Question

Estimating project activity durations is critical to the project budgeting process. Compare and contrast top-down versus bottom-up estimating and discuss how the project costs are influenced by the quality and accuracy of estimates.

Answer 1

The top-down estimating starts with a form of overall result and applies it to a new set of tasks. If a project resembles prior work, the estimator uses relevant components of completed efforts to fill in cost blanks for parts of the current prospect. Projects with several repetitions of a much smaller job or a large version of a small project, lend themselves to top-down techniques that repeat the cost of a small module to derive an overall figure or magnify the cost of a small job to forecast a larger one. An example of top-down estimating would be a manager estimating the cost for temporary staff to help complete a special project. This may include the manager sending the estimate to the department supervisor, budget and HR department. The estimate would need to include an estimate of the number of staff needed, salary requirements, equipment, hours to complete project, etc. The mangers involved in each department would take the budget numbers and adjust accordingly for the required tasks. Bottom-up estimates rely on collecting all the individual costs of a project to build up to the total for the job. The bottom-up estimating provides more-accurate estimates than other estimating methods because it calls upon the expertise and knowledge of the people closest to the work in developing the cost estimates. This method ensures a more accurate appraisal of cost because it involves actual numbers and parts of the project. Since this method provides an estimate for each individual task or activity; if plans change, new estimates can be easily produced because the data already exists. An example of bottom-up estimating is our annual inventory on my current job. I provide administrative support for over 20 home-based nurse investigators and they are all issued standard equipment (per our department policies) when hired for their home offices such as tablets, printers, phones, etc. When providing our purchasing office with annual equipment cost estimates for our nurse positions, this data is already available and accurate. The changes that may occur and require cost adjustments are when equipment is replaced which may involve upgrades, or when all equipment is upgraded after warranties expire.