Question

What are the differences between bottom-up and top-down estimating approaches? Determine advantages and disadvantages for using each approach. Under what conditions would you prefer one over the other? Provide a specific example to support your response.

Answer 1

In bottom-up estimation, project managers tally their costs upward, starting at the bottom and accounting for each expected cost. In sum, the total costs should equal the finished project. It's a basic method of estimating, but the benefit is that it's the most accurate means of estimating a project's total cost. Accuracy is achieved just through the process of starting at the very foundation of a project and working your way up through each cost on the project work breakdown structure.

In top down estimation,it starts with identifying every major aspect to the project. In home technology installations, you will typically start with the components and features of the job. Then, you will create different labor categories that apply to each task. The cost of the project is measured by estimating how much labor will go into each piece of the job. The set cost of the labor category is multiplied by each relevant task. The top-down approach requires a history and knowledge of project pricing to accurately estimate. Smaller-scale installations are commonly the best environment for top-down estimating.

One of the advantages of bottom up estimation include its accuracy. The numbers are more defined and are more reliable to use rather than a guesstimation of the project. It isn’t based on old experience but, rather than the actual costs of completing the work packages and segments of the project. Bottom-up cost estimating – because of its accuracy – is best applied in large, multifaceted projects. Reining in costs and keeping to a budget is usually critically important in such projects, and bottom-up estimating allows you to work in just that manner.

The disadvantage of bottom up is that it is time consuming and we all know that time is money. The more time devoted to a project can jump the costs of the project. Because of the effort needed to detail each and every possible expense – labor, equipment, indirect, direct – using the bottom-up approach is time-consuming. Thus, streamlined and efficient processes are critical in bottom-up estimating, like using standardized work packages and formalized structures.

Some of the advantages of using the top down approach include:

• Your organization realizes a focused use of resources from the individual managed application.
• The first implementation becomes a showcase for the identity management solution.
• When the phases are completed for the managed application, you have implemented a deeper, more mature implementation of the identity management solution.
• Operation and maintenance resources are not initially impacted as severely as with the bottom-up approach.

Some of the disadvantages of using the top down approach include:

• The solution provides limited coverage in the first phases.
• A minimal percentage of user accounts are managed in the first phases.
• You might have to develop custom adapters at an early stage.
• The support and overall business will not realize the benefit of the solution as rapidly.
• The implementation cost is likely to be higher.

In terms of using an example, I would have to use the exercise that we are doing for Sharp Printing, I feel that the use of the bottom-up approach would be best since this is a new project that the company really doesn’t know the outcome. In the reading, the company was using the top-down approach which resulted in a large over-estimation. A project of this scale needs to be managed at the lower levels to correctly gather the right numbers rather than base the products off of projects in the past. For the top-down management, an example would be aircraft maintenance. Engines get changed all the time. The cost of the components really don’t change unless there is a high demand. A project that really doesn’t change in price is a great example to use for top-down because of the prior experiences applied to this job.