Wednesday, January 23, 2008

Project Outputs: Basis of Estimates

Assumptions are factors that project managers consider to be true, real, or certain. It is fine for project managers to make assumptions based on strong evidence and past experience, but baseless assumptions can be dangerous.

Therefore, project managers must always document what factors or facts they based their assumptions on. This documentation is known as basis of estimates, and is an output of activity duration estimating. The basis of estimates will include any assumptions that are related to activity duration estimating.

Consider the example of Sharon, a project manager for a major automobile manufacturer. She is working on her company's latest design, a sleek sports car.

Sharon, in preparing her activity duration estimates, made two assumptions. She assumed that new equipment would increase productivity by 10 percent. She also assumed that profit would increase by 22 percent over last year. Sharon makes the following decisions about these assumptions.
  • Productivity. The productivity increase will affect the estimates for activity duration. An increase can result in shorter activity duration, so Sharon will include this assumption in her basis of estimates.
  • Profits. The profit increase will not affect the estimates, so Sharon will not include this assumption in her basis of estimates.
The basis of any estimates made during the activity duration estimating process must be documented in the project files. Any assumptions also should be included. There are two important reasons why basis of estimates should be documented for a project.
  • They serve as historical data on similar projects.
  • They ensure that everyone on the project has the same information.
Remember, any assumptions made on a project must be documented. Just because one person assumes something, doesn't mean that everyone will make that same assumption. The basis of estimates provides documentation for your assumptions and is an important output of project activity duration estimating.

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