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Three-Point Estimating

5 minutes 5 Questions

Three-point estimating is a technique that uses statistical analysis to arrive at a project estimate. It uses three estimates to define an approximate range for an activity’s cost: the most optimistic cost (best-case scenario), the most pessimistic cost (worst-case scenario) and a most likely cost scenario. Confidence levels and standard deviation are then used to create a probability distribution (usually a PERT distribution) for the overall project estimate.

Three-Point Estimating Estimation Techniques

Importance:
Three-point estimating is a crucial technique in project management that allows for more accurate estimations by considering and analyzing the potential variation in a task's effort and duration. It helps in risk management by providing a comprehensive view of potential outcomes, enabling teams to prepare effectively.
What is Three-Point Estimating?
Three-point estimation is a technique used in project management for developing an estimate of a dependent variable, such as cost or time, considering the amount of variation. The model uses three types: the most likely (M), the optimistic (O), and the pessimistic (P) estimates.
How it Works:
This estimation works by calculating an average of three estimates: optimistic, most likely, and pessimistic. These three estimates take into account the different factors that can impact the task's duration or cost. The formula for the estimation is TE = (O + 4M + P) / 6.
Answering Questions on an Exam:
When answering questions about three-point estimating during an exam, concentrate on understanding the problem, identify the O, M, P values given or can be derived, and use the formula to answer. Explain the reasoning as most exams value the understanding of the concept, not just the mathematical result.
Exam Tips:
1. Understand the formula, and remember the weights given to 'O', 'M', and 'P' in the formula2. Carefully read the question to discern the three roleplayers: the optimistic (O), most likely (M), and pessimistic (P) estimates3. Work out a number of different practice problems to solidify your understanding of how to identify the variables and apply them in the formula4. Always provide the reasoning behind your answer to demonstrate your understanding of the technique.

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CAPM - Estimation Techniques Example Questions

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Question 1

You are managing a software development project. For a particular task, the optimistic time estimate is 4 days, the most likely estimate is 6 days, and the pessimistic time estimate is 10 days. You are asked to evaluate the estimate having the highest possibility. Which answer should you choose by applying Three-Point Estimating?

Correct Answer: 6 days

Three-Point Estimating technique is broadly used in project management for making predictions based on three point estimates: optimistic (o), most likely (m), and pessimistic (p). The formula used in this technique is (o+m+m+p) / 4. So, according to the scenario, we have estimates as optimistic - 4 days, most likely - 6 days, and pessimistic - 10 days. If we substitute these values into the formula, (4 days+6 days+6 days+10 days) / 4, we get 6.5 days. However, this value isn't an option, but since it's closest to '6 days', '6 days' is the most appropriate answer. '4 days' and '10 days' represent the optimistic and pessimistic estimations, and therefore are less probable, considering the facts given. '8 days' is simply not close enough to the calculated result to be the best answer.

Question 2

The task of designing a new software architecture has optimistic estimate of 10 hours, most likely of 14 hours, and pessimistic of 25 hours. The client is asking for the expected task duration. Which Three-Point Estimating value should you provide?

Correct Answer: 16 hours

The three-point estimation calculates the expected time by using the formula (Optimistic + 4 x Most Likely + Pessimistic) / 6. Using this formula, calculated value becomes approximately 16 hours ((10 + 4*14 + 25) / 6 = 15.83). Therefore, the answer '16 hours' is the most accurate estimation. The calculations for the other estimations are incorrect. '10 hours' only considers the optimistic duration, which is not sufficient and also not adhering to three-point estimation principle. '14 hours' only takes into account the most likely duration, while '25 hours' is the pessimistic and longest estimated duration, could be an overestimation when considering three-point estimation principle.

Question 3

In a software development project, the development team estimates a critical feature to take optimistically 2 weeks, most likely 3 weeks, and pessimistically 5 weeks. The project manager needs to provide an estimate to the stakeholders that balances the potential variability in the estimate. Using the Three-Point Estimating technique, what would be the most appropriate estimate to provide?

Correct Answer: 3.17 weeks, calculated as (Optimistic + 4*Most Likely + Pessimistic) / 6

The Three-Point Estimating technique is used to provide a more accurate estimate by considering the optimistic, most likely, and pessimistic estimates. The formula for calculating the estimate using this technique is (Optimistic + 4*Most Likely + Pessimistic) / 6. In this case, the optimistic estimate is 2 weeks, the most likely estimate is 3 weeks, and the pessimistic estimate is 5 weeks. Plugging these values into the formula, we get: (2 + 4*3 + 5) / 6 = 3.17 weeks. This estimate takes into account the potential variability in the project and provides a balanced estimate for the project manager to communicate to stakeholders.

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