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Bottom-Up Estimating: Definition, Disadvantage & Examples

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  • 0:04 Bottom-Up Estimating Defined
  • 1:12 Bottom-Up Estimating…
  • 2:54 Bottom-Up Estimating Example
  • 5:13 Lesson Summary
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Lesson Transcript
Instructor: Stephen Meyer

Stephen has worked as a Project Manager and is PMP certified, as well as certified by the Scrum Alliance.

Estimating is a vital part of project planning, especially for determining project time and cost. There are a number of estimating techniques, including bottom-up estimating. Learn about bottom-up estimating and its advantages and disadvantages.

Bottom-Up Estimating Defined

Lance is a construction project manager who needs to change his approach to estimating. He usually does not spend much time estimating, confident in using his experience with similar projects as a reference point. However, the last few projects he has worked on have exceeded the estimates provided, so he has decided it is worth the effort to be more accurate. He decides to try bottom-up estimating.

Bottom-up estimating is a way to approximate an overall value by approximating values for smaller components and using the sum total of these values as the overall value. In project management, this type of estimating is used to create a schedule or budget. Typically, the project work is broken down, or decomposed, into smaller components and an estimate of duration and cost is assigned to each component. The schedule is determined by aggregating the individual duration estimates, while the budget is determined by aggregating the individual cost estimates.

In planning to use this new approach, Lance wants to get support from his team, as well as project stakeholders. He starts with the disadvantages and advantages of using this approach. From there, he plans to provide them with a specific example using the approach.

Bottom-Up (Dis)Advantages

Lance's decision to adopt bottom-up estimating came after examining the tradeoffs and determining that the advantages outweigh the disadvantages. The advantage of bottom-up estimating is that it leads to greater accuracy. This is exactly what Lance needs. The accuracy results because this approach takes into consideration each component of the project work. Accuracy is also achieved because the estimates for each component are given by the individuals responsible for these components: the ones who know the work well.

The primary disadvantage of bottom-up estimating is the time it takes to complete. While other forms of estimating can use the high-level requirements used to start the project process as a basis, bottom-up estimating requires low-level components. In order to take into consideration each component of the project work, these components must first be identified, through decomposition. This process is long, and can be even more so when a large amount of work or complex work is involved.

Another disadvantage of bottom-up estimating is that it can be costly. The time spent decomposing project work is not free. Additionally, the estimation done for each component is given by the individuals responsible for completing the components. These team members are typically not involved in the project during the planning phase. Bringing in individuals, especially if they are contracted, increases the cost of planning, which increases the cost of the project.

In general, bottom-up estimating is not the best choice for projects that do not allow for long periods of planning or projects that have contracted resources that typically do not start on the project much earlier than when the work is going to be completed. Lance can use this approach because he has a devoted project team who can assist with estimates and because the stakeholders are more concerned with accuracy than speed.

Bottom-Up Estimating Example

The last thing for Lance's transition to bottom-up estimating is to provide an example to his team to show its effectiveness. He takes one of his recent projects, a 1500-square-foot house with two bedrooms and two bathrooms. Most of the housing projects he works on are around 1500 square feet but vary in the number of bedrooms and bathrooms. Since the square footage is the same, he typically uses the budget and schedule from these projects. The average cost is $200,000 and the duration is 16 weeks, so he used these values. However, in his most recent project, the actual cost was $240,000 and the duration was 20 weeks.

Using bottom-up estimating, Lance creates estimates for tasks involved with building the house, grouping them into components of the entire house and individual rooms, and then adds all estimates together. You can see these estimates in the table below:

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