As a manager, you are developing schedule for your project.
How do you specify time estimates for project activities?
From analysis,usually, single-point, most-likely estimates are used for activity duration estimating. But these estimates does not represent accurate information and it may lead to schedule overrun situation.
Project manager’s ultimate goal is to create a realistic project schedule that provides a basis for monitoring project progress for the time dimension of the project. Adapting better estimating technique is needed for project success.
Three-point estimating is one of the general estimating methods that helps project managers produce better estimates. Instead of providing discrete activity duration estimates like 3-weeks, 2-days, etc., the accuracy of it can be improved by considering the amount of risk in the original estimate.
Three-point estimates are based on determining three types of estimates: optimistic, most likely and pessimistic. (i.e. Optimistic – 2 weeks, Most Likely – 4 weeks, Pessimistic – 6 weeks)
* Most likely(approx. realistic scenario): The duration of the schedule activity, given the resources likely to be assigned, their productivity, realistic expectations of availability for the schedule activity, dependencies on other participants, and interruptions.
* Optimistic(best-case scenario): The activity duration is based on a best-case scenario of what is described in the most likely estimate.
* Pessimistic(worst-case scenario): The activity duration is based on a worst-case scenario of what is described in the most likely estimate.
An activity duration estimate can be constructed by using an average of the three estimated durations. Three-point estimates are needed for PERT estimates and Monte Carlo simulations.
The PERT is a more rudimentary approach to quantitative risk analysis. PERT applies a weighted average favoring the most likely outcome: (O + 4M + P)/6