# How accurate do you think an "order of magnitude" cost estimate should be? Can you compare and contrast a busine...

How accurate do you think an "order of magnitude" cost estimate should be?

Can you compare and contrast a business case for a software project with a business case for replacing windows in a house where energy savings are being used as the reason for replacement?

Order of Magnitude (OOM) Estimates are rough guesses made at the very beginning of the project. At this time not much is known about the project and everything can change as planning progresses. Order of magnitude estimates use historical project data with analogous mathematics. The numbers are calculated for the whole project, not for individual tasks or major deliverables. They are usually expressed as a range, like “\$150,000 – \$200,00 cost and 125 – 160 days of duration.” Executives dislike those ranges and immediately use only the lower (most optimistic) numbers. But project managers should stick with the ranges in all their order of magnitude estimates because the range communicates the project’s uncertainty. Then they narrow the ranges as planning progresses and uncertainty declines.

Order of Magnitude Estimates: When To Use Them:-Project managers use order of magnitude (OOM) estimates at the beginning of a project to give executives some data. During the initiation phase, executives need information about how much the project will cost and how long it will take. They use this data to decide if the project should go forward. They may also need to decide to integrate this project with other projects the organization is considering. This data is vital for decision-making purposes and cost-benefit decisions. Unfortunately, this is the time when the project manager knows the least about what the project will entail. He/she doesn’t know what deliverables have to be produced, or how much work those deliverables will require. They also have no idea how many team members will be available to do the work. So the project manager is in no position to provide precise estimates..

Unfortunately, many project managers fall victim to the executives’ pressure and give estimates that aren’t based on facts. Executives may say things like, “Use your project management experience to tell us how long this will take and what it will cost. If you’re worth your salt as a project manager you ought to be able to tell us the duration and budget you’ll need.” This inevitably leads to blaming the project manager for finishing late and over budget.

Project management experience does not give you the ability to pull accurate initial estimates out of the sky. The one exception might be when you’re repeating the same project, like building new fast food stores in the same city. But when you don’t have data from similar completed projects, there is no way you can provide accurate data during the initiation phase.

Order of Magnitude Estimates: Better Than Commitments You Can’t Keep:-Order of magnitude (OOM) estimates are the best tool for a project manager during the initiation phase. With OOM estimates, the project manager is not providing a precise budget and completion date. He/she will be able to do that later on. Now the project manager provides data along with information about the degree of uncertainty of the estimates. Order of magnitude estimates take the form of a project manager saying, “I’m 80% certain that the cost will be between \$50,000 and \$100,000. I’m 70% certain that we can be finished between 100 and 150 days.”

We know that numbers like this will drive executives crazy. But accurate estimates are not possible. The best we can do at this point is give them an estimate that reflects the lack of information. We do not give estimates with no factual basis. The only time we have 100% certainty of the cost or duration estimate is on the last day of the project. Project managers need to explain that the certainty of the estimates will improve as we proceed through detailed planning and execution. The estimates get more accurate as we learn more about the deliverables we have to produce, the amount of work it will take to produce them and the size of the project team available to do the work. Our estimates at initiation may have a range of -25 to +75%. As we begin detailed project planning that range narrows and when the plan is approved, we may have a range of uncertainty that is plus or – 15%. As execution of the project proceeds, the range of the estimates narrows all the way through closeout.

Order of Magnitude Estimates: How To Calculate Them:-We’re going to express the order of magnitude estimates as a range to reflect the uncertainty. We usually use analogous estimating techniques to provide the raw data and then alter this historical data in two ways. First, we’ll adjust the historical data to reflect the differences between the current project we’re estimating and the completed project. We might gather people with known expertise and ask them to assess the differences in complexity, intensity and difficulty of the current project versus the historic one. They might come up with a 15% adjustment factor. This means the current project is 15% more difficult and will require that much additional time.

The second adjustment we would make is to apply our uncertainty percentages. As an example the -25% to +75% range we discussed above. So the numbers for the new DEF project versus the ABC historical project look like this:

HOURS OF WORK:-From the archives: ABC project actually took 10,400 hours of work

Adjustment factor: DEF project is +15% harder than ABC project

Estimate: DEF project requires 11,960 hours of work

Adjustment to reflect uncertainty: -25 to +75 for DEF project

OOM: 8,970 to 20,930 hours of work range for DEF project

The business case captures the reasoning for initiating a project or task. It is the information needed for authorisation of the project.

The purpose of the business case is to document the justification for the undertaking of a project usually based on the estimated cost of development and implementation against the risks and the anticipated business benefits and savings to be gained. The total business change must be considered, which may be much wider than just the project development costs. The concept of the business case may exist under other names, e.g. project brief, project charter, high level project plan. Irrespective of the name the purpose is to present justification for project start up and initiation.

The business case is a key input to the project management plan and is usually owned and created by the project sponsor. Following project close or completion a post-project evaluation (PPE) will usually be held- usually some months after project completion – to measure the project’s benefits against those set out in the business case.

Preparing the business case involves an assessment of:

• benefits,
• risk,
• costs including investment appraisal,
• likely technical solutions,
• timescale,
• impact on operations, and
• organisational capability to deliver the project outcomes.

These project issues are an important part of the business case. They express the problems with the current situation and demonstrate the benefits of the new business vision.

Replacing windows is an expensive proposition that includes not just the price of the windows but the cost of expert installation to ensure that the windows perform as promised. It pays to shop for both, especially now that retailers and remodelers in many parts of the country experience increased demand for replacement windows as local economies and housing markets recover from the Recession.

Replacements come in two flavors. If the original framing is sound and reasonably square, you can install a replacement window into the original opening, replacing the sashes, side jambs and trim. If the original frame is rotted or significantly out of square, a new-construction window must be installed, which can cost 50% to 100% more than a replacement window, Replacing multiple windows will cost you less per window than installing just one or two.

Be sure to match the style and quality of the new windows to your house -- high-end in a luxury home, midrange in an average home, says John Bredemeyer, an appraiser in Omaha. The value of high-end windows in a tract house won't necessarily be reflected in the home's appraised market value. Prospective buyers may love those gorgeous, high-performance windows, but they may not be willing to pay more for the house to get them, especially among today's value-conscious home buyers.

Your monthly energy bill should show immediate savings. Before you install new windows, however, you may want to seal up a leaky house and insulate it. It could cost several thousand dollars, but it may be more cost-effective.

Choose the Right Window:-

Double-hung Windows:-may be opened from the top and bottom.

Double-pane Windows:-are two pieces of glass that may have an inert gas (such as argon or krypton) between them that insulates better than air.

Select a Dealer:-There will always be home-improvement "tin men" who knock on your door and take you hostage in your own living room until you sign a contract -- not to mention the telemarketers, the lead-generating Web sites and the guy operating out of his pickup truck. Don't go there. You want a well-established company with a storefront and a Web site with helpful information. A dealer who will come free of charge to your home to assess your needs is even more desirable.

##### Add Answer of: How accurate do you think an "order of magnitude" cost estimate should be? Can you compare and contrast a busine...
Similar Homework Help Questions
• ### I have this project, I would like to hace an idea of how to do it. I added a sample budget to get you an idea of how to...

I have this project, I would like to hace an idea of how to do it. I added a sample budget to get you an idea of how to designed. Thank you in advance! This is just the sample budget of how to designed! Chapter 1 Project Dream Plans Owning your own home has always been part of the American Dream. But how feasible is building that home? Using Pólya's problem-solving process (http://www.cee.org/tep-lab- bench/pdf/PolyaProblemSolving.pdf ), you will estimate the cost...

• ### Instructions In order to complete your case analysis successfully, you should consider identifying the role you...

Instructions In order to complete your case analysis successfully, you should consider identifying the role you are playing and the tasks you need to perform, analyzing the issues (qualitatively and quantitatively), providing a solution to the problem, and recommendation for each issue identified in the case. An average grade will come from you answering all questions with basic coverage and accuracy, showing all your work. Additional points come from including greater detail, astute and informed commentary where appropriate, and connections...

• ### Which single concept do you think will make you a better manager? Why and how?

Please check my answer below. Thanks.Question Part 1.Of the concepts discussed in our webinars or in the text but not discussed, which single concept do you think will make you a better manger. WHY and HOWQuestion Part 2.Given the concept you picked in part 1 now answer the following question. We have discussed these concepts in the context of the American or Western economies. BUT, ascompanies look at continued expansion into the developing world they are likely to face a...

• ### which single concept do you think will make you a better manger. WHY and HOW

Please check my answer below. Thanks.Question Part 1.Of the concepts discussed in our webinars or in the text but not discussed, which single concept do you think will make you a better manger. WHY and HOWQuestion Part 2.Given the concept you picked in part 1 now answer the following question. We have discussed these concepts in the context of the American or Western economies. BUT, ascompanies look at continued expansion into the developing world they are likely to face a...

• ### Can you please help me on what is their stake in the ethics case of The Dilemma of an Accountant

Can you please help me on what is their stake in the ethics case of The Dilemma of an Accountant. And if you can give me some suggestions on what the impacted of my decision to have him turn in his boss and to file a grievence with the accoutning board.The stakeholder that that I could identified were the Big Eight accounting firm and Baker Greenleaf. Here is the main part of the story. Sorry it is long. Thus, when...

• ### 1. In what ways was Microsoft’s behaviour (a) against the public interest; (b) in the public...

1. In what ways was Microsoft’s behaviour (a) against the public interest; (b) in the public interest? 2. Being locked in to a product or technology is only a problem if such a product can be clearly shown to be inferior to an alternative. What difficulties might there be in establishing such a case? etwork effects Microsoft is a vertically integrated firm (see page 87), with a dominant position in the operating system market (i.e. Windows) and in certain application...

• ### How can we assess whether a project is a success or a failure? This case presents...

How can we assess whether a project is a success or a failure? This case presents two phases of a large business transformation project involving the implementation of an ERP system with the aim of creating an integrated company. The case illustrates some of the challenges associated with integration. It also presents the obstacles facing companies that undertake projects involving large information technology projects. Bombardier and Its Environment Joseph-Armand Bombardier was 15 years old when he built his first snowmobile...

• ### Please help writing a well structured document using the below Agile Runbook - Our Overall Delivery Process How do we initiate a Project? Any project is a response to a pain point or desire expresse...

Please help writing a well structured document using the below Agile Runbook - Our Overall Delivery Process How do we initiate a Project? Any project is a response to a pain point or desire expressed by either customers, internal stakeholders, employees, or regulatory authorities. In short, a project is a time bound and specific goal oriented task-system that is born out of an ask from any stakeholder. Project initiation is laying down a new project by defining its goals, objectives,...

• ### objective The Milestone Assignments are based on the Projects and Cases for use with the Systems Analysis and Design Methods textbook by Whitten & Bentley

objective The Milestone Assignments are based on the Projects and Cases for use with the Systems Analysis and Design Methods textbook by Whitten & Bentley. There are six (6) parts to the Project, consisting of twelve (12) milestones. During Weeks 2-7, you will be required to complete two (2) milestones. Each milestone is worth 40 points. Milestones 5 and 10 are included as already completed work, so you only need submit them as part of the assignment. Guidelines Be sure...

• ### QUESTION 1: Why must project manager should have good technical skills but also good management skills?...

QUESTION 1: Why must project manager should have good technical skills but also good management skills? QUESTION 2: **Communication and Communicator are related" This quote from the text suppose that the communication process is lead by the spokeperson. Do you think is it a gift" to be a good communicator or a skill to improve ( use example of your knowledge to answer)? QUESTION 3: Look at the text paragraph yellow highlighted, and do you think that in today's world...

Free Homework App