Construction Management

Top Down Estimation In Project Management

Top Down Estimation In Project Management

Top Down estimation is a project estimating technique in which the overall project is estimated first and individual tasks are allocated from there. You begin at the top of the pyramid and work your way down.

When there is a fixed budget and/or the scope of the project must fit within a predetermined funding level, this type of project budgeting is used.

When there is a fixed budget and/or the scope of the project must fit within a predetermined funding level, this type of project budgeting is used.

Accuracy

Individual task estimates in top down estimation are only as accurate as the overall project estimate from which they are derived. If the overall estimate is incorrect, nothing will make the individual task estimates any more accurate. And, because projects are typically tracked through individual tasks, this could cause problems during the project if individual tasks are incorrectly apportioned, even if the overall estimate is correct. This adds another level of risk to Bottom Up Estimating, and you’d be surprised how quickly the mummies emerge from their tombs when project estimates are inaccurate.

Cost Estimating

For individual tasks, the Project Management Body of Knowledge (PMBOK) specifies three estimating levels:

  • Analogous Estimating is the calculation of an estimate based on previous, similar projects, such as the neighbor’s fence costing $10,000, so ours should cost $12,000.
  • Parametric Estimating involves the use of a unit cost multiplied by the number of units The unit cost can be derived from previous projects or from publicly available industry data. For example, the fence next door cost $10 per foot.
  • Three Point Estimating.  This method entails calculating an optimistic, pessimistic, and most likely estimate. The following triangular distributions can be used to calculate the final estimated value:

E = (a + m + b) / 3
or the beta distribution:
E = (a + 4m + b) / 6

  • E = Final estimated cost
  • a = Optimistic estimate
  • m = Most Likely estimate
  • b = Pessimistic estimate

Three point estimating may appear to be hieroglyphics, but it is a powerful method that takes project risks into account and can be used in conjunction with the other two.

These methods are applicable to individual tasks and are part of the Estimate Costs process outlined in the PMBOK. The Determine Budget process is used to determine the overall project budget once each task has been estimated.

The Overall Project Budget

The Determine Budget process includes the steps for combining individual task estimates into an overall project budget. Top Down Estimation is one of two methods for estimating in this process. The other is as follows:

Bottom Up Estimating is the first step in determining individual task estimates, followed by aggregating the task estimates into an overall project estimate.

Bottom Up Estimating is more common than Top Down Estimation because Top Down is limited to situations where a budget has been established in advance and the project manager must determine the project scope that fits within the budget.

Finally, keep the mummies in their tombs by first determining project level estimates and then apportioning it down to individual task level estimates using top down estimation.

A Top-Down Example

Assume you’re in charge of upgrading your application’s hardware and software layers. Based on previous experience, you know you’ll need to set up a new server, upgrade the operating system, and then install the most recent version of the application software. All of these are top-down tasks that can be delegated to a project team to complete. Because of a conflicting API or compiled library, there is a risk that the application software will not work on an upgraded software layer. The difficulty lies in all of the small details that have an impact on your project.