Discussion Question: Bottom-up cost estimating determines a project will cost $35,000, while top-down estimating determines the same project will cost $10,000. What specifically can the project manager for the project do to help reconcile these two budget estimates? (p. 144 of Project Management Textbook)
Bottom-up cost estimating engages functional teams in the project planning process, including level-of-effort estimation for tasks which they are responsible or possess subject matter expertise. Because functional project teams are often where the subject matter expertise resides, leveraging bottom-up estimating for specific tasks can hone the estimate and reduce risk, but querying the functional subject matter experts and rationalizing estimates also takes time. (Side note: A protracted timeline for developing a project estimate can put a project at risk. A slow reaction time may cause the project to be put on hold, if it’s a competitive situation you may lose the project due to slow reaction time, etc…) Top-down estimating relies on upper management to set objectives and communicate them to the project manager who then translates objectives into a project plan, assigns resources, sets the schedule, etc… Top-down estimating can typically move faster, but effective top-down estimating relies on prior experience and work product which can be used to estimate the current project.
As a project manager, a $25,000 differential in estimates would cause me concern. Given that I have access to both the top-down and bottom-up estimates, in this case, I would examine and reconcile the phases and tasks of the project to identify the discrepancies. As the project manager, I would then have a dialog with both the functional team(s) and/or upper management as a result of my analysis. With the estimations being so far apart something was likely overlooked or misunderstood in the estimating process.
Top-down estimating is a valuable approach to derive a rough order-of-magnitude (ROM) cost estimate quickly. The ability to promptly estimate costs while ensuring that the project goals align with upper management’s objectives and strategic direction has made top-down estimating popular, but many organization leverage a hybrid approach which utilizes bottom-up estimating to refine top-down estimates.
With all that said, the accurate estimate likely resides somewhere between 35K and 10K. Executive and upper management are managing to a budget and outcome while functional team members are conservatively managing time to execute tasks to deliver an outcome. Upper management’s fiscal focus can often lead to lofty expectations which don’t strike a realistic balance time, money and outcomes. Functional teams can often be-be overly conservative on task duration and/or resourcing which drives up the cost of the project (too much time and/or resource = too much money = unhappy executive or a dead project). It’s the job of the project manager to reconcile and manage (sell, especially to upper management) realty.
Back to Basics (8): Top-Down Versus Bottom-Up Project Planning. (n.d.). Retrieved January 31, 2018, from https://www.inloox.com/company/blog/articles/back-to-basics-8-top-down-versus-bottom-up-project-planning/
Black, F. W. (2002). Top down-bottom up project management. Paper presented at Project Management Institute Annual Seminars & Symposium, San Antonio, TX. Newtown Square, PA: Project Management Institute.
Portny, Stanley E.. Wiley Pathways Project Management, 1st Edition. Wiley Higher Ed. Kindle Edition.
Top-Down vs. Bottom-Up Project Management Strategies. (2017, June 01). Retrieved January 31, 2018, from https://www.liquidplanner.com/blog/how-long-is-that-going-to-take-top-down-vs-bottom-up-strategies/
What Are the Differences Between Bottom-Up & Top-Down Estimating Approaches? (n.d.). Retrieved January 31, 2018, from https://bizfluent.com/info-8784461-differences-bottomup-topdown-estimating-approaches.html
Evaluate the network diagram in Figure 6–18 on page 196 of the Project Management Textbook. In each box, the letter on the left is the name of the activity, and the number on the right indicates the activity duration in days. Use the forward and backward pass to figure out the earliest start time, earliest finish time, latest start time, and latest finish time at each activity. What is the critical path in the diagram in Figure 6–18? What is the duration of the critical path? Check your work against Figure 6–19 on page 197 of the Project Management Textbook
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Week 4 Exam (#2): 95%