Performance analysis of cost management methodologies. What's the best method? Read the article to find out!

Happy Friday, everyone!

Those who know me understand project performance metrics and benchmarks are a passion of mine—clearly, I need to get out more! Throughout my career, especially during my time with the IPA, one of the key challenges I’ve encountered is the difficulty in building a solid business and investment case for organisations to develop their benchmarking capabilities.

It’s not just about “collecting/finding data to benchmark,” although that’s important. It’s actually a cultural shift and organisational transformation. Consider the following:

• How do we integrate benchmarking into our project management policies, procedures, and lifecycle? Both as inputs and outputs?
• How do we incorporate benchmarking into our investment case, cost-benefit analysis, and project selection process?
• How do we embed benchmarking into our project assurance and governance processes?
• How do we incentivise and support our supply chain to provide data? And how can we ensure that our internal processes and culture are well-positioned to collect data efficiently and passively?
• What data do we even need? We often lack the very data we most require—who’s keeping track of these gaps?
• What does a benchmarking team or service look like within our organisation? What capabilities are required, and how do we differentiate it from our cost management functions?
• How do we establish and embed a data catalogue, glossary, and dictionary across the organisation?
• How do we scale this transformation effectively to best realised the benefits?

These are all important questions (and feel free to reach out—I’m always happy to chat!), but it suddenly seems like a major investment. And to be honest, it is—and it should be—because it can unlock a significant improvement in your project delivery performance.

The cost to make this step change is likely far less than the cost of a failed project. That includes selecting the wrong project in the first place, or experiencing cost overruns due to underestimating project costs (not to mention schedules and CO2 impacts).

However, measuring the potential and cashable benefit of benchmarking to inform investment is challenging.

So, I was pleased to see the results from Doug Hubbard @Alex Budzier Andreas Leed study and survey results on Project Management Practices for their book "How to measure everything in Project Management” releasing in early 2025 (I cant wait)

For their research, they conducted a survey to gather empirical data on how different project management methods, tools, and certifications impact project success. The survey was distributed via LinkedIn, targeted emails, professional events, and industry groups to reach a broad audience.

They received 215 responses from project management professionals across various sectors. The survey covered key areas such as respondent roles, project details (industry, budget, complexity, etc.), management methodologies, cost estimation, risk management, and the use of digital tools. The demographic data showed strong representation from North America (38.1%) and Europe (35.8%).

Here is a sneak preview on cost estimating methods insight

Cost Estimating Methods

Respondents were asked, "What method(s) for cost estimating were used in the project? Check all that apply. If you are unsure, you may leave this question blank."

The results are shown in table below . The table shows that Bottom-Up (50.2%) and Top-Down (42.3%) estimation methods were the most prevalent. Note that projects may use several estimating methods, and that some of the methods below are overlapping – e.g. analogous estimating is a type of top-down estimating, and three-point is mostly a type of bottom-up estimating.

Success Metrics: Cost and Schedule Overrun Ratios

How are we measuring success?

Two metrics of project success—cost and schedule overrun—are used in this appendix to assess project performance. Cost overrun is defined as the ratio of the actual project costs incurred to the estimated project costs, while schedule overrun is defined as the ratio of the actual time taken to complete a project to the initially estimated time. Both ratios provide a quantitative measure of adherence to the original project plans.

What are the results?

Cost Estimating Methods Results

The regression analysis found that projects using?Analogous Estimating?were associated with significantly lower schedule overruns and cost overruns, both at the 0.1 threshold. This finding is consistent with the graph where?Top-Down?and?Analogous Estimating?methods exhibit lower cost and schedule overruns compared to?Bottom-Up?methods (including Three-Point Estimating).

Just to reiterate, these methods aren’t mutually exclusive projects may use several methods. Equally, some projects may (and do) only use 1 or 1 and a half methods.

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Are you surprised by these results? ?Share your thoughts in the comments section. Whether you agree or disagree

Conclusion

Firstly to address the article header, there is no "1 best method"! I used the hook to "click bait you"! The key is using the right tool for the right job - and like building a set of draws, you need to use multiple tools. You could hammer in the screws, or "hammer nails" using the end of a screwdriver (comment if you have tried this).... but you are probably not going to get the results or quality of output you are wanting - also, its lot harder! Using the right set of tools at the right stage of the build is key. Benchmarking and statistical forecasting are fantastic and powerful tools for your project and organisation

Investing in your organisational ability and capability to unlock benchmarking and statistical forecasting will be an absolute game changer. The investment case writes itself.

Follow me and connect for more pearls of benchmarking and forecasting pearls of wisdom (I know you want too). Follow and connect to Doug Hubbard , Alex and Andreas Leed to hear more about their book and launch How to measure anything in Projects Management