73R-13: Basis of Estimate

Transcription

1 73R-13: Basis of Estimate As Applied for the Software Services Industries Slides are used with permission from Nesma, All rights reserved.

2 Acknowledgements For transforming AACEi 34R-05: Basis of Estimate into 74R-13: Basis of Estimate As applied for the Software Services Industries Ton Dekkers (author), Hans Bernink, Marten Eisma, Ray Sadal and Jelle de Vries Association for the Advancement of Cost Engineering International for supporting and publishing 74R-13 as part of TCM Framework: 7.3 Cost Estimating and Budgeting 2

3 Objectives Introduce the Students to the concept of Basis of Estimate: Background and Definition Importance Key Concepts Present Basis of Estimate in detail Structure of the Basis of Estimate Components of the Basis of Estimate Illustrate how to use the Basis of Estimate Estimation Process Verification & Validation Audit Project (Change) Control 3

4 What is an Estimate? The most knowledgeable statement you can make, at a particular point in time, regarding: Effort/Cost Schedule Staffing Risk Reliability Defects Image courtesy of Galorath Inc All Rights Reserved. Estimates get more precise with progress (Project Control) A good estimate is a distribution, a range of possible outcomes (not a single point) 4

5 Estimation Industry Best Practices Developed through experience and research Collaborative knowledge from multiple sources Benchmarking Estimation Methods Sizing Techniques Organizations Academic Measurement & Analysis Tracking & Control Literature Can be customized to fit a specific organization and its environment Historical Data Collection Best Practices Estimation Lifecycle Best Practise: 74R-13: Basis of Estimate - As applied for the Software Services Industries Risk Assessment Confidence Levels Estimation Processes 5

6 Estimate or Gestimate? 6

7 Estimation Challenges Estimation Process Consistent Controllable Estimation Verification Defendable Comparable Estimation Validation Defendable Benchmark Audit Consistent Controllable Project Control Controllable Defendable 7

8 What is a Basis of Estimate? It is a succinct method of documenting critical aspects of the project for the purpose of mitigating cost risk. It is a documented record of communications and agreements that have been made regarding the estimated costs. It is a document that is prepared by the estimator or estimating team that provides the basis for the costs identified within cost estimate. It should be seen as the one deliverable that defines the scope of the project and ultimately becomes the basis for change management. Anyone should be able to read the BOE to understand and asses the estimate. 8

9 Purpose of the Basis of Estimate 9

10 Purpose of the Basis of Estimate Document the overall engagement scope Communicate the estimator s knowledge of the engagement Alert the stakeholders to potential cost risks and opportunities Provide a record of key communications made during the estimate Provide a record of all documents used to prepare the estimate Act as a source of support during dispute resolutions Establish the initial baseline engagement control Provide the historical relationships between base-lined estimates Facilitate the review and validation of the estimates 10

11 Purpose of the Basis of Estimate (II) 11

12 High Level Overview PURPOSE GUIDELINES Software Development, Maintenance & Support, Infrastructure estimation Prepare 1 RECOMMENDED PRACTICE Estimate Assumptions, Conditions & Risks Secure Quality Finalise 5 SUPPORTING FOUNDATIONS AACEI, MAIN, NESMA, ISBSG, ICEAA 12

13 Basis of Estimate details 13

14 Prepare PURPOSE GUIDELINES Software Development, Maintenance & Support, Infrastructure RECOMMENDED PRACTICE Estimation purpose Design Basis (Components lists, units, etc.) Allowances Not in the Basis Containments cost elements for mitigation Estimate Quality Assurance Reviews Engagement Scope Description Sizing Basis Requirements Functional technical Assumptions internal, external Contingencies Uncertainty, unforeseeable elements Attachments Estimating methodology (FP, expert, etc.) Effort Basis delivery constraints, service levels Exclusions No costs included for Management Reserve changes in scope, effort Estimate Classification (1,2,3,4,5) Planning Basis Working time standby Exceptions anomalies or variances on standard Reconciliation Changes to previous estimation Level of detail Stage, Deal size/type, fixed price/tm Cost Basis methods and sources, units Risks and Opportunities assumptions Benchmarking Comparisons to similar engagements Attachments Attachments Attachments AACEI, MAIN, NESMA, ISBSG, ICEAA 14

15 Purpose Statement Briefly describe the Project that is being estimated Software Architectural Solution What Type of Project is it? New Development / Enhancement Rebuild / Migration Infrastructure Type and Capacity of Staffing Location of the realization / implementation What is the Overall duration of the Project Critical factors (primary focus): Time, Functionality, Quality 15

16 Engagement Scope Description Should correspond with the Product Breakdown Structure What to be provided How to be provided Activities necessary to deliver Brief description of the scope for each major segment of the project Identify primary staffing roles Indicate buy-ins involved in the project Packages Outsourced components 16

17 Methodology Indicate estimation methodology Functional Size Based Expert Parametric Document the resources used Staffing involved Historical data (selection) applied Recommended to register effort and experiences of preparation of estimate Preferably use metrics that can be collected as part of the engagement operation and/or closing 17

18 Estimate Classification Estimate class Primary characteristics Maturity level of solution definition (% of completion) End Usage Typical purpose of estimate Class 5 0 to 2% Solution concept verification Secondary characteristics Methodology Typical estimating method Class 4 1 to 15% Solution selection Unit costs; Parameters Class 3 10 to 40% First SSR s WBS; Unit cost; Parameters (high level) Class 2 30 to 75% Control or Bid, semi detailed Class 1 65 to 100% Post bid, project start, project change Expected accuracy range Typical variation in low and high range ROM L: -20% to -30% H: +30% to +50% WBS; Unit cost; Parameters (assumptions) WBS; Unit cost; Parameters (detailed level) Based on: AACE International Recommended Practice No. 56R-08; Rev. December 5, 2012; TCM Framework: 7.3 Cost Estimating and Budgeting L: -10% to -20% H: +20% to +30% L: -5% to -15% H: +10% to +20% L: -5% to -10% H: +5% to +15% L: -3% to -5% H: +3% to +10% 18

19 Level of Detail Engagement Status / Estimate Classification Conceptual vs. Semi-Detailed vs. Final Funding Cost Value of the Engagement $100K vs. $1 M vs. $10M vs. $100M + Type of Finance of the Engagement Fixed Price vs Time & Material Nature of the Project New development vs. Rebuild vs. Infrastructure Estimating Methodology Used Functional Size Based vs. Parametric vs. Semi-Detailed vs. Detailed Other Factors Multiple Locations, Multiple Technologies, Data Used Be thorough but not overly descriptive 19

20 Estimate PURPOSE GUIDELINES Software Development, Maintenance & Support, Infrastructure RECOMMENDED PRACTICE Estimation purpose Design Basis (Components lists, units, etc.) Allowances Not in the Basis Containments cost elements for mitigation Estimate Quality Assurance Reviews Engagement Scope Description Sizing Basis Requirements Functional technical Assumptions internal, external Contingencies Uncertainty, unforeseeable elements Attachments Estimating methodology (FP, expert, etc.) Effort Basis delivery constraints, service levels Exclusions No costs included for Management Reserve changes in scope, effort Estimate Classification (1,2,3,4,5) Planning Basis Working time standby Exceptions anomalies or variances on standard Reconciliation Changes to previous estimation Level of detail Stage, Deal size/type, fixed price/tm Cost Basis methods and sources, units Risks and Opportunities assumptions Benchmarking Comparisons to similar engagements Attachments Attachments Attachments AACEI, MAIN, NESMA, ISBSG, ICEAA 20

21 Design Basis Qualify the information specified per Company Standards Functional, Non-Functional and Project information required Document references Estimate deliverables (alignment Estimation Process) Design information such-as functional and non-functional requirements, architectural information (hardware, software) and required units of meaure Identify engagement specific metrics for particular services e.g. training quantities, incident volume, data usage Identify Integration components and impact Packages, COTS, Open Source, Subcontracting 21

22 Sizing Basis Requirements Use cases, Backlog Items, SLA Functional Size IFPUG ( Nesma ( COSMIC ( Technical Size Lines of Codes, Interfaces, Modules, Service Size Incident, Tickets, Users, Messages, Implementations, Installations Identify assumptions Document level of measurement (high level, detailed) 22

23 Effort Basis Activities needed to deliver products / services engagement Tools Calculation Models Parametric Analysis Estimation (SEER - Galorath, SLIM - QSM, TruePlanning - Price) Delivery Constraints Delivery Date, Service Level Historical Data Private Data / Benchmark Open Source Data (ISBSG) Tool Data / Benchmark providers 23

24 Planning Basis Document the execution approaches Project Management Engineering and Design Procurement Execution Identify Contracting and Resource Strategies Gross / Net Hours Hours per Period and Shifts (24/7) Holidays and Overtime assumptions Identify Critical Constraits Quality, Dead Line, Fixed Price, Resources Identify overall Schedule and Key Milestones 24

25 Cost Basis Describe the methods and sources used for determining the costs of all units, effort, subcontracts, materials, and expenditures Cost per applied measurement units Pricing Sources for Effort Hours (including productivity adjustments) Pricing Sources for Hardware and/or Software (and discounts) Pricing Sources COTS components Pricing Sources Overhead (Management, Facilities, Travel) Pricing Sources Contractors 25

26 Assumptions, Conditions & Risks PURPOSE GUIDELINES Software Development, Maintenance & Support, Infrastructure RECOMMENDED PRACTICE Estimation purpose Design Basis (Components lists, units, etc.) Allowances Not in the Basis Containments cost elements for mitigation Estimate Quality Assurance Reviews Engagement Scope Description Sizing Basis Requirements Functional technical Assumptions internal, external Contingencies Uncertainty, unforeseeable elements Attachments Estimating methodology (FP, expert, etc.) Effort Basis delivery constraints, service levels Exclusions No costs included for Management Reserve changes in scope, effort Estimate Classification (1,2,3,4,5) Planning Basis Working time standby Exceptions anomalies or variances on standard Reconciliation Changes to previous estimation Level of detail Stage, Deal size/type, fixed price/tm Cost Basis methods and sources, units Risks and Opportunities assumptions Benchmarking Comparisons to similar engagements Attachments Attachments Attachments AACEI, MAIN, NESMA, ISBSG, ICEAA 26

27 Assumptions, Conditions & Risks Allowances allowances that have not been detailed in the body of the estimate Assumptions Any other assumptions made by the estimator but not documented elsewhere in the estimate basis Exclusions Potential items of cost which a reviewer might associate with the engagement, but for which no costs have been included in the estimate Exceptions Anomalies or variances to standard estimating practices Risks and Opportunities Identify those elements with high or very high risk or opportunity values related to cost, duration, quality and/or safety critical measures Containments Measures included to prevent and/or mitigate the identified risks Contingencies Contingency covers inadequacies in complete project scope definition, estimating methods and estimating data Management Reserve The intended purpose and use of management reserve should be clearly identified. The approval process, management and tracking of the management reserve should also be clearly identified. 27

28 Secure Quality PURPOSE GUIDELINES Software Development, Maintenance & Support, Infrastructure RECOMMENDED PRACTICE Estimation purpose Design Basis (Components lists, units, etc.) Allowances Not in the Basis Containments cost elements for mitigation Estimate Quality Assurance Reviews Engagement Scope Description Sizing Basis Requirements Functional technical Assumptions internal, external Contingencies Uncertainty, unforeseeable elements Attachments Estimating methodology (FP, expert, etc.) Effort Basis delivery constraints, service levels Exclusions No costs included for Management Reserve changes in scope, effort Estimate Classification (1,2,3,4,5) Planning Basis Working time standby Exceptions anomalies or variances on standard Reconciliation Changes to previous estimation Level of detail Stage, Deal size/type, fixed price/tm Cost Basis methods and sources, units Risks and Opportunities assumptions Benchmarking Comparisons to similar engagements Attachments Attachments Attachments AACEI, MAIN, NESMA, ISBSG, ICEAA 28

29 Secure Quality Reconciliation Major differences between the new or re-baselined estimate and the last published estimate Benchmarking Comparisons of overall estimate metrics, ratios, and factors with similar engagements, historical data, and industry data Identify significant variations and provide comments Provide a detailed Benchmark Analysis Report as an attachment Quality Assurance Identify all Reviews that have previously taken place and all anticipated future Reviews 29

30 Benchmark Data Private Data Optimal references situations No reference to peer group efficiency Open Source Data International Software Benchmarking Standards Group (ISBSG) Transparent Open Source Database Development & Enhancement Data > 8000 projects from 32 countries, for 7 major industry types Maintenance & Support Data > 1,000 applications from 13 countries and 9 major industry types Tool incorporated data Easy to use No detailed verifiable data (propriety details) 30

31 Finalise PURPOSE GUIDELINES Software Development, Maintenance & Support, Infrastructure RECOMMENDED PRACTICE Estimation purpose Design Basis (Components lists, units, etc.) Allowances Not in the Basis Containments cost elements for mitigation Estimate Quality Assurance Reviews Engagement Scope Description Sizing Basis Requirements Functional technical Assumptions internal, external Contingencies Uncertainty, unforeseeable elements Attachments Estimating methodology (FP, expert, etc.) Effort Basis delivery constraints, service levels Exclusions No costs included for Management Reserve changes in scope, effort Estimate Classification (1,2,3,4,5) Planning Basis Working time standby Exceptions anomalies or variances on standard Reconciliation Changes to previous estimation Level of detail Stage, Deal size/type, fixed price/tm Cost Basis methods and sources, units Risks and Opportunities assumptions Benchmarking Comparisons to similar engagements Attachments Attachments Attachments AACEI, MAIN, NESMA, ISBSG, ICEAA 31

32 Finalise Estimating Team Appendices: Estimate Deliverables Checklist Reference Documents (requirements, designs, texts, notes, specifications) Additional Attachments (optional) Reconciliation report, benchmarking report, risk analysis report 32

33 Practical Case BoE verification results RECOMMENDED PRACTICE Estimation purpose Design Basis (Components lists, units, etc.) Allowances Not in the Basis Containments cost elements for mitigation Estimate Quality Assurance Reviews Engagement Scope Description Sizing Basis Requirements Functional technical Assumptions internal, external Contingencies Uncertainty, unforeseeable elements Attachments Estimating methodology (FP, expert, etc.) Effort Basis delivery constraints, service levels Exclusions No costs included for Management Reserve changes in scope, effort Estimate Classification (1,2,3,4,5) Planning Basis Working time standby Exceptions anomalies or variances on standard Reconciliation Changes to previous estimation Level of detail Stage, Deal size/type, fixed price/tm Cost Basis methods and sources, units Risks and Opportunities assumptions Benchmarking Comparisons to similar engagements Attachments Attachments Attachments NA OK Challenge At risk 33

34 Conclusions The Basis of Estimate: Applicable for Estimation / Analysis / Verification & Validation Applicable for various Software Services Provides a structure for: Consistency Transparency Comparison Defendability Creates an equal level playing field A public available Recommended Best Practice Develop for Software Services 34

35 Important Points to Remember Be complete but be concise! Be able to support your facts and findings Identify the estimating team members Describe the techniques and data used in the estimate Identify other projects that were referenced Develop the BOE while the estimate is being prepared 35

36 Thanks for attending this workshop Basis of Estimate (BoE) Slides are used with permission from Nesma, All rights reserved.