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In My Estimation January 27, 2010

Posted by Jason in Daily PM.
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A long time ago, I wrote a piece about estimation.  It talked about the need for caution when faced with a client or manager who wants a ballpark estimate for a project or task.

This was reinforced recently (though not in the way you think) during an experience with a business case study.  It involved an estimate of a number that is in the hundreds of millions, and which made use of a number of units in the billions.

The problem is that without a clear, methodical approach to such an estimate or some prior anchoring point for the result, there is no way to “gut check” these numbers.  They are simply too big.  200,000,000 is way more than 100,000,000… or is it?  It’s the difference between 10% and 20% of 1 Billion.  Could be important, maybe not…

The point of the original article was that – at least in the civil engineering context – we depend on having that prior knowledge, anchor, or experience from which we can judge the validity of a high-magnitude number.  However, as I found out, that’s not always possible.  It then becomes necessary to carefully vet each assumption and calculation to ensure you’re heading down the right path.   Careless calculations lead quickly to a dead-end, or worse, circular assumptions that invalidate the result.

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