The bottom up approach for estimating times and costs that uses costs from past projects

What is Bottom-Up Estimating?

Bottom-up estimating involves the estimation of work at the lowest possible level of detail. These estimates are then aggregated in order to arrive at summary totals. By building detailed cost and time estimates for a work package, the probability of being able to meet the estimated amounts improves substantially. The people who derive these estimates are usually those involved in a project team; they have hands-on knowledge of the proposed work, and so are in the best position to understand the associated work requirements. the only downside to bottom-up estimating is that it can take a substantial amount of time to complete.

Advantages of Bottom-Up Estimating

There are multiple advantages to using bottom-up estimating. First, because these estimates are derived by people directly involved with a project, they tend to be quite accurate. Second, this approach can be used in conjunction with other estimation techniques to arrive at a more fine-tuned final estimate. And finally, any estimation errors made using the bottom-up approach tend to balance out, where over-estimates in one area are offset by under-estimates in other areas. This means that the overall estimate for a project may still be reasonable.

Bottom-Up vs. Top-Down Estimating

Bottom-up estimating is preferred over top-down estimating, where management imposes cost and time figures on a project without having gone through any detailed analysis to substantiate their results. Top-down estimating is more likely to result in significant differences between actual and estimated results.

The bottom up approach for estimating times and costs that uses costs from past projects

It is difficult to accurately estimate the cost of a project. One of the biggest challenge that project managers faced is that they are held accountable for their budget estimations despite the uncertainties that the project is facing.

Accurate budgeting becomes an essential skill for a project manager, it is important that project managers find an appropriate approach to use to facilitate their project management.

There are two main approaches to take when creating a budget – top-down approach and bottom-up approach. Top-down approach requires the project management to decide how much the project will cost and dividing the amount between the work packages; bottom-up approach requires the project manager to estimate the total cost of the project by costing the lowest-level work packages and rolling up.

Top-down budgeting approach

In this approach, budget decision is often made by the senior management. The budgeting is done by dividing the cost between the work packages. Prior projects that were executed before can be use point of reference to budget allocation, and whether the decided cost is realistic based on the scale of project.

One of the advantages of using this approach it is targeted at achieving project objectives within the allocated budget. This way, project team can avoid inefficiencies and wasting unnecessary resources.

However, this is not without a down side. This approach is made based on the assumption that the person who created the budget has the relevant knowledge and expertise to make a reasonable cost estimate. if the project manager does not have the relevant knowledge, there is a risk that an unrealistic budget that is insufficient to deliver the project will be set, threatening the progress of the project.

Bottom up budgeting approach

In this approach, the project team will first identify the tasks and activities involved in the process of the project. The budget will then be calculated based on the lowest-level work packages and rolled up to arrive at the total project costs, including direct and indirect costs.

The advantage of the bottom-up budgeting is its accuracy, as long as all aspects of the project is well accounted for and nothing is missed out. The project manager’s involvement in the process can establish teamwork and enhancing team morale.

The disadvantage of this approach is the difficulty in consolidating the complete list of tasks and activities for the project. There is a risk of overlooking or late addition of activities that will affect the allocated budget.

Managing Project Costs and Budgets is a 3-day course that will provide personnel involved in project management effective skills and knowledge that will allow them to manage the dynamic project cost function. Through these skills and new knowledge, participants will take home the ability to implement the application of techniques that will contribute directly to more efficient project financial management processes. For more information, please visit us at http://www.opuskinetic.com/training or contact us at .

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What are the bottom

Bottom-up estimating involves estimating smaller components of something and then using the sum total of the estimates to determine the overall estimates. For projects, this approach is used for estimating things like budgets and schedules and is done as project work is being broken down or decomposed and estimated.

What is a bottom

Bottom-up estimating in project management is a method of estimating project duration or cost by aggregating the estimates of the lower-level components of the Work Breakdown Structure (WBS).

What is an example of bottom

Example of Bottom-Up Estimating The work package owners are asked to estimate the resource needs (headcount), the duration and the total costs for each activity under their work package.

What is bottom

The bottom-up approach to project management means that you begin with brainstorming possible solutions to meet that final deliverable. In other words, you know what the project goal is, but are not sure (yet) how to get there.