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Topics: Cost Management, Information Technology, Using PMI Standards
what is the estimation of effort (percentage) you put on a project for project management activities when you provide high level estimates at project initiation?
During project initiation, I have seen companies asking PM to do a high-level estimation of the required effort to do the work at the beginning of the project in order to move forward on their internal Gates's process to get budget approval. Unfortunately, I've seen in many companies that they will often consider a % on top of the required effort to do the work. and if PM asks for more, it would sound weird regardless of the complexity of the project (Ex: if a developer needs 100 Man-days to deliver a software then PM effort shouldn't be more than 10% to 15% max on top of that (10-15 man-days). however, this is not a formula and every project is unique. In addition, it is not always easy to ask for more even when you go through planning later on. I've seen in the past management underestimates the effort required for a project manager to deliver a product of quality = by doing his job as he/she should and not rushing all phases. So they will just exclude the necessity for a project management plan and other project documents needed in PM's job.

Does any of these sound familiar to you?
How do you deal with such a situation?

Thanks in advance for your inputs.
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Soha,

yes, I have had 10-15% for PM effort as high level estimate, though some projects were as low as 5% (if there is good support for PM by the wider organization, like effective automation, tools and a good PMO) and others 25% (with higher complexity). With 10-15% a team of 8 needs a fulltime PM (or team lead), which also is a typical estimate.

If the sponsor does not accept your estimate and approves only less, I used adding other roles to the slate, like a quality manager, which were estimated and approved separately.

BTW I learned to call it person-days, as I more and more appreciate women as team members (and PMs).

The other aspect is that you have the need for a PM you might look at the FTE - sometimes it makes sense to put a fulltime PM in charge.
Dear Soha
High level estimates are tentative estimates based on earlier experience on similar projects, anologous estimate.witout having known the real scope of the project.
It is always a good practice to put the riders whwn high level estimates are presented to sponsor for initial budget approval.
As the scope gets cleared definitive estimates can be prepared and you can approach sponsor for presentaion of true picture.
Regards
Mohan
Soha -

This is one benefit of using a rolling-wave approach for project funding as it provides an opportunity for both the customer and delivery team to get a better understanding of what may be needed as the project progresses.

Another idea if you are following a close-to-pure deterministic approach would be to develop a detailed WBS for the PM deliverables to both estimate and justify the costs involved.

Finally, there is the need to educate customers on what a PM actually does so they are not misunderstanding what the funding will be used for.

Kiron
While it depends on the organization architecture (structure, style of leadership, etc) the amount we put is 20%-25% of total project duration. No matter that more important is to put the project manager activities inside the project schedule.
The two most common ways I see this done is the % as you described, and the "belly button" approach where you consider the approximate % of time of individuals (each having their own belly button) such as one PM full time for the duration and 1 PM admin, 50%.

The % compared to the total project usually comes in at about 5-10% and beyond that there are questions regarding too much or too little PM. There are many caveats to that however such as a dedicated person on a smaller project may take a larger %. The organization may have some functions that do PM type work. We have an engineering integration office where some PM type activities are performed but they don't show up as PM hours. Some circumstances might also require more hours such as your project is occurring when some major process or tools change is occurring independently, like a CAD/CAM system which can require more PM involvement due to the added complexity.

Ultimately however, I always find that the believably of the estimates are as good as the PMs ability to explain their logic. If the estimates don't pass the sniff test from the leadership team, then you need to be able to justify why. Overinflated estimates can get you an arbitrary direction for cost reduction. (We will accept your estimate reduced by 30%.) Under estimation can result in insufficient PM resources and you'll pay for that in project overruns elsewhere.

Interestingly, I have seen 3 experts in different disciplines such as PM, CAD, and mechanical design estimate the same project 3 different ways, and all came out quite close which was a pretty good indicator that the estimate probably wasn't too far off any way you look at it. Management thought it was too high, made an arbitrary budget cut, and ultimately proved that all 3 estimation techniques were far more accurate than drive-by management decisions.
Here's a novel idea to determine a reasonable project management cost - use risk analysis. Managing a project is a risk mitigation measure.

Estimate the cost of the project without project management. The cost of project management should reflect the level of effort to mitigate the risk to a point where the project is viable.

This methodology may become somewhat complex. An alternative is to allow for basic project management at say 5 to 10 % and increase or decrease this value based on a risk analysis - how much are you going to mitigate risk and/or enhance benefits for each additional dollar spent on management. This strategy allows you to provide 'effective' project management. It allows you to up the effort for complex projects and minimize effort for the simple stuff.
Generally I agree with Thomas Walenta's input, and Kiron also makes a key point to clearly identify what the real activities of the PM function involves for this project. Not everyone assigns project management activities (for estimating purposes) in the same manner: it is important to understand your organization's accounting systems - and it is also important to assess the project's degree of difficulty and any unique issues for the project being estimated. Remember that estimates must fairly represent the effort to deliver the project in compliance to the defined scope and requirements.

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