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Optimistic estimate + Pessimistic estimate

Lack of experience with similar projects: Accuracy in cost estimating tends to increase as estimators, project teams, and organizations gain experience working with similar projects. Inexperienced estimators and project teams may not be familiar with the scope of a project, which may lead to inaccuracies with – even with deterministic estimating techniques. At an organizational level, the use of analogous estimating techniques is typically not reliable if the organization has not conducted similar projects before.

Length of the planning horizon and of the project: Professional estimators stress the importance of not making premature estimates. As we have discussed, accurate estimating depends on the degree to which a project is defined. For large, complex projects, approaches such as rolling wave planning mean that future work is less well defined. It is important that cost estimating practices reflect this and that cost estimates are revised as more up-to-date information becomes available. For mega projects that take several years to complete, it’s important to take currency value fluctuation and political climates into account.

Human resources: Creating accurate estimates becomes more difficult as the number of human resources involved in a project increases. While it is standard practice to assume that any resource will only be productive 80% of the time and to create estimates accordingly, it becomes harder to account for costs in managing and organizing people. This is especially noticeable in project activities that involve building consensus or coordinating tasks across many people.

Difficulty also arises when estimating costs of human resources via resource costing or parametric estimating. Both estimating techniques revolve around the concept of unit-based costing, but the complexities of managing people make it difficult both to obtain accurate unit costs and to forecast the task completion time accurately. Further, it’s unlikely that workers’ skill levels will be identical (even if they are classified as such), so some time deviation is inevitable. This shows the value of systematically overestimating instead of underestimating, especially when dealing with human workers.

Several other common mistakes can affect the accuracy of estimates