Question

1. BOTTOM UP ESTIMATES AND TOP DOWN ESTIMATES ARE TWO STRATEGIES IN ESTIMATES A PROJECT. DISCUSS ADVANTAGES AND DISADVANTAGES FOR BOTH STRATEGIES. (20 mark)

2. based on question 1, which strategy is commonly used in your organization in estimating a project. (15 mark)

Answer 1

Top Down estimate:

Top Down is a costing estimate. Under this strategy the cost flows from top to bottom. This means that it is decided by the project manager that example, $100,000,000 would be the cost of the project. It then gets allocated to different heads of expenditure.

Bottom Up estimate:

It is also a costing estimate. Under this strategy the cost flows from bottom to top. This means that the total cost of the project is decided after summing up the cost of each of the identifiable cost center. This even keeps a certain buffer for the risks and the uncertainties that may arise in the project.

Most companies use the bottom-up approach because of the following reasons:

1. It helps in giving an accurate estimate of the cost.

2. The deviation is less as compared to the top-down approach.

3. The quality does not compromise due to the shortfall of resources at the end.

4. It has a buffer reserve to tap the uncertainties.