IT projects have a large rate of failure. This is partly due to the unstable environment an IT project has to operate in, partly due to bad management, but mainly due to the fact that projects start with an unrealistic estimate and has to live up to impossible expectations. The “Basis of Estimate” is a good framework to establish the completeness of an estimate and to control the progress. To create a reliable estimate for a realistic project the right basis must be selected for design, sizing, effort, planning and cost. How can we select the right experience data to make realistic predictions for a new IT project.

1. Estimating & Control
Reliable Estimates for Realistic Projects
Frank Vogelezang
Manager Pricing Office

2. 2
Agenda
Estimating IT projects
 Estimating . . Off track?
 On track with a track record
 Keep track

3. Introduction
Frank Vogelezang 3
Pricing Office
Functional Size
- NESMA FPA
- COSMIC

4. Estimating . . Off track?
Why is IT so difficult to create reliable estimates

5. IT has a bad track-record in project estimating
Estimating . . Off track?
5
For a critical analysis of the Chaos reports see: www.cs.vu.nl/~x/chaos

6. IT has a bad track-record in project estimating
Estimating . . Off track?
Any idea where this bad track-record comes from?
 No clear project objective
 Start with an inadequate budget
 Too little time and/or resources
 No use of benchmarking
 No idea what an estimate is
6
We can double
the estimate . . . . but then it will
ultimately be four
times as expensive!
on estimating

7. A typical IT estimate
Estimating . . Off track?
7
Probability
Schedule / Cost
50/50 median result
First likely option

8. Estimating on track
Start on track and stay on track by building a track record

9. On track or off track
Keep track of your portfolio
9
www.itdashboard.gov
-15% on $5.3 Billion
+31% on $461 Million

10. Benchmarking as reality check
Does it fit my historical track record?
10
Paul Masson’s
Law
Parkinson’s
Law
Brooks’
Law
Minimal time
Optimal effort
Time
Effort/Cost
Realistic
Productivity

11. A bad estimate is the start of a troubled project
Recommended practices as an external track record
11
RECOMMENDEDPRACTICE
Estimation
purpose
Engagement
Scope
Description
Estimating
methodology
(FP, expert,
etc.)
Estimate
Classification
(1,2,3,4,5)
Design Basis
(Components
lists, units, etc.)
Sizing Basis
Requirements
Functional
technical
Effort Basis
delivery
constraints,
service levels
Planning Basis
Working time
standby
Cost Basis
methods and
sources , units
Assumptions
internal,
external
Allowances
Not in the Basis
Exclusions
No costs
included for…
Exceptions
anomalies or
variances on
standard
Risks and
Opportunities
assumptions
Containments
cost elements
for mitigation
Contingencies
Uncertainty,
unforeseeable
elements
Management
Reserve
changes in
scope, effort
Reconciliation
Changes to
previous
estimation
Benchmarking
Comparisons to
similar
engagements
Estimate
Quality
Assurance
Reviews
Attachments
Level of detail
Stage, Deal
size/type, fixed
price/TM
Attachments Attachments Attachments

12. Keep track
From a reliable estimate to a realistic project result

13. 13
Keep track
Actuals versus plan
Schedule Variance
Time Variance
Cost Variance
Budget Variance
Actual cost
Earned value

14. 14
Keep track
Forecast based on actuals
Schedule
Slippage
Cost
Overrun
Actual cost
Earned value
Total cost (forecast)
Total value (planned)

15. 15
Keep track
The whole picture
Budget Variance
Schedule
Slippage
Schedule Variance
Time Variance
Cost Variance
Cost
Overrun
Actual cost
Earned value
Total cost (forecast)
Total value (planned)

16. 16
Keep track with Estimating & Control
Reliable estimates and realistic projects
 Estimate & Plan
 Create a baseline estimate
 Develop a Project Plan
 Monitor and Control
 Document actuals
 Create forecast based on actuals
 Re-estimate and establish new baseline
 Measure and Analyse
 Establish variances for the whole project
 Determine experience data parameters
 Incorporate this knowledge in future estimates and plans
Estimate
&
Plan
Baseline(s) vs
Final Actuals
Experience &
Knowledge
Measure
&
Analyse
Monitor
&
Control

17. 17
frank.vogelezang@ordina.nl
WatKostIT.blogspot.nl
ThePriceofIT.blogspot.com
@FrankVogelezang
FrankVogelezang
www.linkedin.com/in/frankvogelezang

18. Basis of Estimate for IT Services
New standard practice by NESMA and AACEi
18
RECOMMENDEDPRACTICE
Estimation
purpose
Engagement
Scope
Description
Estimating
methodology
(FP, expert,
etc.)
Estimate
Classification
(1,2,3,4,5)
Design Basis
(Components
lists, units, etc.)
Sizing Basis
Requirements
Functional
technical
Effort Basis
delivery
constraints,
service levels
Planning Basis
Working time
standby
Cost Basis
methods and
sources , units
Assumptions
internal,
external
Allowances
Not in the Basis
Exclusions
No costs
included for…
Exceptions
anomalies or
variances on
standard
Risks and
Opportunities
assumptions
Containments
cost elements
for mitigation
Contingencies
Uncertainty,
unforeseeable
elements
Management
Reserve
changes in
scope, effort
Reconciliation
Changes to
previous
estimation
Benchmarking
Comparisons to
similar
engagements
Level of detail
Stage, Deal
size/type, fixed
price/TM
Estimate
Quality
Assurance
Reviews
Attachments Attachments Attachments Attachments

19. Row 1 – General aspects
Basis of Estimate for IT Services
19
Estimation
purpose
Engagement
Scope
Description
Estimating
methodology
(FP, expert,
etc.)
Estimate
Classification
(1,2,3,4,5)
Level of detail
Stage, Deal
size/type, fixed
price/TM
 Purpose
 Engagement Scope Description
Decomposes the solution into its constituent elements
 Estimating methodology
Is the estimate functional size based, expert based, analogy based, process
metrics based, parametric based
 Estimate Classification
From detailed fixed-price estimates (1) to the first screening of ideas (5)
 Level of detail
The lower the classifiction, the more details are needed
RECOMMENDEDPRACTICE

20. Row 2 – Basis
Basis of Estimate for IT Services
20
Design Basis
(Components
lists, units, etc.)
Sizing Basis
Requirements
Functional
technical
Effort Basis
delivery
constraints,
service levels
Planning Basis
Working time
standby
Cost Basis
methods and
sources , units
 Design Basis
Process or architectural documents that describe the project
 Sizing Basis
Units used to express the project in product quantities
 Effort Basis
Methods (and tools) used to convert size into effort
 Planning Basis
Activities, Milestones and Constraints
 Cost Basis
Methods and sources used for determining all unit, effort, subcontract,
material and expenditures cost
RECOMMENDEDPRACTICE

21. Row 3 – Risks
Basis of Estimate for IT Services
21
Assumptions
internal,
external
Allowances
Not in the Basis
Exclusions
No costs
included for…
Exceptions
anomalies or
variances on
standard
Risks and
Opportunities
assumptions
 Allowances
 Assumptions
 Exclusions
What is nót part of the estimate
 Exceptions
Anomalies or variances to standard estimating practices
 Risks and Opportunities
High risk or opportunity related to cost, duration, quality and/or safety
RECOMMENDEDPRACTICE

22. Row 4 – Mitigation
Basis of Estimate for IT Services
22
Containments
cost elements
for mitigation
Contingencies
Uncertainty,
unforeseeable
elements
Management
Reserve
changes in
scope, effort
Reconciliation
Changes to
previous
estimation
Benchmarking
Comparisons to
similar
engagements
 Containments
Measures included to prevent and/or mitigate the identified risks
 Contingencies
 Management Reserve
 Reconciliation
major differences between the new
or re-baselined estimate and the last published estimate
 Benchmarking
comparisons of overall estimate metrics, ratios, and factors with similar
engagements, historical data, and industry data
RECOMMENDEDPRACTICE

23. Row 5 – Quality
Basis of Estimate for IT Services
23
Estimate
Quality
Assurance
Reviews
Attachments Attachments Attachments Attachments
 Documentation of the QA on the Estimate
 Estimate Deliverables Checklist
 Reference Documents
sizing report, requirements, designs, texts, notes, specifications
 Additional Attachments (optional)
reconciliation report, benchmarking report, risk analysis report
RECOMMENDEDPRACTICE