation techniques you need to use here, and if you haven't attended our free training already, be sure to check it out at www.examspm.com/free where I will teach you The exact strategies you need to use in order to pass your PMP exam in the next 6 weeks. These strategies will work whether it's your first try or if you have failed previously and you're attempting your PMP exam again. Okay, with that being said, let's now dive into today's lecture. So first up, we have analogous estimation. So you use analogous estimation when you compare the cost of the project with any similar projects that you have done in the past in order to come up with the estimation for your current project. You use this technique when you have little information about the current project and you have done similar projects in the past. The cost estimation of this technique can be considered a rough order of magnitude as the accuracy of this estimate is not really good. So this estimation technique is also known as the ballpark estimate. Next up, we have the parametric estimation. So in parametric estimation, you take statistical data from any past projects or industry benchmarks and apply apply it to your current project. For example, the cost of painting per square foot. So this is usually more accurate than an analogous estimation. However, it also does take a longer time as well. This estimation technique can be definitive or rough order of magnitude depending on the quality of data and effort involved. So let's take a look at an example here. Let's say that it costs $150 to install 1 mile of cable and we need 10 miles of cable on our project. So therefore, we would estimate that the cost of installing the cables we need on our project to be $150 times 10, which gives us $1,500. Now let's move on to our 3rd type of estimation, which is our 3-point estimation. So like its name suggests, what you're doing in 3-point estimation is that you're determining 3 points instead of 1 and taking the average of those 3 points in order to come up with your cost or your schedule estimations. So here's the exact steps to coming up with your estimation. The step— first step is to come up with an optimistic estimation. The second step is to come up with the most likely estimation, and third, a pessimistic estimation. And if the question is asking for this 3-point estimation, what you're going to do is add up your optimistic plus your most likely plus your pessimistic and divide it by 3. There's a variation to the 3-point estimation called PERT, and in PERT estimation, what you're doing is you're adding the optimistic plus 4 times the most likely plus plus the pessimistic estimation and dividing by 6. In this scenario, you're putting more weight on the most likely estimation. So in 3-point estimation, you find 3 estimates and take the average in order to remove the bias. The accuracy of this estimate is better than the 2 we previously described. Now let's take a look at an example. So let's say that our task is to complete file migration, and optimistically, it will take 4 weeks for us to complete this migration. Most likely it will take us 7 weeks, and pessimistically, in the worst-case scenario, it'll take us 9 weeks to complete. And if we're using the standard 3-point estimation technique to calculate how long it will take us to complete this task, we will add up the 3 estimations that we have determined, so 4+ 7+ 9, and divide that by 3, which gives us 6.67 weeks. And if we use PERT estimation, we will give more weight to the most likely scenario of 7 weeks. So if we're using PERT estimation, We're doing 4 plus 7 times 4 plus 9 divided by 6, and this gives us 6.83 weeks. On your upcoming PMP exam, if the question doesn't specify to use the 3-point estimation, you can assume that by default the question is asking you for the PERT estimation. So you can use the formula optimistic plus 4 times most likely plus pessimistic divided by And our 4th and final type of estimation is called the bottom-up estimation. The bottom-up estimation technique gives you the most accurate results and is also known as the definitive estimation technique. So in this technique, you find the cost or the schedule of the activity by adding up all of the individual component parts of the project. So if you're determining the cost of the overall project, you will add up all of the cost of all of the activities within that project to determine the overall cost. And same for schedule. If you're trying to find the overall schedule or timeline for the project, you would add up how much time it's going to take you to complete each of the individual activities and add all of that up in order to determine the overall timeline for the project. So as you can see, doing this technique is going to require a lot of time, but it's going to give you the most accurate results. So this concludes our video on the 4 different types of estimation techniques. Just as a recap, they are analogous estimation, parametric estimation, 3-point estimation, and bottom-up estimation. You do need to know these 4 for your upcoming PMP exam. And if you want to learn more tips just like this one and learn exactly how you can pass your PMP in the next 6 weeks, be sure to sign up for a free training at www.examspm.com/free. I can't wait to see you there. Thank you so much for joining us today.