If you have ever stood up close to an impressionist’s painting, it looks like a lot of dots (if Seurat is your artist, that is). As you step away from those dots, the picture becomes clear. You take your eyes off the individual details and see the whole. It is amazing!

Where does it start, though? It all starts with those dots, placed in the appropriate place and with the right color. For most projects, the big pictures of the cost estimate and delivery schedule are an aggregation of the little dots – cost and effort estimates at the lowest level of the WBS, which now includes your product and project deliverables.

Disclaimer: This post assumes you are starting from scratch on a project for which you do not have a similar project already built. You may be in the beneficial position of having another project that is similar to yours, where you can copy and revise that cost and effort data to reflect your project. You still need to review the remainder of this post since the principles in it apply to making changes to numbers you already have.

Disclaimer 2: For some projects, industry-wide data may provide cost and effort estimates on entire work activities or sub-projects (a portion of a project), thus saving you the time of building an entire estimate from the bottom-up. You may still want to stick with me since, more often than not, you will build estimates from the bottom up.

Forming the Image

What are these dots that we apply to create a beautiful impressionist’s cost estimate and delivery schedule? Simple in theory, a bit more complicated in practice. They are:

• From the cost perspective:
  • Unit costs – these are normally expressed in your local currency (e.g. dollars)
  • Unit quantities – depending on the unit, the means of measurement varies:
    • for raw materials – pounds, kilos, linear feet, etc.
    • for products – number of units
    • for services rendered – usually measured in number of hours unless a “fixed bid” price is given for the range of services
  • How it works:
    • multiply your unit cost by your unit quantity, or
    • enter your fixed bid price for the services rendered

• From the time perspective:
  • There are two ways to measure time
    • the length of time it takes to finish a started task.
    • the amount of effort actually spent finishing that task.

What’s the difference? And why is it important? That gets into an understanding of who is working on your project and what their availability is. Say your boss assigns someone to your team, but they can only work on your project for two hours per day on an eight-hour task. The effort is eight hours, but it is spread over (8 hours / 2 hours per day, equaling) four days. Hence:

• Effort – 8 hours
• Duration – 4 days

Which measurement do you need to craft your schedule? The answer is both. You also need to know the time availability of your project team; that will be covered in a separate post.

You need to know the effort, since cost is normally “effort * billing rate”. Duration, as shown in the example above, is a factor of effort and availability.

- If availability is in "hours per day", then duration = effort / availability
- If availability is in percent of a day or week, for example: 25% of a week, then duration = effort / (hours in a standard week * availabiity). In the United States, a standard week is 40 hours.

Filling in the dots

Materials Costs

Where do your costs come from? Most likely, your company has price guides on raw materials and products, or has working relationships with service providers with whom the rates are fixed for a certain period of time. (This might not always be true; in some cases, they could change on a project by project basis depending on the services provided.)

If you do not have a price guide or current rates for your service providers, you may need to do some hunting to prepare your cost estimates. In any event, the goal is to populate the lowest level items on your WBS with the number of units and unit cost, then have the worksheet compute the cost estimate.

Personal Services Costs

Where does your time come from? That is a bit more complicated. For activities that are tried and true and do not have variability, you may have a worksheet indicating how long that activity should take. For other tasks, such as building a cost estimate, delivery schedule, or new system function, that information may not exist. You would have to talk to the project members performing those tasks about how long they think it will take them. (Other approaches exist, but I am trying to keep this simple.)

Will the team members’ estimates always be accurate? Likely not. Some people estimate conservatively, meaning they may estimate 8 hours for what is, for most people, a 4-5 hour task. Others estimate aggressively, saying a 4-hour task will take them 1-2 hours. Some may not answer at all, and you may need to ask their supervisor for a fair estimate.

In any event, people are human and bad prognosticators. You may need to create a little buffer (aka contingency) in your delivery schedule to ensure aggressive estimates do not wreak havoc on your schedule. You probably also want someone with a greater depth of experience with those tasks to provide a sanity check on your estimates.

For each lowest-level activity, you will populate an effort estimate and an availability estimate. Your WBS worksheet will calculate the duration. It will look like this:

Taking a Step Back

If your worksheet works as it should, all your costs should summarize to the project level. If you have your project parsed into different phases, you should also have phase level cost and effort estimates.

Don’t look at the duration total, though. It will likely freak you out! From an overall cost perspective, your impressionist painting is mostly complete. You can tell your sponsor and the governance board how much the project is expected to cost. Determining when those costs occur, though, will come soon. You need to hone the schedule to do that. This post is already long enough; that topic will be covered in the next post.

The Developing Picture (Takeaways)

With your detailed WBS, you have researched unit measurements and costs for materials and products that you need for the project, and you’ve obtained hourly rates and effort estimates for activities conducted by your project team. You entered those for the appropriate activities in your WBS, which computed a project-level (and likely, phase level) costs and efforts. Your durations are out of whack, because at this point, the picture looks as though every task is done in sequence, one at a time, with no overlap in activity. That is not realistic; many activities can be performed at the same time, but not all. The next post will explain schedule setup in a simple way.