This article discusses what bottom-up estimation is, how to do it, and how it works with decomposition in project management.
Bottom-up estimation works from the smallest tasks in order to estimate the duration and financial cost of a project. Once each of the smallest tasks have been accounted for, then the project budget and duration can be estimated by adding up all of the estimates to get the sum. Generally, this method for estimating cost and duration is much more accurate than the top-down method, because it considers the sum of the parts, rather than the whole.
Because bottom-up estimation requires the project manager to know what the smallest tasks are, decomposition is a prerequisite for it. To estimate time from the bottom up, take each work package, individually, and ask “How long will this task take?” Once this question has been answered, write down the answer to keep track of it. Next, ask,”Is there a cost associated with this task beyond the cost of labor?” Associated costs might include the purchase of equipment or software, or an additional consultant that might have to be hired. Note this figure.
Repeat this process for all of the work packages listed. You can work either from your decomposition map or from the work breakdown structure. Once the initial duration estimates for all of the work packages have been made, then add these numbers up. The number at the end will be the estimation for the project duration.
Using the estimated project duration, and the additional costs, you can now estimate the cost of the project and the cost of each work package. Begin by estimating the baseline cost of each work package. The formula for cost is the duration multiplied by the rate per hour of work. Once you have come up with a figure, then add in any additional costs associated with that work package. At the end, aggregate all of the costs per work package and you will come up with an estimate for the entire project.
By working from the bottom-up with estimation, project managers can paint a more accurate picture of how much their project will require in terms of resources, duration, and finances. For more information on estimation and project management, see UBC’s “Estimating Project Effort and Cost.”