Validating Estimates
Validate all estimates before you consider them complete. Use the following checklist to validate an estimate:
- Review the definition of the project to understand what is being estimated. Be aware that you might be given separate targets for cost and expense.
- Study the ground rules, constraints, and assumptions of the project, and understand the project environment.
- Focus on data sources. Determine the source of the estimates and statistics, determine whether the data has resulted from guesses, and look for omissions. The best estimates are those that are provided by people responsible for the work and approved by people with accountability. Challenge assumptions, such as asking why one technical solution is to be used instead of another, or why a supplier is to be used instead of an internal organization.
- Compare the estimate with established standards. Ask if standards exist. If they do, what are they and what drives them? Be cautious with standards because they might be out of date (for example, software development standards).
- Determine whether the methodology is acceptable. Ask if cost-estimating relationships apply and whether you have accounted for all costs. An example is whether it is appropriate to use a top-down estimate based on the project phase. If your project is in an execution phase, you should be preparing a bottom-up estimate. However, if you are in a concept phase, then you could use a top-down or range estimate.
- Look for cost drivers, which are major factors, and determine whether they are reasonable. An example is that, if you have three programmers, you need to determine whether they each need one computer or two for coding and testing. You would also need to ask if they each need their own telephone or if they could share one. Other questions to ask are whether, when the programmers’ tasks are complete, they should be retained, rented equipment should be returned, or offices should be moved to eliminate overhead for office space. Determine the costs of project elements and pay close attention to keeping those costs down.
- Determine whether the estimate meets the objective. In review and validation, there are often changes to the estimate, and you must allow time to rework the estimate.
- Use a different approach to validate the estimate. If possible, use an independent reviewer and provide him or her with all of the necessary data.
- Ensure that all risk response contingency and assumptions are included in the estimate.