Project Management

The Money Files

A blog that looks at all aspects of project and program finances from budgets, estimating and accounting to getting a pay rise and managing contracts. Written by Elizabeth Harrin from

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The Psychology of Estimating

James Lea, founder of Project Science, spoke at EVA 26 earlier this year. He talked about the psychology of estimating. “People,” he said, “are just as important as the techniques and data.”

He went on: “Plans and estimates are built by and used by people. Psychology matters.”

The talk was very interesting, and here’s what I took from it.

He started by asking us our experiences of estimating and the emotional responses we had at the time. Think about your own experience of estimating. Did you feel:

  • Under pressure?
  • Worried about how the numbers would be used?
  • Unsupported by colleagues
  • Unsure what the estimate was for?

That’s all (unfortunately) normal, and we all nodded along as he talked.

Challenge how will estimates be used

James talked about how we should challenge how estimates should be used. “Uncertainty drives variable reactions in our teams,” he said. “It drives emotions and responses.” If you are open about how estimates are going to be used and how they should be used, that can help people feel more comfortable with the process.

Make estimating positive

How can we enable our teams to experience planning and estimating as a positive, creative experience? Instead of the stressful, “I suppose I can give you a number,” experience that it is mostly?

It’s hard for an organisation to accept that it doesn’t know the answer, and that can sometimes lead to a poor experience of the estimating process for the people involved.

Here are some ways he suggested we could turn the experience into a positive one:

  • Develop the models
  • Turn the work of an individual into the work of a team with reviews
  • Use the past as a guide to future performance
  • Frame everything as a change
  • Refine the estimates.

Creating a route to predict the future

James talked about asking the question about whether we have a route to predict whether the estimate is a robust one or not. We need to understand what is in and out of our control. Where things are out of our control, accept that and track it.

Estimates are only a guess without a map of how you got there and a set of viable routes.

We often hear that people can’t estimate where there is no historical data. Well, data science should make it easier now to estimate from past performance and the vast tracts of data we store about projects. If leaders can give teams the data, in a way that helps with estimating, that should make our estimates better.

Building defensible plans

James talked about showing your workings and documenting the bases of estimates. Steve Wake, the conference chair, shared his thoughts too, namely that the audit office regularly says people don’t know the basis of estimate and therefore the best ‘proof’ that your estimates are good is that you can justify them.

He talked about bounding your plans carefully, describing the world around the estimate as well as the estimate itself to provide rigour.

He suggested we quantify and compare with data science, applying risk appetite to the delivery methodology to round out what we know.

That, and the other points discussed, are ways to shape the emotional response and create a safe space for people to estimate their work.

What do you think? Let me know in the comments below.

Posted on: June 21, 2022 04:00 AM | Permalink | Comments (4)

Programme Management: Planning Your Finances

Last month I looked at what you need to consider when setting up programme financial management, drawing on The Standard for Program Management, Fourth Edition (2017).

Today I wanted to write some more about financial planning at programme level (as we would spell it here in the UK), again, using The Standard as the foundations but sharing my experience as well.

The financial management plan for a programme

The Standard talks about having a financial management plan which is made up of:

  • Funding schedules and milestones (financial timeline)
  • Initial budget
  • Contract payment and schedules
  • Reporting activities and how reports will be managed
  • Metrics for reporting and controlling finances

This all fits into the overall programme management plan, but could be a separate document.

The document is supposed to outline a lot of information about how money will be managed during the work. It should go into detail about:

  • How risk reserves will be accessed and used
  • How the programme will deal with financial uncertainty e.g. international exchange rate fluctuations, changes in interest rates, inflation, currency devaluation etc
  • How the programme will deal with cash flow problems and if any are already identified
  • What the local laws and compliance regulations are and how these will be met
  • Incentive and penalty clauses in contracts.

In addition, as with all plans, you should include how the budget is going to be approved and what that authorisation process looks like.

In my experience, we did not have all this written out, although we did have a Finance team who were very much on the ball and probably had considered it without making it my job (thank you, wonderful Finance Manager!). In addition, the detailed technical budgets, which represented most of the cost (aside from staff) were put together by the technical architect, and were comprehensive. By the time it was my turn to look after the numbers, the paperwork seemed solid and it was very much a tracking exercise. I can’t take too much credit for the planning effort.

We were using international resources so the currency issue was very much relevant, and so was the risk reserve because we were doing something new to us with a high degree of uncertainty.

To be honest, I’m not sure we had a formal process for risk reserves either. Contingency had been added to the budget, but we did not allocate budget to risk management activities on a per risk basis. Given the scale of the investment, that was probably a mistake! I don’t recall any terrible dramas happening as a result of not having funding assigned in that way, even when the programme timeline was extended.

Contract payment schedules were documented in the contract instead. Our legal team bound up the contract and relevant schedules into little A5 booklets and I had one that sat on my desk and became my go to reference for all things to do with service level agreements, contract expectations and when I had to approve certain milestones to issue payments.

One time, I issued the payment notification and requested the funds be paid, but I had not warned Finance such a large request for cash would be coming so the actual payment was delayed a few days. That taught me I needed to start my process earlier so that Finance had notice that a large payment was due as part of our contract schedules.

Planning at a programme level feels harder because there is generally a bit more uncertainty, the timescales might be longer than your average project, more people are involved, and the numbers are higher. However, it’s never one person’s job. As you come together as a team, experts can provide their input to make sure the final result is something the governance team, finance team and programme management team can be confident with.

Posted on: April 12, 2022 04:00 AM | Permalink | Comments (3)

Types of Project Cost [Video]

Project costs feels like a topic I’ve revisited many times over the course of writing this blog (can you believe I started it in May 2010?) and today I want to use my monthly video to go into the differences between direct and indirect costs and fixed and variable costs. They are terms new project managers might get confused about and we hear them thrown around in discussions. What do they mean for projects?

In this video I share a few examples of each so you can get a feel for how these might play out for your work. If you want a text-based post to refer back to, then this article on 5 types of project cost also includes some information on the topic.

Do you have different definitions or examples to share? Leave a comment under the video as this community is better for all the different voices in it!

Posted on: April 05, 2022 04:00 AM | Permalink | Comments (1)

What to do about sunk costs [Video]

Sunk costs… what a headache when it comes to decision making. In this video, I talk about what they are and why they are a problem. If you don’t feel they are a problem for you as a project manager, then all credit to you!

In summary, sunk costs are those that have already been paid out. They are budgeted expenditure that has already been committed – the company can’t get those funds back. I agree they absolutely that this expense shouldn’t cloud your judgement, but unfortunately not everyone in the project sphere feels the same way and often decisions are made with sunk costs playing a large part in what next steps are taken.

In my view, project sponsors who feel that saving face is more important than business value are most at risk from making choices that perhaps wouldn’t stand up to too much audit scrutiny when the project is reviewed for benefits in a couple of years’ time post-delivery. Having said that, everyone is at risk of feeling invested when they have poured effort into working on something.

We have to work really hard to make sure that sunk costs, and the emotion attached to a project, don’t play a part in tough decisions about the project’s future.

Watch the video and then share your thoughts in the comments below: am I right, or is there more to it? Can’t wait to hear your views!

Posted on: March 08, 2022 04:00 AM | Permalink | Comments (7)

3 Categories of Estimating

Categories: cost, estimating

There are loads of different ways to estimate, from looking back over past projects and using that information to help you work out what this new project might need in terms of resourcing and costs to detailed modelling techniques and more.

You probably use a bunch of different ways to estimate, depending on what you are estimating and how much information you have about the thing being estimated. But did you realise that estimating techniques fall into three categories?

Two of those are the ones you probably studied on your project management courses: quantitative and qualitative. The third is a category that you might not have come across unless you work with agile or iterative techniques: relative estimating. Let’s have a look at each of those.


Quantitative (I hate typing that word!) is a way of estimating that relies on you having data and numbers to be able to make a definitive, mathematical estimation of how long things will take or how much they will cost. As the name suggests, this type of calculation is based on quantities. If you know how many of something you need (resource hours, bricks, units, etc) then you can work out the cost because you know (or can find out) the price for a single item.

Of course it’s not always quite that simple. If the cost of a brick is 1p, and you need 100,000, you might get a discount on such a large quantity. But basically, these types of estimating are quantity- driven.

Types of quantitative estimating include:

  • Analogous estimating
  • Parametric estimating
  • Bottom-up estimating

And you may have other techniques you use on your projects that rely on the same kind of approach: find the numbers that relate to the tasks and use them to extrapolate the total estimate for the project based on amalgamating all the figures for all the tasks.


Qualitative estimates are data-led. You don’t necessarily have quantities, so you need other ways of working out the time/cost. For example, how long will it take for the subject matter expert to update the policy? There’s an element of research in there, plus an approval process, and the time to write up and publish the new policy. That’s hard to quantify in terms of hours because it’s knowledge work, and we don’t use our brains in simple to understand units. You might get a burst of policy inspiration in the shower, or you might need a couple of days to let the ideas mull around in your head before you sit down and write the updates in 20 minutes.

Types of qualitative estimating include:

  • Expert judgment (that old favourite: the educated guess)
  • Observation (basing the estimate on what you see)
  • Interviews (another form of expert judgement: getting info from other people)
  • Surveys (sourcing info from the wisdom of crowds).

These are all suitable types of estimating that are OK in specific circumstances, and we do need a range of ways to size project work.


Finally, we come to relative ways of estimating. They are relative in relation to each other – the project tasks. I wouldn’t say these were particularly reliable techniques for estimating project costs (beyond resource time if that is chargeable) because sponsors tend to like actual figures for budget forecasts, not a statement about whether an activity is more or less expensive than something else. However, that could be useful information for a prioritisation exercise as it would help them understand what they could get for their remaining budget.

Relative estimating, when used for sizing project tasks, is about comparing the effort involved in doing the work to other tasks also on the table.

Types of relative estimating include:

  • Planning poker or T-shirt sizing
  • Affinity grouping

I use T-shirt sizing with my own work, although I don’t truly work in an agile environment. It’s a case of looking at the tasks (which, in an agile environment would be user stories) and deciding whether the effort involved is big, medium or small. In a team environment, we’d be doing that together but as a way to structure my To Do list, I do the exercise alone.

All of these types of estimating have a place in your toolbox and they offer a selection of ways to think about and plan our work. It’s easy to fall into the trap of thinking you have to use the same estimating method for every task on the project but you really don’t. Estimating approaches should be tailored to the task/activity/item. For some, parametric will be the standout winner and the most relevant way of working out the time required. For others, you’ll be relying on expert judgement or using planning poker to get a view of effort. Pick and mix your approaches from the three categories and you’ll end up with a rounded, appropriate way of planning your work.

Which of these categories do you use the most? Let us know in the comments below!

Posted on: December 27, 2021 04:00 AM | Permalink | Comments (6)

"Humanity has advanced, when it has advanced, not because it has been sober, responsible and cautious, but because it has been playful, rebellious and immature."

- Tom Robbins