The Magic of a Basis Of Estimate

Ever wonder how estimates evolved from back-of-the-envelope guesses to sophisticated calculations which can appear to predict the future? Or how project managers come up with cost and schedule estimates? The pivotal concept that took the mundane act of guessing costs and turned it into a fascinating journey through numbers, logic, and, believe it or not, a bit of magic is the Basis Of Estimate (BOE). A key tool used to develop realistic and defensible project plans, and although the process can seem mysterious, it's actually quite straightforward.

The BOE documents the methodology, references, and assumptions used to create an estimate. It provides transparency into how the cost and schedule numbers were derived. A typical report includes details on the scope of work, relevant historical data, subject matter expert judgments, and any analytical techniques applied. The report should also include a section for what it is not.

Developing a solid estimate is crucial for setting realistic baselines

Here's a quick rundown of how BOE took shape and why they remain integral in project management today.

The Origins

• Formal BOE practices emerged in the 1950’s for the U.S. Department of Defense projects to improve cost estimating after significant overruns
• Government-wide standards were established in the 1960’s where agencies were required to create BOE that supported budget requests
• In the 1990’s, Earned Value Management systems mandated BOE for tracking project performance against an approved baseline.

BOE Framework Today

• Foundation for cost and schedule estimates
• Estimates can be traced back to credible sources and assumptions
• Managers have insight into estimated accuracy and risks
• Supports effective collaboration across teams when properly documented?

Why BOE Matter

BOE increase estimate integrity and accountability in several ways:

• Reduces bias by exposing assumptions
• Allows estimates to be reproduced and validated
• Facilitates estimate updates as new data becomes available
• Provides audit trail for estimate changes
• Enables continuous process improvement

The BOE removes the black-box mystique from estimates by showing the methodology and references behind the numbers. It builds confidence and transparency into plans and is a foundation critical for delivering on time and within budget.

Expanded BOE Example

Looking at a project to build a new mobile app, the BOE would document the agile development approach, referencing sprint cycles and team velocity from past projects. Assumptions like the number of sprints needed based on projected features would be disclosed. Relevant salary data, third-party service costs, and comparable estimates from industry research would provide additional inputs.

• For a construction project, the BOE could reference material and labor costs from recent, similar projects and location-specific productivity metrics.
• For an implementation project, the BOE may leverage metrics on legacy data migration and user adoption from past projects. Subject matter expert judgments on testing and training needs would factor in.
• For product development, the BOE could tap market analysis on production costs, as well as developmental benchmarks from prior product generations.

BOE Framework Levels

Widespread use today started and evolved from the standards first pioneered by government agencies. As estimation best practices diffused into the private sector and became ingrained in project management. They enable both public and private enterprises to plan projects with greater discipline.

BOE are essential today because they provide the rigor needed for large, complex projects involving multiple stakeholder groups. Some key reasons include:

• Large projects require more credibility, transparency, and oversight into planning assumptions where an audit trail for estimates helps make better choices.
• Early detection of flaws in estimating methodology or cost drivers can lead to continuously improving estimates critical on multi-year projects.
• Change management improves as projects evolve by documenting the baseline estimate which facilitates analysis of estimate/plan changes.
• Buy-in and accountability across teams involved in planning and delivery.
• For regulated industries to help demonstrate diligence and compliance.

Future BOE Trends

• More automation in generating BOE through AI/machine learning that can analyze historical data and identify estimation patterns. This could increase BOE speed and consistency.
• Integration with real-time project performance data for continuous adjustment of dynamic BOE. This will enable greater estimate accuracy through on-going learning.
• Increased use of visualization tools to analyze BOE data. Interactive dashboards can make estimates more transparent and BOE easier to update.
• Use of blockchain technology to provide even greater immutability and security around BOE content. This can facilitate auditing and traceability.
• Collaborative online BOE platforms for easier development and information sharing across project teams and stakeholders.

Navigating Success with Feedback Recognition

At the intersection of project management and financial prudence, the benefits of recognizing and leveraging feedback becomes glaringly apparent. Choosing to acknowledge, as well as act upon the insight provided, is a wise decision and a strategic move that can redefine the trajectory of your success.?

Benefit 1: Proactive Decision-Making

One of the key advantages of feedback is the empowerment it provides for proactive decision-making. In the dynamic landscape of project management, where variables can change in the blink of an eye, having a tool that not only anticipates but also suggests solutions to potential pitfalls is invaluable. By acknowledging the insights a BOE offers, we gain a proactive edge. Pivot strategies, reallocation of resources, and addressing issues before they escalate, transforms chaos into proactive, calculated moves.

Benefit 2: Financial Stability and Transparency

By recognizing the feedback generated by a BOE, you ensure that your project's financial foundation remains solid, which acts as a financial watchdog, alerting you to potential overruns or deviations from the estimated path. Acknowledging this feedback allows for transparent communication with stakeholders, mitigating surprises, and building trust. In a world where financial stability is synonymous with success, BOE becomes the bedrock upon which transparent and financially sound projects thrive.

Benefit 3: Continuous Improvement and Learning

Every project is a learning opportunity, and recognizing feedback from BOE is similar to opening a treasure chest of insights. Acknowledging the nuances for the alignment with reality, teams can embark on a journey of continuous improvement. Feedback becomes a roadmap for refining future estimates, enhancing the accuracy of future projects, and fostering a culture of learning within the ecosystem. It transforms projects from isolated endeavors into stepping stones for perpetual improvement.

The Challenge: Embrace BOE on Your Next Project

Now, the challenge beckons to use BOE on your next project. Let it be not just a tool in your toolbox but the guiding star that leads you to success. Challenge your team to move beyond traditional estimation methods and fully immerse themselves in a structured approach. Take this invitation to elevate project management and harness the power of data-driven decision-making.

Implementing BOE: A Simple Step-by-Step Method

Implementing BOE doesn't have to be a daunting task. Follow these simple steps to integrate BOE seamlessly into your project:

Define Project Scope:

Clearly outline the scope of your project. What are the deliverables? What are the key milestones? Understanding the project's scope is the first step in accurate estimation.

1. Identify Work Breakdown Structure (WBS) and Break down the project into manageable components using a Work Breakdown Structure. This hierarchical decomposition helps in organizing and understanding the various elements of the project.
2. Gather Historical Data by leveraging historical data from past projects or industry benchmarks. This forms the basis for estimating costs and durations by providing a foundation for more accurate predictions.
3. Engage Stakeholders and collaborate with project stakeholders, including subject matter experts and team members. Insight and expertise contribute to a more comprehensive understanding of requirements and potential challenges.
4. Select BOE Methodology based on the characteristics of Scope Time and Budget for the goal. Time and Materials, Parametric Estimating, or Analogous Estimating should align with the nature of the project.
5. Utilize BOE Software Tools are leveraged to streamline the estimation process. Modern frameworks integrate technology for real-time analysis, making the estimation process efficient and precise.
6. Incorporate Contingency Plans help us recognize the inevitability of uncertainties. Build contingency plans into your estimates to account for unforeseen events, reducing the impact of surprises on the project's financial health.
7. Regularly Update BOE because it is not a one-time affair. Regularly update estimates as the project progresses and variables change. This ensures that your estimates remain accurate and relevant throughout the project lifecycle.

By following these steps, you not only implement BOE effectively but also lay the groundwork for a project that is grounded in realistic expectations, proactive decision-making, and financial prudence.

Recognizing and acting upon BOE feedback isn't just a best practice; it's a strategic imperative for project success. Embrace the challenge, implement BOE with confidence, and let the insights guide your projects to higher efficiency and financial excellence.

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Key Terms:

• Cost estimate - quantitative assessment of the likely costs for an activity
• Schedule estimate - prediction of the time required to complete
• Earned Value Management (EVM) - methodology for measuring performance against the approved plan

#ProjectManagement #BOE #CostEstimating #Planning

FAQs

What are the key components of a BOE?

Cost estimating methodology, descriptions of the work, supporting data, assumptions, and exclusions. Details on the estimating techniques used, reference sources consulted, and calculations performed are essential. What it is and what it is not can be helpful.

When should a BOE be developed?

The BOE is prepared early in the project life cycle, typically during planning and prior to establishing the performance measurement baseline. A BOE should be revisited and updated as needed throughout execution.

Who prepares the BOE?

While the project manager oversees development of the BOE, the cost estimator or planning team typically puts it together along with Subject matter experts.

Can a BOE be used for types of projects other than software?

Yes, the concept is applied universally across industries and project types, from construction to product development and is tailored to the specific project.

Is there a standard template for creating a BOE?

Some organizations provide BOE templates with required elements. However, the format can vary based on the project and established estimating procedures. The depth and detail of a BOE are scalable.

What are the risks of not having a BOE?

Without a BOE, estimates may be perceived as arbitrary or lack credibility. Poor upfront planning, unrealistic schedules, insufficient budgeting, and lack of buy-in are also risks that will need to be mitigated while in execution.

How often should a BOE be updated?

A BOE should be revisited at major milestones, as changes occur, and as more accurate estimating data becomes available. Updates help keep estimates and plans grounded, measurable, and repeatable.

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