So you’ve been asked to provide an estimate for project cost or time. What do you do?

You could simply think of a random number, multiply it by the number of freckles on the back of your hand, divide it by the number of bites it took to eat your lunch today and then subtract a 5 digit prime number. That’s an estimate isn’t it? Yes it is and I have seen methods not too dissimilar to this actually being used to justify investing in a project or a business case. Sometimes the process of providing an estimate for time or cost is simply a political exercise to provide people with what they want to hear.

So is there a better way? Of course there is.

The first step is to acknowledge that an estimate is exactly that – an estimate. It isn’t a quote or a contractually fixed amount. It’s an attempt to forecast what the likely time or cost will be using all the information you have at hand. Obviously the more information and the more accurate the information the better the estimate will be.

There are two elements to estimating – clarity and accuracy. When preparing your estimates there are a range of tools and techniques you can use, each with its own level of clarity and accuracy. Choose the most appropriate tools and techniques to get the best estimate possible.

Clarity relates to how transparent the information you used to make your estimate is. Have you acknowledged the sources and methods used to make the estimate? You can have an estimate that acknowledges a wide range of pricing or time but is transparent in its sources and assumptions made. You should always acknowledge where your information came from and how certain you are about its validity. This lets people know how to treat your estimate.

Accuracy relates to the size of the margin of error and this links directly back to how well scoped the work is. Remember that every line item in your cost or time estimate can have a different range of accuracy depending on what information is being used to make the estimate. With all of these different levels of accuracy you can then have an overall level of accuracy for your estimate which averages out all the different ranges of accuracy.

I always find it is better to qualify your estimates by clearly exposing the sources, assumptions and individual range of accuracy made in preparing your estimates. The better your sources and the less assumptions the clearer the estimate will be. The more accurate your scope of work the less margin of error there will be in your estimate.