Complex projects have many dynamic components that are constrained by finite conditions. Project management deals with these components everyday.
Consequently, unless the task has been successfully completed many times, project management needs to take great care when estimating the time, resources and effort required for successfully estimating and bidding a project they are considering.
It’s all about costs and time that are affected by unknown variables, optimistic expectations and the fear of delivering bad news – “it can’t be done that quickly”!
To increase the accuracy of an estimate, project management should:
- Focus on available resources and budget
- Use planning documents, specifications and project plans
- Identify all stakeholders
- Keep an accurate record of time spent on each aspect and phase of the project
- Develop a contingency plan and focus on must-haves, not nice-to-haves
- Use multiple methods to derive an estimate to gain greater accuracy and to keep details of the assumptions made and the associated constraints
- Determine a complexity factor for the project – from simple to extremely difficult.
- Consider a proof of concept or pilot programme
- Be wary of bids from sub-contractors, ensure that they conform to their scope of work and allow contingencies for their inaccuracy
- Allow for overheads and determine how they will be applied
- Research standard methodologies such as PMBOK and the US GAO Cost Estimating and Assessment Guide
When the estimate is complete, the final bid should be comprised of the collaborated estimate, contingencies to cater for risks and unexpected events, and a profit component.
Project Management does not have a crystal ball to manage risk and it may be mitigated in several ways:
- Using your staff (more control) or sub-contractors who carry some of the risk and overheads
- A competitive advantage (technique or IP)
- Project scope control – recover justifiable unexpected costs
- Keep accurate records to ensure that variations can be substantiated
If project managers can carefully scope, plan and constrain project conditions they can control risk and help ensure delivery that’s on time and within budget.