By your definition I would call it contingency planning as apposed to padding.
By my definition padding is associated with padding the cost. This means if you receive a invoice from your supplier for the cost of a resources, you will add an percentage cost to the cost, may call it a 'handling fee' and then charge the customer the new cost.
This practice occurs with 'middle men' and other third party suppliers as well as occurring in the PMO.
As for contingency planning (Project Estimation) by estimating the total cost based on preliminary information, this practices is common and widespread especially if the client quickly wants to get a 'ballpark figure' as to how much the project will cost.
Daire
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1 reply by Rami Kaibni
Mar 15, 2020 3:11 PM
Rami Kaibni
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Daire
No way, don't confuse padding with contigency please. Totally different.
Contingency in a way is the estimated or calculated moneTary value for the Known-Unknowns could be could calculated or based on a percentage from previous experience / historical data. On the other hand, padding is just inflating the estimates just to be on the safe side without any rationale and this is a very bad practice for so many reasons of which one of them that it could be misleading to the client especially when they need to take major funding and financing decisions (Refer to my previous comments and answer to our fellow colleagues).
In summary, in creating contingency reserves, the PM Team would have the necessary information to reliably calculate what additional time or funds the project may need and it is called "Reserve" whereas in padding, the PM Team will arbitrarily determine how much additional time or cost they want to attach to their estimates and it is called a "Pad".
On the other note, what you are referring to as Padding when you add cost to your supplier's invoice is not really padding, it is basically mark-up which will be based on an agreed percentage in the contract depending on the type of contract you entered into with the owner.
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Mar 15, 2020 4:50 AM
Replying to Daire Guiney
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Dear Rami,
By your definition I would call it contingency planning as apposed to padding.
By my definition padding is associated with padding the cost. This means if you receive a invoice from your supplier for the cost of a resources, you will add an percentage cost to the cost, may call it a 'handling fee' and then charge the customer the new cost.
This practice occurs with 'middle men' and other third party suppliers as well as occurring in the PMO.
As for contingency planning (Project Estimation) by estimating the total cost based on preliminary information, this practices is common and widespread especially if the client quickly wants to get a 'ballpark figure' as to how much the project will cost.
Daire
Daire
No way, don't confuse padding with contigency please. Totally different.
Contingency in a way is the estimated or calculated moneTary value for the Known-Unknowns could be could calculated or based on a percentage from previous experience / historical data. On the other hand, padding is just inflating the estimates just to be on the safe side without any rationale and this is a very bad practice for so many reasons of which one of them that it could be misleading to the client especially when they need to take major funding and financing decisions (Refer to my previous comments and answer to our fellow colleagues).
In summary, in creating contingency reserves, the PM Team would have the necessary information to reliably calculate what additional time or funds the project may need and it is called "Reserve" whereas in padding, the PM Team will arbitrarily determine how much additional time or cost they want to attach to their estimates and it is called a "Pad".
On the other note, what you are referring to as Padding when you add cost to your supplier's invoice is not really padding, it is basically mark-up which will be based on an agreed percentage in the contract depending on the type of contract you entered into with the owner.
RK Saving Changes...
Thomas WalentaGlobal Project Economy ExpertHackenheim, Germany
Rami
for me padding is a valid tool in the project managers’s toolbox. I understand it is defined here as adding a amount of cost/time to a base estimate WITHOUT making an effort to base it on further analysis.
If we are in a hurry, or an urgency, we are doing this all the time, as humans and as PMs. It is based on intuition and instinct, the way we make 90% of our decisions anyway.
No tool in itself is unethical, it depends on how it is used and the context. It would be rather unethical (dishonest) to show only best case estimates. If there is no more information and no time, a padding would be better than no buffer.
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1 reply by Rami Kaibni
Mar 16, 2020 1:48 PM
Rami Kaibni
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Thomas
I am not sure I agree with you. For me padding demotes transparency and will be misleading in many ways.
Its interesting that you find it as a PM Tool. I certainly don't.
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Mar 16, 2020 8:27 AM
Replying to Thomas Walenta
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Rami
for me padding is a valid tool in the project managers’s toolbox. I understand it is defined here as adding a amount of cost/time to a base estimate WITHOUT making an effort to base it on further analysis.
If we are in a hurry, or an urgency, we are doing this all the time, as humans and as PMs. It is based on intuition and instinct, the way we make 90% of our decisions anyway.
No tool in itself is unethical, it depends on how it is used and the context. It would be rather unethical (dishonest) to show only best case estimates. If there is no more information and no time, a padding would be better than no buffer.
Thomas
I am not sure I agree with you. For me padding demotes transparency and will be misleading in many ways.
Its interesting that you find it as a PM Tool. I certainly don't.
RK Saving Changes...
Manuel PerezProject Management Coordinator| Las Vegas Valley Water DistrictNorth Las Vegas, Nv, United States
Sometimes padding is forced upon PM's by the organization. Although, I don't ever use padding, it is a battle to convince the organization that your estimated cost are valid. If you are in an organization that always requires you to lower your estimates, then as a result PM's will up their estimates to end at a level which it needs to be.
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2 replies by Rami Kaibni and Thomas Walenta
Mar 17, 2020 2:00 PM
Rami Kaibni
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Manuel
I understand the pressure we sometimes get from up the ladder BUT we have an ethical obligation to always be transparent and honest.
RK
Mar 18, 2020 5:00 PM
Thomas Walenta
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Rami
ethical obligations are not only in regard to one ethical value (honesty) but to some more. If I am honest but neglect my responsibility and respect towards the sponsor they do not like it.
Ethical judgements and decisions are dependent on the specific situation and the balancing of all ethical values.
No tool, including padding, therefore can be unethical per se. It depends how it is used and the context.
Saving Changes...
George FreemanThought Leader | Author | Architect| Florida, United States
Rami,
As a PM in the IT sector and in my experience, padding is overtly discussed and anticipated. We ask developers what padding approach they used, and then we ask the leads what factoring they put in, if any, and so forth up the chain.
I have a tolerance for padding based on a multitude of project environment variables that are based on expert-opinion and lessons-learned. When I challenge the estimates for a project, and I find there is no padding, that is a red flag to me (too much padding is also a red flag). It may be fine, but I will make sure additional due-diligence is done in that estimate area to confirm.
Internal Customers versus External, IT Sector versus other, Management culture, PM and team experience levels, etc., all impact the overt ability to pad. However, as Thomas alluded to, padding is occurring whether we believe it is or not. Why not bring it into the “open” and make it part of the conversation? If you don’t, you may regret it as a PM – at least in the IT sector.
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1 reply by Rami Kaibni
Mar 16, 2020 6:33 PM
Rami Kaibni
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Very interesting feedback George. Well, I guess different different industries then lean to different measures. This certainly doesn't work in Construction Projects where there are millions of dollar at stake.
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Mar 16, 2020 5:40 PM
Replying to George Freeman
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Rami,
As a PM in the IT sector and in my experience, padding is overtly discussed and anticipated. We ask developers what padding approach they used, and then we ask the leads what factoring they put in, if any, and so forth up the chain.
I have a tolerance for padding based on a multitude of project environment variables that are based on expert-opinion and lessons-learned. When I challenge the estimates for a project, and I find there is no padding, that is a red flag to me (too much padding is also a red flag). It may be fine, but I will make sure additional due-diligence is done in that estimate area to confirm.
Internal Customers versus External, IT Sector versus other, Management culture, PM and team experience levels, etc., all impact the overt ability to pad. However, as Thomas alluded to, padding is occurring whether we believe it is or not. Why not bring it into the “open” and make it part of the conversation? If you don’t, you may regret it as a PM – at least in the IT sector.
Very interesting feedback George. Well, I guess different different industries then lean to different measures. This certainly doesn't work in Construction Projects where there are millions of dollar at stake. Saving Changes...
Peter RapinSubject Matter Expect; Project Delivery| Independent ConsultantOntario, Canada
I propose a simple concept of padding versus contingencies or even risk allowances.
Contingencies and risk allowances are calculated line items - transparent.
Padding is hidden, only the author(s) knows its there and how much there is - opposite of transparent.
It can become a nasty game - the costing people pad expecting the bosses to cut knowing that the costs have been padded. Ultimately the entire costing exercise is meaningless.
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1 reply by Rami Kaibni
Mar 17, 2020 2:01 PM
Rami Kaibni
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Very well said Peter - You nailed it and that's why I consider Padding to be a bad practice that lacks transparency and honesty.
"Padding is basically adding extra time or cost to an estimate because the estimator does not have enough information."
On R&D type projects, PMs often don't know what problems we will face until we find them. There is an old saying that "The Devil is in the details". We guess-timate that we will need a full time PM to handle those problems, even though we don't know the problems yet that we will need to solve later.
You can estimate based on hours to do tasks or the specific individuals who have to do the work and come up with different answers. If you look at a purely project based organization structure where people are dedicated to a project, the advantage is they are not distracted. The cost is that they are not always 100% involved. If you have a project based organization, it is inherently padded to give you that advantage of everyone being 100% dedicated to a project.
The way I look at it, padding is for the unknown unknowns, while contingency is for the known unknowns.
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1 reply by Rami Kaibni
Mar 17, 2020 2:15 PM
Rami Kaibni
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Keith
I am not sure I am in line with everything you said. When we don't have enough information, we normally do analogous estimating or parametric based on historical information and figures. If that's not available, we work with the norms in the area.
On the other hand, when we calculate Management Reserve (Cost of Unknown-Unknowns), we do that based on a percentage that is calculated objectively based on historical data, not just any percentage.
There is a good article that you can refer to: "Stop Padding Your Estimates" by Bob Zimmerman - Check it out. He starts by saying:
"When you pad an estimate, you typically increase your estimated effort/cost due to fear. I call this estimating from a place of weakness. You are afraid of the unexpected event, so hopefully padding it will cover it.
When asked why you think something might take 50% longer or cost more than expectations, it leads to an awkward uncomfortable conversation. And almost always, it creates distrust."
RK
Saving Changes...
Anton OosthuizenSenior Business Analyst / Project Manager| Self EmployedPretoria, Gauteng, South Africa
We sit with a lack of official definition for padding. The argument that padding is not the same contingency is totally flawed because it may or may not be true depending on how and why padding was done. You could argue that if you pad correctly you create a contingency in your schedule but if you pad price to inflate our profit margin you are unethical. So in the absence of an official definition in this context, we could also argue that to pad something is to make it more comfortable i.e. increasing my likelihood of achieving a milestone.
So to just state that padding is wrong or right can never be anything other than a subjective opinion made by somebody with knowledge about the particular situation.
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1 reply by Rami Kaibni
Mar 17, 2020 2:07 PM
Rami Kaibni
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Anton
Padding is totally different than Contingency (Refer to Peter's Response) so I humbly disagree with what you've mentioned.
In the way you defined it "Padding Correctly" this is basically doing proper and transparent estimating, its not padding. There is no padding correctly and padding incorrectly.
There is a good article that you can refer to: "Stop Padding Your Estimates" by Bob Zimmerman - Check it out. He starts by saying:
"When you pad an estimate, you typically increase your estimated effort/cost due to fear. I call this estimating from a place of weakness. You are afraid of the unexpected event, so hopefully padding it will cover it.
When asked why you think something might take 50% longer or cost more than expectations, it leads to an awkward uncomfortable conversation. And almost always, it creates distrust."
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