Project Management Institute

Timing is everything

ESTIMATING SOFTWARE ISN'T JUST FOR NUMBER CRUNCHING ANYMORE.

Estimators have moved beyond the accounting department, sharing their wealth of information to negotiate stronger deals, help project managers plan better schedules and enable executives to see more clearly how well current projects fit into their strategic goals.

Here are four companies that use estimating software to make better business decisions faster.

BY KIM KAISER

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executive summary

  • img   Calibrated estimating software creates more accurate predictions of final cost and delivery dates, giving project team members greater confidence in initial project plans.
  • img   Estimating applications help keep the customer in the loop to avoid confusion and disagreement about project proposals.
  • img   The software helps project steering committees determine whether a proposed project aligns with organizations’ strategic direction.
  • img   Integrating an estimating application's data into other programs improves communication with customers.

Speaking the Same Language

Before Bae Systems, Hampshire, U.K., a leading aerospace and defense company, implemented estimating software, skepticism abounded.

“You could never be sure how accurate [available information] was, and this made planning difficult,” says David Chard, Bae's project planning release manager. “[The software] gives us greater confidence in the data, and we can rely on it to be more indicative of what will happen in the future.”

img With an estimating application in place, Bae Systems now puts out more accurate predictions of final cost and delivery dates, squelching many skeptics’ concerns.

And the benefits go beyond accuracy. Mr. Chard says the software has helped promote cultural change on Bae's Eurofighter Typhoon project. The Eurofighter Typhoon is a highly advanced, Mach 2-capable, multipurpose combat aircraft designed to meet the requirements of four European partner nations. The software “has brought about more informed and accurate decision-making among the project managers,” Mr. Chard says. “They now have timely access to the facts and are able to use these to predict future performance.”

The software also allows for the project team to focus more on analyzing the estimation data, rather than computing the data, and it has improved cost and business awareness. “The data quality continues to improve,” Mr. Chard says. “Everyone is now talking about the same common project language.”

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The software has brought about more informed and accurate decision-making among the project managers.

David Chard, Project Planning Release Manager, Bae Systems, Bristol, U.K.

Seeing Eye to Eye With Customers

Raytheon Intelligence & Information Systems (IIS), Garland, Texas, USA, provides critical communications and battle management capabilities for land, sea, air and space applications, including signals, imaging and geospatial intelligence, air and space-borne command and control, ground engineering support, and weather and environmental data management.

The company uses estimating software to determine the cost of new business pursuits. Raytheon IIS implemented its cost modeling software about nine years ago to better align its processes and tools with its customers, many of whom already used similar applications.

img The parallel systems enable Raytheon and potential customers to avoid confusion and disagreement about projected new business cost estimates, says Gary Constantine, manager of parametric estimating. Using the same cost estimating tools as its customers has helped create a common knowledge and estimating-tools base, leading to greater common understanding of proposed cost estimates, reduced costs, and increased efficiency in fact-finding and negotiating processes.

The detailed cost drivers provide models along with local model cost history calibrations, giving customers hard-core data on which to base their decisions. “Our customers use [estimating software] to develop a ‘should’ cost and compare it to our estimate,” Mr. Constantine says. “Using common cost estimating tools makes it easier for them to understand how we got our cost.”

Developing software for its defense-based customers requires that applications run to military standards, so intensely detailed designs and test plans are presented at standup presentations that require a great deal of preparation. Estimating software enables IIS team members to enter probability levels for each parameter, making it possible to determine the impact of change in various program parameters. Mr. Constantine says internal studies have shown the use of properly calibrated cost models has enabled cost realism, with a plus or minus 10 percent level of accuracy for proposal estimates. “[With calibrated estimating software] we can turn in an estimate in faster time, which improves the quality of the estimate and its acceptance,” Mr. Constantine says.

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This chart only represents a sampling of estimation software providers and available features, not a comprehensive list of the available tools or a testament to quality. The listing is meant to be a launching point for further discussion and research on the subject. Appearance in this chart does not constitute an endorsement by PM Network or PMI.

Watch the Road Ahead

Volkswagen (VW) Credit Inc., Libertyville, Ill., USA, the credit arm of the Wolfsburg, Germany-based carmaker, implemented a new estimating application in November 2003 to tackle myriad frontend project procedures.

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Our customers use [estimating software] to develop a “should” cost and compare it to our estimate.

Gary Constantine, Manager, Parametric Estimating, Raytheon Intelligence & Information Systems, Garland, Texas, USA

Estimators will use the new application for system development project proposals most often, but they also will expand the application's value to help in new product development, technical infrastructure, and maintenance and upgrade project plans.

The implementation project team currently is entering historical data to create an initial platform upon which to base estimates. Upon upload completion, Robert Wallace, PMP, IT PMO manager, expects the new system will eliminate redundant data sent to customers, previously the cause of confusing, conflicting information for potential buyers. “We expect it to provide a more systematic way to audit projects to ensure they are following the prescribed process,” he says.

img The application's output helps the project steering committee determine whether the proposed project will augment the organization's strategic direction or stray from the ultimate goals of the executive suite. The estimates also enable project leaders to hit the ground running. “The project manager takes ownership of the project, builds out the schedule, allocates resources from the pools and begins to track project progress,” Mr. Wallace says.

In the few months since VW Credit rolled the program out, the estimating application has increased visibility and enabled executives and project leaders alike to learn where and how valuable time is spent. The application also has helped the company identify which business processes and standards need greater definition.

“As we continue to try to utilize new functionality, we often find we can't implement or train on how to use the system until we have a clearly defined and common business process across the organization,” Mr. Wallace says. “It's true that software doesn't fix business process issues. However, I think it has helped us recognize the business process issues we may not have otherwise addressed.”

Project performance will be monitored continuously based on corporate values. “Currently as an organization, we don't systematically monitor projects for the purpose of determining when they no longer add value,” Mr. Wallace says.

The new software will help enforce the company's established project management methodology. “The most profound impact the software may have on old versus future project management is by forcing a common project management methodology,” Mr. Wallace says. “Currently, groups across IT can choose to use project templates or not. The new tool provides us with a control mechanism to monitor and ensure that all projects in the organization are following the prescribed project process.”

Aiming Higher

Northrop Grumman Mission Systems, Redondo Beach, Calif., USA, is looking to take its estimating to the next level by sharing estimates with other programs to optimize its data usage.

img Lori Vaughan, senior cost engineer for the Office of Cost Estimating and Risk Analysis, says that integrating data into various programs makes products more deliverable to customers and improves communication. “We can refine the information even further if necessary, and it can be put into Microsoft Project. It makes it more useful for detailed planning purposes,” she says.

In the past, Northrop would gather data to determine a cost estimate but wouldn't use it to paint larger project pictures. Now, Ms.Vaughan says, Northrop is experimenting with refining the data from the cost estimate and using it to maintain and update the parametric models of work that have been completed to date. The estimate gives project leaders, executives and customers a better frame of reference to plan next steps. “It is vital to have as much open communication between ourselves and our stakeholders,” Ms. Vaughan says. “The parametric model works as a frame base for that communication, and it helps flush out assumptions across stakeholders.”

Aside from communication, the estimating tools help Northrop stay organized and allow for rapid changes if assumptions or parameters vary. The process of re-estimating a project is much quicker now if changes need to be made, Ms.Vaughan says. “It is something that our customers want to be doing, so it makes a lot sense for us too,” she says. PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK | SEPTEMBER 2004 | WWW.PMI.ORG
SEPTEMBER 2004 | PM NETWORK

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