We all know that uncertainty is constant in project management. That is why project managers rely on three-point estimating to overcome this uncertainty and make informed decisions. Project management requires addressing three scenarios - optimistic, pessimistic, and realistic. You can also learn these techniques using efficient project management training courses. Compiling the same, you get the three-point estimation technique that enables efficient project management. This helps protect the team from failure by identifying all potential changes in a specific project.
So, if you are an aspiring software developer or project manager, you must know what three-point estimating in project management is, including PERT, and the relevant use cases.
What is the Three-Point Estimating Technique?
Three-point estimating is a project estimation technique that assesses anticipated outcomes or costs. This approach helps different project managers to generate realistic estimates. It further helps these professionals derive an expected value through a comprehensive evaluation, even with limited information.
The three-point estimation is a powerful approach that involves analyzing and incorporating multiple estimates as suggested below:
Optimistic Estimate
This estimate involves the case of smoothly reaching a particular goal. It is associated with the scenario where everything is perfect. This process takes less time to reach the goal. Hence, it is exhibited by a green light in the figure, which remains closest to the destination.
An optimistic estimate is the ‘best case’ projection. It implies an ideal situation with rare chances in practical appearance.
Pessimistic Estimate
This particular estimate involves the roughest case of reaching a goal. It represents the situation of immense challenges that often require the highest cost of completion. It is also called the ‘worst-case’ scenario with numerous setbacks because of unforeseen challenges, obstacles, and delays.
A red light represents the pessimistic estimate and is the farthest from the goal.
Realistic Estimate
A realistic estimate refers to the practical approach to the goal. Here, challenges and favors are often estimated in balance, which happens in real life. It further involves progress based on expectations.
This estimate is the real-life scenario and is represented by a yellow light. It is far from the goal.
Three-Point Estimating Formula
Project managers utilize a three-point estimating formula to determine the most likely estimate. It usually happens when multiple variables are involved. The triangular distribution and the beta distribution (PERT) are the two common types of three-point estimating formulas.
Triangular Distribution
This formula provides a straightforward method to calculate average outcomes. It involves taking the mean value of any component in the three-point estimate.
Triangular distribution takes the optimistic, pessimistic, and most likely durations to calculate the expected duration using the following technique:
(optimistic + pessimistic + most likely) / 3
Beta Distribution (PERT)
The Beta distribution is also known as Project Evaluation and Review Technique (PERT). It refers to a more intricate approach to three-point estimating in project management. It involves applying a weighted average related to the optimistic, pessimistic, and most likely estimates.
This formula usually involves multiplying the most likely estimate by four. It is four times the original value, and then involves dividing the sum of the total three estimates by six.
(optimistic + 4 x most likely + pessimistic) / 6
Understanding PERT
The Project Evaluation Review Technique (PERT) helps identify the time it takes to finish a particular activity in project management. This particular system helps appropriately schedule and coordinate different tasks throughout any specific project. PERT also helps keep track of the progress or lack of tasks and activities of the overall project. The US Navy developed this excellent technique in the 1950s. It aimed to manage the Polaris submarine missile program of the Navy’s Special Projects Office.
Here are the advantages of working with PERT:
- It helps maximize the use of different resources within a project.
- It makes project planning a more manageable task.
- It proves helpful even when there is little or no previous schedule data.
- It enables professionals like project managers to effectively determine a more definite completion date.
Estimation Times in PERT
There are three different estimation times involved in PERT. These include the following:
- Optimistic Time Estimate (TOPT)
- Most Likely Time Estimate (TLIKELY)
- Pessimistic Time Estimate (TPESS)
These three estimated times are derived for each activity in PERT. This way, a particular time range is given for each activity with TLIKELY, which is the most probable value.
1. TOPT
This is the fastest time any particular activity can be completed. The assumption made here is that all the necessary resources remain available. It also means that all predecessor activities are completed as planned.
2. TLIKELY
Project managers are often asked to submit only a single estimate. This estimate goes to upper management in such a case.
3. TPESS
This is the maximum time required to complete any activity in project management. In this case, many things related to the particular activity may go wrong. A lot of rework and resource unavailability can be assumed eventually when this precise estimation is derived.
How Does the PERT Chart Work?
A PERT chart refers to a graphical representation of any project's timeline. This particular timeline displays all individual tasks necessary to complete a project. In short, this chart is a project management tool allowing users to map out a specific project's timeline. This enables them to itemize individual tasks efficiently. As such, the users can communicate project instructions with the help of a PERT chart, and set project schedules and timelines.
A PERT chart uses different circles or rectangles which are called nodes. These nodes often represent project events or milestones. You can use different types of software to make a chart. This includes using specialized computer software or even Microsoft Excel to create PERT charts.
The nodes on the PERT chart link to several other vectors or lines that represent the tasks of a particular project. Dependent tasks refer to items that must be performed in a specific manner.
Items that remain at the same stage of production but on different task lines are referred to as parallel tasks within a project. They are often independent of each other and may occur at the same time.
Triangular Distribution Vs. PERT
There are some significant differences between the two three-point estimating formulas as follows:
Shape
The triangular distribution assumes that every value within the estimated range is equally likely to occur. It is triangular, including a peak at the most reasonable estimate.
The PERT distribution will always assume values closer to the most likely estimate. These are more likely to occur than values that remain far away. PERT has a more bell-shaped curve with a higher peak at the most reasonable estimate.
Spread
The triangular distribution boasts a broader spread of values than the PERT distribution. This means the value range that could occur is wider with the triangular distribution. On the other hand, a PERT distribution has a narrow range of values.
Use
Professionals use triangular distribution when they have little historical data. The same applies if the range of values depends on expert judgment or guesswork.
PERT distribution is used when there is more historical data. It also applies to situations with more certainty about the range of values.
How to Use a Three-Point Estimating Technique?
A project manager must carry out the three-point estimating technique for every project. The stepwise approach to this particular technique is as follows:
Step 1: Task Analysis
Assess the specific task and its associated resources. Identify the positive and negative possibilities by analyzing the tasks and resources. Consider the possible challenges for the least resistant completion of the particular project.
Step 2: Identify the Estimate
Enlist all three scenarios, including optimistic, pessimistic, and realistic estimates. Design roadmaps for all three scenarios to encompass timely completion of tasks for any particular project.
Step 3: Calculate a Three-point Estimate
The project managers must calculate the final estimate, including the standard deviation.
Use the formula O+4R+P6 to estimate the value. Examples include the number of days, currency, and efforts in terms of people and time.
Extend the calculation further to determine standard deviation with the formula P-O6
Here, P is pessimistic and O is an optimistic estimate.
Step 4: Calculate the Mean
Head on further to calculate the mean optimistic time by the following formula:
Mean - Standard Deviation
Further, calculate the mean pessimistic time by the following formula
Mean+Standard Deviation
Analyze and take a practical approach after all calculations to identify the percentage accuracy for a better idea.
Step 5: Analyze the Results
Review the estimated value that you get from the formula. It usually represents the most probable estimate for that particular task. Consider this estimate with the range between the optimistic and pessimistic estimates. It will help you gain insights into the potential variability or risks related to the specific task.
Step 6: Communicate and Document
Share the estimated value, including the corresponding optimistic and pessimistic estimates with relevant stakeholders. Document the forecast along with your project management documentation. Examples include the project schedule or cost estimation.
Step 7: Monitor and Refine
Monitor the performance and compare it to the estimated values as the project progresses. This feedback loop helps you improve your estimation techniques over time. It also assists in increasing the accuracy of all future estimates.
Also, Read: https://www.simpliaxis.com/resources/cost-estimation-in-project-management
Benefits of Using Three-Point Estimating
You get several benefits when using three-point estimating in project management:
Improved Accuracy
Three-point estimating is the best technique because it considers multiple scenarios. It includes worst-case, best-case, and most-likely outcomes. This approach provides a better view of the potential result ranges. It further increases the accuracy of estimates rather than relying on a single value.
Risk Assessment
Three-point estimating helps project managers analyze and manage risks more effectively by considering optimistic and pessimistic estimates. It highlights potential risks and uncertainties that allow the implementation of proactive risk mitigation strategies.
Enhanced Decision-making
Three-point estimating offers a range of estimates to give project managers valuable information related to decision-making. It allows for an efficient understanding of the potential outcomes. The process further helps make informed choices regarding project scheduling, resource allocation, and risk management strategies.
Stakeholder Communication
Three-point estimating provides a transparent approach to estimation. Stakeholders can access optimistic, pessimistic, and most likely estimates. This promotes transparency and fosters an understanding of the variability potential in several project outcomes.
Realistic Planning
Three-point estimating helps project managers consider the risks associated with different activities. This leads to more realistic planning and sets achievable project goals. Such milestones are based on a balanced understanding of worst-case, best-case, and most-likely scenarios.
Continuous Improvement
Project managers can refine their estimation techniques. They can also identify areas of improvement by comparing the estimated values with actual performances. This feedback loop leads to continuous improvement in several project management processes.
Conclusion
The three-point estimating technique is one of the most valuable techniques in project management. On the other hand, PERT offers you a comprehensive and transparent approach to consider the associated possibilities and uncertainties to estimate the final results. There are multiple other tools and techniques related to project management that are crucial for efficient functionality and showcasing your skills. Considering the same, you should opt for some professional courses under Simpliaxis to learn more about the technique and other project management skills.
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