Original Post Date: Wednesday, August 27, 2008

While working with clients who operate under fixed budgets I often hear, "Cost is not an issue when we plan and budget, so why is estimating important?".  I quickly stress that estimating is not just about cost.  It about balancing project scope, cost, time, benefits and risks. If your estimates are not accurate, your projects and portfolios are not optimized – and you are wasting money.

Projects are planned and managed within scope, time, and cost constraints. These constraints are referred to as the Project Management Triangle.  Each side represents a constraint.  One side of the triangle cannot be changed without impacting the others. The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the project's end result. These three constraints are often competing constraints: increased scope typically means increased time and increased cost, a tight time constraint could mean increased costs and reduced scope, and a tight budget could mean increased time and reduced scope.

The discipline of project management is about providing the tools and techniques that enable the project team to forecast, anticipate and organize their work to meet these constraints.  The discipline of portfolio management is about using tools and techniques to provide management with accurate estimates of cost, scope and time for each ongoing and proposed project so that they can make the right decisions to optimize their objectives within overall constraints. Every day, project managers and business leaders make decisions based on estimates of the dynamics of the project management triangle.  Since each decision can determine whether a project succeeds or fails, accurate estimates are critical.  Projects launched without a rigorous initial estimate are five times more probable of experiencing delays and cancellations.   Even projects with sound initial estimates are doomed if they are not guided by informed decisions within the constraints of the triangle.  If you are working under a fixed budget (cost constraint), then an inaccurate estimate of the number of product features you can produce (scope) within a fixed period of time (schedule) will doom your project.  Inaccurate estimates across your projects de-optimize your portfolio. 

Unfortunately, most project management tools only balance cost and schedule. Tools like Microsoft Project, CA Clarity, Primavera, and others do not link cost and schedule with scope.


Project modeling and estimating tools, like TruePlanning by PRICE Systems, maintain a persistent link among project scope, cost, schedule and risks.  With project models, project managers can instantly see the impact that changes in scope have to costs and schedules.  Any side of the Project Management Triangle can be constrained while "what if?" analyses are performed.  Accurate estimates optimize the balancing act.

 

Successful organizations recognize that estimating is not just about cost, but about balancing within constraints and optimizing results.  They respect the triangle.