How can you use bottom-up estimation to accurately project costs?

?? In this method, people from the lower levels of the project management pyramid also play an effective role in preparing estimates. But a big risk is that they often do not have enough knowledge of macro and managerial and unforeseen issues. We are obliged to manage the trend and predictability by considering coefficients for other overhead costs or risks. ? My other suggestion is to help the order of information insertion and calculation by preparing specific files and tables, we can have all the variables in parametric and flexible formulas and by modifying any variable related to microprojects, work packages or even Activities to get the right result faster and more accurately.

Bottom-up estimation approach gives you correct estimate since it involves cost consideration at micro level and costs are arrived based on the reasonable units rates by Rate analysis. This method also gives you the calculated risks which should be consider in the estimation for example if the Steel is major part of the project materials, the estimator should consider the Steel prices as per the Forecast prices by the platform such as LME during the calendar year of the project execution.

Engage team members in estimating task durations and resource requirements. Sum individual estimates for a comprehensive project cost projection. Leverage their expertise to identify potential risks and uncertainties, ensuring a more accurate bottom-up estimation. Regularly revisit and refine estimates as the project progresses for ongoing accuracy.

Bottom-up estimation involves breaking down a project into smaller, more manageable components to estimate costs at a granular level. It's valuable because it offers a detailed view, relying on specific inputs from individual tasks or elements to build an overall cost projection, enhancing accuracy and transparency. To utilize this method, identify and estimate costs for each task or component, then aggregate them to derive the total project cost. Challenges include time and resource intensiveness, as well as potential inaccuracies due to unforeseen dependencies. Improving bottom-up estimation involves refining task-level estimations with historical data, expert input, and continuous assessment, enhancing accuracy and reliability over time.

Drawing from my experience, those involved at the ground level possess invaluable insights into the resources required for each task. They are often the first to identify potential challenges and resource needs, which might be overlooked in top-down approaches. Therefore, it's essential to engage these team members in the estimation process. Their input not only enhances the precision of cost projections but also ensures a more comprehensive understanding of the project's scope. Incorporating their perspectives not only improves accuracy but also fosters a sense of ownership and responsibility, contributing to the overall success of the project.

I recommend Bottom-up estimation in certain cases because it gives you more accuracy. But of course, you have to have a clear concept of your project goal or objectives prior to that. And it also needs a lot of data like the market prices, or the risks associated with that, etc. So, yes bottom-up estimation can be very helpful if the other circumstances are supportive.

In essence, bottom-up estimation ensures a more precise and reliable cost projection by breaking down the project into manageable components.

Incorporate contingency reserves to account for unforeseen circumstances. This enhances the project's resilience to changes and uncertainties.

Additionally, it may be prone to overlooking broader project intricacies. Coordination can be challenging, especially in large teams. Finally, changes in project scope or requirements may necessitate recalculations, affecting the estimation's accuracy.

The assumptions or human biases of the team members can be the ultimate challenge in bottom-up estimation. Proper training or coaching beforehand on such an estimation process can be helpful. And as I said earlier, yes the team members have to be sure about the project objectives or certain requirements clearly. A vague understanding can lead to an ambiguous estimation.

To use the bottom-up estimate, it is necessary to have a clear understanding of the detailed project scope, thus gaining visibility into all elements that will make up the cost estimate. The main challenge and significant difference compared to the top-down estimate is the substantial effort required to gather the costs.

Seek insights from team members with expertise in specific project components. Leverage estimation tools and software for more accurate predictions.