Bad Estimates Just Don't Happen
Summary: Based on over 30 years of project and estimating experience working both as the owner representative and as the consultant, my conclusion is that bad estimates just don’t happen! Bad estimates are almost always the result of incomplete information and/or the lack of communication.
Estimate Definition
What’s the definition of an estimate? An estimate per the dictionary is “a rough calculation”, “an approximate computation of the probable cost”. Yet most people tend to look at estimates as an absolute number! How often does the final project cost come in exactly for the estimated cost? That almost never happens! Unfortunately, people don’t attribute the difference to the approximate nature of estimates. More likely they attribute the difference to “problems” with the estimator or the estimating process. That’s why estimating is one of the toughest project jobs, because it’s the only job where you are “wrong” 99.99% of the time!
As a recent example, an estimate for some air emission control equipment was prepared that totaled $1.0 million. The project estimator was pleasantly surprised to hear a year later the final cost was $980,000. This means the estimate was within 2% of the final actual project cost! A short time later the estimator happened to see the client sponsor, and expected a nice pat on the back for such an accurate estimate. However, image his surprise when the first words from the client sponsor were “what happened – you were off by $20,000”?
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Subject Matter Expert: Joseph A. Lukas, PMP®, PE, CCE
Joe Lukas is Vice-President of PMCentersUSA, and leads a team of instructors and consultants in delivering project management and business analysis training and consulting to clients across the country. Joe has been involved in project management for over 30 years and has worked in engineering, manufacturing, construction, project controls, estimating and contracting, and has been a Program and Project Manager supporting world-wide programs. His project management experience spans information systems, product development, capital construction and manufacturing projects. He is a registered Professional Engineer, Project Management Professional and Certified Cost Engineer.