Expectation versus Reality: Reducing the Estimation Gap

Mark, a project manager in a multinational IT company, is having a tough time explaining to management why the project he is in charge of is way behind schedule and the costs seem to be spiraling upward every week. This was supposed to be a routine project for the company, with no surprises; yet, every week the project gets deeper and deeper into crisis. This situation is very typical and a common one in many companies.

In their 2009 bi-annual report, the Boston-based consulting firm The Standish Group reported a significant increase in failed projects. Measured by cancellation prior to completion, or delivered but never used, the project failure rate in 2008 was 24%. Forty-four percent of projects were defined as late, over budget, and/or with less than the required features and functions; 54% of projects had cost overruns and 79% had time overruns.

The costs of these failures and overruns are just the tip of the proverbial iceberg. The lost opportunity costs are not easily measured, but could run in the trillions of dollars. Is it not surprising and, in fact ironic, that projects do not meetthe two most  fundamental constraints of project management: budget and timelines?

Why Does this Happen?

Cost and timeline overruns are typically associated with what are referred to as “forecasting errors” or “technical errors,”…