Can someone help me to explain this statement that belongs to Estimate Cost " For example, a project in the initiation phase may have a rough order of magnitude (ROM). the estimate in the range of -25% to +75%. Later in the project, as more information is known, definitive estimates could narrow the range of accuracy to -5% to +10%. In some organizations, there are guidelines for when such refinements can be made and the degree of confidence or accuracy that is expected". Saving Changes...
Deepesh RammoorthyICT Project Manager ( PMP®AgilePM®Certified ScrumMaster® (CSM®))| Australian Red Cross Blood ServiceTarneit, Vic, Australia
If your Project Sponsor walks in two weeks after they have given you a charter and ask you " How much is this project going to cost? " and if your project charter has said $2 Million, are you going to be able to put your hand on heart and tell the sponsor , it's going to cost $2 Million, $2.5 Million, $4 Million or $1.5 Million? How accurate do you think your estimate at that early stage is likely to be.
Your sponsor needs to answer their boss , so they just want an estimate
The project Budget defined in your charter is either 1) a best guess from the sponsor's point of view 2) It's the Project Funding that has been allocated in this financial year for their department to spend on projects to achieve the organizational objectives. Chances are the sponsor can get more money if you, the Project Manager can justify that the project needs more money. Or they may be constrained.
Now if the sponsor is under pressure , what about you? According to the PMI , A project manager must at all times give a realistic estimate of Project Budget But according to the Planning Processes, until you reach the determine budget stage, you are not going to be able to give a more accurate budget estimation of -5 to +10% to your sponsor.
At best, you can give them a Range of Estimate , also known as a Rough Order of Magnitude. Simply because, you have not had time to Plan and Estimate the Project Budget just yet .
At this stage, you can only give what is called as an Analogous or Best Guess estimate and that should be anywhere between -25% to +75% . No doubt your sponsor will fall from the chair , but if they give you enough time to plan , you can guarantee to give them a much realistic estimate.
Some companies may be very strict that these estimates absolutely have to be between -10 or +10. Generally while you are still in the planning stage you can change your estimates as you know more about the project and this is called Progressive Elaboration and Rolling Wave Planning. But Some companies may have a different guideline as to when changes to estimates can be made, maybe they are flexible enough to change it midway through execution? Its upto the company Saving Changes...
