Project Management Institute

A low tolerance for error

No one can see into the future—yet project managers have to try. Sidestepping these common estimating errors will help.

BY RACHEL BERTSCHE

PORTRAITS BY JEFF SINGER

Tracy Parker, PMP, Nvidia, Santa Clara, California, USA

Tracy Parker, PMP, Nvidia, Santa Clara, California, USA

Project managers aren’t fortune-tellers. Yet that’s exactly what the job calls for: knowing in advance what a project will cost, how long it will take and what resources it will need.

When project practitioners’ initial estimates don’t match up with reality—when the project goes over budget and beyond schedule—it doesn’t always mean the project failed during execution. It could mean the initial cost and timeline estimates were faulty in the first place.

“It is crucial to create reasonable estimates and set manageable expectations,” says Gaurav Chauhan, PMP, senior manager of projects for international property consultancy Knight Frank, Haryana, India.

Still, Mr. Chauhan says, estimating errors happen all too frequently. The consequences are clear: A megaproject to extend a commuter rail line in New York, USA—the largest ongoing transportation infrastructure project in the country—has gone more than US$6.5 billion over budget and 14 years beyond schedule. The culprit, according to a former project lead, was an unrealistic initial estimate.

Here are eight common causes of estimating errors, as well as the best ways to avoid them.

It is crucial to create reasonable estimates and set manageable expectations.”

—Gaurav Chauhan, PMP, Knight Frank, Haryana, India

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The Problem:

Living in the Past

When creating their estimates, project practitioners have to consider how similar projects fared in the past. However, it can be dangerous to rely on history alone.

Looking solely to previous projects was “the biggest estimating mistake I ever made,” says Wafi Mohtaseb, PMI-ACP, PMI-SP, PMP, a software development manager at the National Bank of Kuwait, Kuwait City, Kuwait. “At the time, I did my estimates based on similar previous projects, and I had an overreliance on historical numbers. It was early in my career, and it cost me a lot. It’s a very common mistake.”

The Solutions:

Involve subject matter experts. Build time into the estimating process to talk with industry specialists working on similar initiatives in the present, Mr. Mohtaseb says.

“Estimating is important team work,” Mr. Chauhan says. “Most estimates will be accurate if you have the right experts working with you. Break down the project into different parts that subject experts can weigh in on with confidence.”

Looking solely to previous projects was “the biggest estimating mistake I ever made.”

—Wafi Mohtaseb, PMI-ACP, PMI-SP, PMP, National Bank of Kuwait, Kuwait City, Kuwait

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Project managers should be concerned with technical feasibility and cost/schedule reasonableness, and then be ready to propose scope deferrals or reductions in the event of funding cuts, emergencies or competing priorities.”

—Russell Looney, PMP, Project Time & Cost Inc., Richland, Washington, USA

The Problem:

Public-Sector Optimism

Around the world, large public infrastructure projects requiring political approval are prone to overly optimistic estimating. For example, Boston, Massachusetts, USA’s infamous central artery/tunnel project—popularly known as the “Big Dig”—was estimated to cost US$2.8 billion but ultimately went more than 190 percent over budget and finished nine years late.

Overly optimistic estimating on large public infrastructure projects “happens regularly, and it comes with the territory,” says Russell Looney, PMP, senior cost estimator at Project Time & Cost Inc., who is based in Richland, Washington, USA. The organization specializes in construction management for federal government projects.

There are various reasons that estimates might ultimately prove very low. “Sometimes agency turnover, elections, labor, environmental or economic factors result in project delays, terminations and restarts,” he says.

It’s not just that politicians set and approve budgets at the legislative level, or that cost-conscious political dynamics can sway project managers toward overly optimistic estimates. “The reality is that today’s budgets and funding levels are moving targets,” Mr. Looney adds.

The Solutions:

Know the dynamics and volatility of the project’s environment. Seek stakeholder perspectives during the planning stages and be ready for anything.

“Project managers should be concerned with technical feasibility and cost/schedule reasonableness,” Mr. Looney says, “and then be ready to propose scope deferrals or reductions in the event of funding cuts, emergencies or competing priorities.”

Also, successful project managers working on megaprojects understand the value of involving experienced life cycle cost estimators beginning at the scope definition phase, he says. That way, decision-makers have useful cost information for capital requirements and forecasting.

The Problem:

Varying Experience Levels

A team member who is new to a task typically takes longer to complete it than someone who’s done it before, so estimating a timeline without considering team members’ varying levels of experience can cause major estimating glitches.

“If you ask for an estimate on a task and the person giving you the estimate hasn’t done the task before, they have nothing to go on,” says Marc Gorcey, PMP, program director, Havas Digital, Toronto, Ontario, Canada. “You can always expect a communication gap when someone is dealing with something brand-new.”

“If we’re going into an area where there’s new work… I add in a bit of a risk factor.”

—Marc Gorcey, PMP, Havas Digital, Toronto, Ontario, Canada

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The Solutions:

Don’t assume everyone on the team shares the same knowledge or experiences. Instead, ask before estimating: Find out if team members have worked on similar tasks. With less experienced members, expect a learning curve—and schedule for it.

“If we’re going into an area where there’s work that may be new to me or new to the person executing the task, I add in a bit of a risk factor,” Mr. Gorcey says. “When I ask them to deliver an estimate, I use their experience as a conversation opener to say, ‘How sure are you of this estimate?’ If I forget to do that, I can get into problems.”

Present executives with alternatives: ‘You can’t have it by May 1, but you can have this on May 1 or that on May 1—or all of it in July.’”

—Tracy Parker, PMP

The Problem:

The Top-Down Decree

Executive pressure can be hard to navigate—and to estimate. A top-down decree of the timeline, especially before the full project scope has been made clear, could set up a team for trouble, and potentially even failure, Mr. Mohtaseb says.

“When timeline estimates are decreed, it will inevitably impact the quality of the deliverables. Then, to overcome quality issues, you’ll end up investing more time and resources in the testing and development cycles,” he says.

“The intent from the top is mostly to put a project manager at maximum efficiency,” Mr. Chauhan says. As a result, however, project managers are often asked to finish projects in an unrealistic amount of time or with unrealistically low costs, he adds.

The Solutions:

Rather than trying to sway sponsors by pointing to a general project timeline, break it down into its components. “If you divide the project into parts and demonstrate a reasonable estimate for each,” you can show why the time requested is, in fact, the time needed, Mr. Chauhan says.

When it comes to persuading executives, project practitioners should follow the guideline of “show, don’t tell.” Instead of simply insisting that a mandated timeline won’t work, illustrate it by pointing to specific scheduling data, says Tracy Parker, PMP, IT program manager, IT project management office at tech company Nvidia, Santa Clara, California, USA. “You can say, ‘Look, the numbers aren’t falling in the schedule that we’ve put together. We’ve optimized it 100 percent and we will not be done when you want us to be done, but we will be done by this other date.’”

Never just say, “We can’t,” Ms. Parker says. Offer a different solution instead. For instance, while the project might not be completed by the executives’ desired date, the team could complete a pilot project by then. “Dealing with an imposed estimate,” Ms. Parker says, is a matter of presenting executives with alternatives: “You can’t have it by May 1, but you can have this on May 1 or that on May 1—or all of it in July.”

The Problem:

The ‘Just a Quick Look’ Client

It’s rare that a client will sign off on a project estimate, walk away and then not show up until the project is complete. Clients will want to take “just a quick look at your deliverables” during the project execution—a mid-project check-in, Mr. Gorcey says. “A client is always going to want to jump in and give their opinions partway through,” he says.

That “quick look” can result in a major adjustment of an otherwise on-target project estimate. “When their quick look turns into a lot of changes or an entirely new direction, that can set your whole project off course.”

The Solutions:

Don’t get caught off guard by check-ins. Build them into the estimate.

“If you don’t make it clear in your statement of work exactly when the client gets to give input, when they get to change direction and how that communication is supposed to happen, then you get in trouble because they’ll do it anyway,” Mr. Gorcey says. “You could be halfway through a job and the client says, ‘Well, I just want to see it.’ But what if they see it and don’t like it?”

Create an estimate that allows for that “what if,” Mr. Gorcey adds. “If they have a scheduled chance to give input, you can at least tell them to wait until that specific moment.”

When [clients’] quick look turns into a lot of changes or an entirely new direction, that can set your whole project off course.”

—Marc Gorcey, PMP

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The Problem:

Everything Changes

An estimate is just that—an estimate, not a certainty set in stone. The problem isn’t that the estimate will change, however; the problem is assuming it won’t.

“It’s so easy to make a mistake on cost, at least in the very initial phase when you’re doing a charter,” Ms. Parker says. “If you’re held to a cost from that initial phase, everyone is going to lose.”

The Solutions:

Project managers should treat the estimate from the start as a changing document—and so should executives and other stakeholders. Change isn’t a bad thing: It means the estimate can become more precise.

“You should initially estimate the project in orders of magnitude, plus or minus 50 percent, and home in as you go. When you get a more definitive estimate, it should be plus or minus, say, 10 percent,” Ms. Parker says. “Or you can say, ‘I think this is going to cost US$100,000, but I only have 50 percent confidence in that number.’” Closer to project execution, that percentage may increase.

Also, document not just the estimate, but how it changed and became qualified over time. “That way, if you have to ask for more money later and the sponsor says, ‘But you said it was only going to cost US$100,000,’ you have the documentation to back you up.”

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It’s so easy to make a mistake on cost. If you’re held to a cost from the initial phase, everyone is going to lose.”

—Tracy Parker, PMP

The Problem:

The Holiday Factor

It’s an easy mistake to make: Project managers assume that all stakeholders share the same calendar. Yet making that assumption while devising an estimate can have dire consequences later on.

Early in her career, Ms. Parker made what she now calls a “rookie mistake,” one that delayed her project by a few weeks. “I didn’t account for the holidays, both in the United States and abroad,” she says. “In the United States, if you’re working on something that goes through the Christmas holiday season and you don’t block out everybody’s vacation time and the days the office has off, you’re going to be in trouble.”

That trouble will only grow if project practitioners overseeing cross-border initiatives don’t consider other countries’ holidays, Ms. Parker adds.

“If you’re working on something that goes through the Christmas holiday season and you don’t block out everybody’s vacation time and the days the office has off, you’re going to be in trouble.”

—Tracy Parker, PMP

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The Solutions:

Build national and company holidays into the scheduling estimate—taking into consideration team members’ countries of origin. Also, while holidays are fixed, vacation time isn’t; check in with team members about their planned time off. It isn’t uncommon for western Europeans to take all of July or August off.

“I remind people, ‘If you’re going to be on vacation, let me know so I can build it into the schedule,’” Ms. Parker says. “That way you set everyone up for success rather than realizing you forgot to account for five weeks’ worth of the team’s time, which makes everyone look bad.”

I learned to avoid overlap problems by creating reasonable float in timelines.”

—Gaurav Chauhan, PMP

The Problem:

Too Much Multitasking

It can be tempting, especially when devising an initial estimate, to think multiple project tasks can be performed simultaneously to save time. Yet such overlaps can backfire if the team hasn’t verified that they’re practical, Ms. Parker says.

“In software development, we tend to try to overlap activities during deployment, so you might say, ‘Can’t the quality assurance happen during the day and the security assessment happen at night? Or can’t you do both at the same time?’” she says. “But a lot of times load testing that happens during quality assurance testing in a staging environment might be happening at the same time that the security people are running assessment tests and are trying to break the system, and those things can affect each other.”

An estimate that doesn’t take such consequences of overlapping into account “can actually add time in the long run,” she adds.

Mr. Chauhan ran into similar problems on a project early in his career. “Overzealous overlapping of activities was a common error for me,” he says. “Everything looked great, until the multitasking couldn’t live up to the numerous overlaps.”

The Solutions:

It comes down to being cognizant of what you’re scheduling when, Ms. Parker says. Overlapping can work—if all the overlapped activities don’t hit one project phase. “Make sure you aren’t going to be overlapping a lot of things that may shove into load testing time, for example,” she explains.

“I learned to avoid overlap problems by creating reasonable float in timelines,” Mr. Chauhan says. In other words, expect tasks to take more time, not less. 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.

APRIL 2015 PM NETWORK
PM NETWORK APRIL 2015 WWW.PMI.ORG

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