Three-Point Estimating
Three-point estimating is a cost estimation technique that acknowledges uncertainties in cost estimates by considering three outcome possibilities for each project component: the most likely (M), the optimistic (O), and the pessimistic (P) estimate. These three points can be derived from historical data, expert judgment, or a combination of the two. The technique then calculates a weighted average of these three estimates, typically using the PERT (Program Evaluation and Review Technique) formula, which assigns higher weight to the most likely estimate. The result is a more realistic and risk-adjusted cost estimate that accounts for possible variations in key cost drivers, recognizing that project costs may deviate from initial estimates due to unforeseen events or changing project conditions. Three-point estimating can lead to more accurate and reliable cost forecasts, enhancing project management decision-making and facilitating risk assessments and contingency planning.
Three-Point Estimating Guide
Three-Point Estimating
What is it: Three-Point Estimating is a tool in Project Management used to estimate the cost or duration of an activity in a project. It leverages three different estimates - the Optimistic (O), the Most Likely (M), and the Pessimistic (P) to arrive at E, the expected estimate. The formula used is E = (O + 4M + P) / 6.
Why it is important: Three-Point Estimating reduces the risk of cost and scheduling overruns by providing a more realistic and reliable estimate. It accounts for uncertainties and risks inherent in project activities.
How it works: By considering different possible scenarios (Optimistic, Most Likely, and Pessimistic), Three-Point Estimating helps in making informed decisions and better planning.
Exam Tips: Answering Questions on Three-Point Estimating
Common questions on Three-Point Estimating often revolve around understanding the concept, the formula, and its application. Here are some tips for answering such questions:
1. Understand the basic concept: Be sure about what Three-Point Estimating entails and its relevance.
2. Know the Formula: The formula - E = (O + 4M + P) / 6 is central. Ensure to commit it to memory and know what each value stands for.
3. Application: Practice questions around applying the formula.
4. Read questions carefully: Understand what the question requires before attempting the answer.
5. Time management: Don't spend excessive time on one question. Be mindful of time.
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