Top 6 Project Estimation Ways in 2025 | iCert Global

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There are many ways in which projects can be estimated in terms of cost and duration in industries ranging from Engineering to IT, Construction, Farming, and Accounting.

There are six key things that a project manager must balance to plan for a project effectively:

1. Scope – How much work is going to be accomplished?

2. Techniques – How do we estimate the project?

3. Time – How long will it take?

4. Resources – Who will do it?

5. Cost – How much money will it cost?

6. Risks – What problems could cause it to take longer?

Now, we will learn the most important ways of estimating projects.

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What are Project Estimation Techniques?

Project estimation techniques are methods of estimating the time, cost, and resources needed for a project. For example, a cost estimate helps to decide how much spending will take place in a project.

When clients or team members request project details, these methods help project managers respond accordingly and prepare.

 Why are Project Estimates Important?

Precise estimates allow teams to plan and deliver projects in a timely manner. Without precise estimates, it is challenging to know how long a project will take or what quantity of people and materials will be needed.

Project managers use estimates to supply the appropriate personnel, equipment, and materials when they are needed. Estimates help create goals and expectations.

Who Makes Estimates?

The whole project team helps in estimating. The project manager will collate the data, but experts and team members work together to give accurate estimates.

When more experienced people help, the estimates are more realistic. The project manager revises the estimates when needed.

3 Key Elements of Project Estimation

1. Effort Estimation – What amount of work is needed?

2. Cost Estimation – What amount of money is needed?

3. Resource Estimation – What equipment and staff are needed?

There are a variety of methods of estimating a project, including:

• Analogous Estimation – Looking at similar projects in the past as an example.

• Parametric Estimation – Utilizing formulas to make estimates.

• Delphi Method – Experts submit their ideas anonymously.

• Three-Point Estimate – Worst case, best case, and average.

• Expert Judgment – Seeking advice from seasoned experts.

• Vendor Bid Analysis – Vendors' price comparison.

• Bottom-Up Analysis – Breaking down a project into its smaller parts.

• Simulation – Testing to predict possible outcomes.

Project Estimation Methods

1. Top-Down Estimate

We use this approach when we first have an approximate idea of the project. We first estimate big chunks of the project, e.g., features or designs. As we know more, we break down these big chunks into smaller tasks for greater precision.

2. Bottom-Up Estimate

This method is used when we are already familiar with small facts about the project. We estimate each small task separately and aggregate them to get the overall project estimate. This will be most successful when only portions of the project are well known.

3. Analogous Estimating

This method is used when a project is similar to another completed project. Experts look at completed projects with the same tasks and use what they have learned from those projects to estimate the new project. This technique is beneficial when there is not much specific data.

4. Parametric Estimating

This approach uses figures and formulas to make effort and cost estimation of a project. For example, in construction work, the price of a building may be approximated based on cost per square foot. In software development, effort can be measured by lines of code. This is more accurate because it uses actual numbers.

5. Three-Point Estimating

This method uses three varying estimates:

• Optimistic (Best-case estimate) – All goes right.

• Most likely estimate – Assuming everything goes according to plan.

• Worst-case estimate (Pessimistic) – Assuming everything will take longer or cost more.

These three are used to calculate a reasonable average. This technique is also known as PERT (Program Evaluation and Review Technique).

6. What-If Analysis

This method helps project managers understand how some of the factors like time, cost, and resources could affect the project. It is used to predict possible outcomes and risks.

Estimates are typically carried out in a workshop involving major team players. In the workshop, the following are accomplished:

• Break down the project into activities (Work Breakdown Structure - WBS).

• Place the activities in priority order to be executed.

• Estimate the effort required for each task.

• Decide on the number of people and material needed.

• Find out any risks or issues that will impede the project.

• Decide on the overall cost in terms of effort and resources required.

When to Make Estimates?

In Waterfall projects, planning is carried out early, right at the start of the project. Cost, time, and resource estimates are written down and updated as and when new risks or issues arise.

In Agile projects, planning is done in smaller steps. The team creates estimates at the start and updates them regularly during short work cycles (sprints). Adjustments are made in meetings after each sprint to improve future estimates.

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