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Three-Point Estimating: A technique used to estimate cost or duration by applying an average or weighted average of optimistic, pessimistic, and most likely estimates when there is uncertainty with the individual activity estimates.
Source: PMBOK guide 6th edition
If you are preparing for the PMP Exam you might have heard the technique called PERT “Program Evaluation and Review Technique” quite a few times. In this article, let’s go through the basics of it and Three-point estimating.
What is PERT?
In simple words, it helps you to calculate how much time it might realistically take to finish the project.
PERT (Program Evaluation and Review Technique) is a project management technique that helps in planning, scheduling, and coordinating tasks within a project.
It was developed in the 1950s by the U.S. Navy for managing complex projects, particularly those related to defense and construction.
The PERT technique involves the following key components:
- Network Diagram: PERT uses a graphical representation called a network diagram or a PERT chart to depict the sequence and relationships among various tasks or activities in a project. The diagram consists of nodes (representing tasks) connected by arrows (representing dependencies or relationships).
- Task Identification: Each task or activity in the project is identified and listed. These tasks are often represented as nodes in the network diagram.
- Task Sequencing: The relationships and dependencies between tasks are determined and represented by arrows in the network diagram. This helps establish the order in which tasks should be performed.
- Estimation: Duration estimates are assigned to each task based on expert judgment, historical data, or three-point estimating techniques (optimistic, pessimistic, and most likely estimates). These estimates are used to calculate the expected duration for each task.
- Critical Path Analysis: PERT identifies the critical path in a project, which is the longest sequence of dependent tasks that determines the minimum time required to complete the project. The critical path helps identify tasks that have zero float or slack and cannot be delayed without affecting the project’s overall duration.
- Schedule Development: Using the estimated durations and the critical path analysis, a project schedule is developed. The schedule provides a timeline for completing the project and helps in resource allocation and tracking progress.
- Risk Assessment: PERT considers uncertainties and risks associated with task durations. It allows for the identification and evaluation of risks and helps in developing contingency plans to address potential delays or issues.
PERT is particularly useful for projects that involve numerous interdependent tasks and have a level of uncertainty or variability in task durations. It helps project managers visualize the project’s flow, identify critical tasks, allocate resources effectively, and make informed decisions for project planning and control.
Now we know the basics of PERT, let’s dive deep into Three-point estimating and how to calculate it with an example.
Tip: My suggestion to you is to draw the network diagram and practice during your free time, it will increase your confidence level and make it look very easy while taking the exam.
Three Point Estimating
Three-point estimating is a technique used in project management to estimate the duration, effort, or cost of a task or activity. It involves using three estimates to capture the inherent uncertainty and risks associated with the estimation process.
Please do note that the three-point estimating technique is used within PERT to estimate the duration of individual tasks or activities.
The three estimates used in three-point estimating are:
- Optimistic Estimate (O): This is the best-case scenario estimate assuming everything goes according to plan and there are no obstacles or delays.
- Pessimistic Estimate (P): This is the worst-case scenario estimate, considering all the potential risks, obstacles, and delays that could occur.
- Most Likely Estimate (M): This is the estimate based on a realistic assessment of the task or activity, taking into account typical conditions, resources, and constraints.
Using these three estimates, a weighted average can be calculated to derive a single estimate known as the Expected Estimate (E).
The formula commonly used to calculate the expected estimate is:
E = (O + 4M + P) / 6
This formula gives more weight to the most likely estimate (M) by assigning it a weight of 4, while the optimistic (O) and pessimistic (P) estimates are assigned a weight of 1. The purpose of this weighting is to ensure that the most likely estimate has a greater influence on the final estimation.
Three-point estimating provides a more nuanced and probabilistic approach to estimation compared to a single-point estimate.
It helps project managers consider the potential risks, uncertainties, and variations that may affect the duration, effort, or cost of a task. This technique can be particularly useful when dealing with complex or uncertain projects, allowing for more accurate planning and resource allocation.
Example:
Here is a simple example of estimating the duration of a software development task using three-point estimation.
Assume the task is to develop a login page for a web application. Here are the three estimates provided by the project team:
- Optimistic Estimate (O): 2 days
- Pessimistic Estimate (P): 6 days
- Most Likely Estimate (M): 4 days
To calculate the expected estimate (E), we can use the formula: E = (O + 4M + P) / 6
- E = (2 + (4 * 4) + 6) / 6
- E = (2 + 16 + 6) / 6
- E = 24 / 6
- E = 4 days
So, the expected estimate for the duration of the login page development task is 4 days.
Using this estimate, the project manager can create a schedule and allocate resources accordingly. Additionally, the three-point estimation approach allows for consideration of the potential risks and uncertainties associated with the task.
In conclusion, three-point estimating is a valuable technique in project management for estimating the duration, effort, or cost of tasks or activities. By incorporating optimistic, pessimistic, and most likely estimates, this approach captures the uncertainties and risks involved in the estimation process. The use of a weighted average, such as the expected estimate, provides a more nuanced and probabilistic estimation, allowing for more accurate planning and resource allocation.
By using three-point estimating, project managers can make informed decisions, identify critical tasks, assess risks, and develop contingency plans. It enables better project planning, scheduling, and control, ultimately leading to improved project success rates and higher accuracy in resource allocation.
Once again, thank you so much for taking the time to read this article. For more content on Project and Operations Management and best practices, I encourage you to explore my other articles here at Project Insights – for best practices and real project experience (projinsights.com)
Your comments and feedback are always welcome and appreciated.