Top-Down Estimating (Top-Down Estimation)
Top-down estimating (or top-down estimation) is a useful technique which relies on the information provided by a similar past project. Unlike the bottom up estimating (or bottom-up estimation), it provides a quick but rough estimation. Upper-level management often takes advantage of using the top-down estimation to forecast the total cost of a project based on the experiences of people who involved in a similar project. Top-down estimating is a useful technique when you need cost estimates at the early phases of a project. You can use when there is little information regarding the deliverables. In this method, it is possible to make estimation quickly with fewer resources and effort. It is also used to evaluate the project proposal at the strategic level. Oracle Primavera P6 allows you to make a top-down estimation and bottom-up estimation. In this article, we will demonstrate how to make a top-down estimating in Primavera P6 Professional.
Top-Down Estimating vs Bottom-Up Estimating
Professionals working in the field of project management often mix up bottom-up and top-down estimating concepts. Many of them think that they are the same, however, they are different. Unlike top-down estimating, project teamwork at the task level of WBS (Work Breakdown Structure) to perform a bottom-up estimate. At the early phases, top-down estimating is used to predicting the cost or duration of a project. Over time, detailed bottom-up estimates replace the original top-down estimate.
Top-Down Estimating in Primavera P6
Estimating is known as the practice of predicting the cost and time required to deliver the project deliverables. Since top-down estimating is used when there is little information available for the project, the estimating process is supported by experience from an expert.
There are some techniques used in conjunction with top-down estimating. For example, apportion method is a top-down estimating technique which calculates the cost of individual tasks as a percentage of the total project cost (direct costs and indirect costs).
For better understanding, let’s review the simple example below.
We have a Block Valve Station project as shown in the Figure 1.
We will open the Work Breakdown Structure (WBS) window by selecting Project | WBS from the main top drop-down menu, Figure 2.
Now we will add Est Weight and At Completion Total Cost columns as shown in Figure 3.
Est Weight of Construction is 8 (Civil:2, Mechanical: 3.5, Electrical: 3), Testing is 1, Landscaping is 0.5. Total is 9.5 but we will insert 10 Est Weight for the Block Valve Station, Figure 4
We will insert 0.5 Est Weight for the Project Management activity from the “Activities” window.
In the “Activities” window, we will add “Est Weight”, Budgeted Labor Units, Budgeted Labor Cost, and Budgeted Total Cost columns, Figure 5.
Now we will distribute the total “Est Weight” of each WBS, to its activities. All our weights should be distributed among deliverables and activities, Figure 6.
We will insert a labor resource and unit price($100/hr) for the resource, Figure 7
After assigning the “LABOR” resource to the activities, we will perform the Top-down estimate. We will select Tools | Top Down Estimation from the main top drop-down menu, Figure 8.
In the “Top Down Estimation” window, we will select the project top level WBS for WBS box. The resource is “LABOR” and we will budget 500 Hour effort for all project. Figure 9.
Then, we will select “Apply” and see how our 500-hour effort is distributed among activities and associated deliverables, Figure 10
We can also see the unit and cost distribution in WBS level, Figure 11
Let’s assume that our budgeted 500-hour effort will increase 20 percent due to the weather conditions. We will calculate the impact of this increase by inserting 20 % to the “Apply adjustment” box in the “Top Down Estimation” window, Figure 12.
As shown in Figure 13, budgeted units and costs are increased 20 percent based on our adjustment.
Now we will save this estimate for future references. In the “Top Down Estimation” window, we will click “Save As” and fill the “Estimate Name” box, Figure 14
We can see the history by clicking the “History” button in the “Top Down Estimation” window.
Top-down estimation is a quick method for estimating the total project cost than other techniques that require more detailed information. Consensus methods, ratio methods, apportion methods and function point methods can be used in conjunction with the top down estimating.
Top-down estimating is also used to determine the duration of the project. It is the opposite of bottom up estimating. Although it is a fast and efficient method, it has some disadvantages. It provides a less accurate estimation than other estimating techniques. Bad estimation always results in disputes and problems within a project.
Primavera P6 Professional enables to make Top-Down Estimating for activities and deliverables. By using the Primavera P6 top-down estimating feature, planners can easily distribute the proposed cost of their projects among both deliverables and activities. It is possible to analyze the impacts of percentage adjustments and save the estimate for future reference.
In this article, we discussed the top-down estimation technique and demonstrated how to perform it by using Primavera P6. We hope that it will be useful for project control engineers. If you want to share your experiences or add something, you can use the comments section below.