Project estimates are used to predict the costs, task completion times, and resource needs for a project, often broken down by specific activities. These estimates serve as the foundation for plans, decisions, and schedules, and their accuracy is essential. However, since they are looking into the future, they are inherently uncertain.
There are several common types of project estimates that businesses use to plan and manage projects:
- Rough order of magnitude (ROM) estimates: ROM estimates are high-level estimates that provide a rough idea of the scope and cost of a project. They are often used at the beginning of a project to help determine feasibility.
- Budget estimates: Budget estimates provide a more detailed estimate of the costs associated with a project. They are used to allocate resources and set financial targets.
- Three-point estimates: Three-point estimates provide a range of possible costs for a project, based on best-case, most likely, and worst-case scenarios. They are used to provide a more realistic view of potential costs and to identify potential risks.
- Definitive estimates: Definitive estimates provide a detailed and accurate estimate of the costs and resources needed for a project. They are typically developed once the project scope has been fully defined and are used to finalize the project budget.
- Bottom-up estimates: Bottom-up estimates are developed by estimating the cost of individual tasks or components of a project and then aggregating them to determine the total project cost. They are used to provide a more detailed and accurate estimate.
- Expert judgment estimates: Expert judgment estimates are based on the experience and expertise of individuals or groups who have knowledge of the project or similar projects. They are often used to supplement other types of estimates.