Part 69: Three-Point Estimating
(Project Schedule Management: Estimate Activity Durations)
(Project Cost Management: Estimate Costs)

  • Three-Point Estimating is used to estimate duration and cost
  • For duration
    • Three-Point Estimating improves activity duration estimates by considering estimation uncertainty and risk
    • Developed with the Program Evaluation and Review Technique (PERT)
    • To use Three-Point Estimating, we calculate three estimates
      • MOST LIKELY (tM)
        • Typical scenario for the activity
        • We base this on the duration of the activity, the amount of resources that are likely to be assigned to the activity & their productivity level, dependencies on other participants, and typical interruptions
      • OPTIMISTIC (tO)
        • Best-case scenario for the activity
      • PESSIMISTIC (tP)
        • Worst-case scenario
    • The three estimates form a distribution, which results in the estimate, tE
    • There are several ways to calculate tE, but the most common ways are
      • TRIANGULAR DISTRIBUTION = simple average
        tE = (t0 + tM + tP) / 3
      • BETA DISTRIBUTION = taken from PERT, where the tM is given the most weight
        tE = (t0 + 4tM + tP) / 6
  • For costs
    • Improves activity cost estimates by considering estimation uncertainty and risk
    • Three estimates are used to determine the range for an activity’s costs
      • MOST LIKELY (cM) = estimate based on realistic effort for the work and predicted expenses
      • OPTIMISTIC (cO) = best-case scenario for the activity
      • PESSIMISTIC (cP) = worst-case scenario
    • The three estimates form a distribution, which results in the estimate, cE
    • Most common ways to calculate cE
      • TRIANGULAR DISTRIBUTION = simple average
        cE = (c0 + cM + cP) / 3
      • BETA DISTRIBUTION = taken from PERT
        cE = (c0 + 4cM + cP) / 6