These initial estimates are only used to create an incipient idea, and they will suffer various modifications and adjustments throughout the estimating process.
The primary advantage of the analogous approach (used by the top-down estimating technique) is that, if the records have been properly kept relative to past projects, the access to the data is extremely easy. The major downside however is that the past projects reveal the characteristics of past conditions. And even if the present project is indeed similar to one against which it is being benchmarked, imperceptible differences could occur and generate as such mistakes. The problem occurs even more frequently when the experts rely on memory and do not confront the reports of past projects (Cobb, 2005).
The bottom-up estimating technique does not rely on past results but breaks the project down into smaller tasks and assesses the time, resources and costs incurred in its completion. An interesting specification to be made here is that the managerial team conducting the bottom-up estimations considers the costs of starting the project from zero and finishing it to its full potential. They will calculate the costs at each stage and then roll them up for the overall project estimations. Similar to top-down estimations, these initial values will be modified throughout the process and in the end, will lead to a highly accurate result. In addition, the analysis of every stage will help the manager to ensure that the future stages are being developed in accordance with the allocated budgets and in the given time and resource restrictions. Despite its precision however, the bottom-up methodology is characterized by tedious work and increased consumption of time and resources. In addition, the process could overlook tasks that in the end will impact the overall outcome and resource consumption of the project (Cobb, 2005).
The problem of overlooking project components does not occur with top-down estimation technique - since it is based on analogies with past projects, it is highly likely that all components and tasks will be assessed (Lock, 2007). Take for instance the case of a company looking to open a new subsidiary. As they make the estimations based on the subsidiary opened the previous years, they will consider features such as location costs, marketing costs for the new locations, redesign or the costs of hiring new staff members. Given that it is the first time they consider such an endeavor, the second team using the bottom-up estimating technique might omit to include the costs of redesigning the new building.
3. Concluding Remarks
Various sources have been studied in order to generate a comprehensive look at two highly popular tools of developing project estimations. The best way to reveal the conclusions of the study is to organize the finding in a succinct and easy to read table that presents a comparative look at top-down and bottom-up estimating mechanisms:
Assesses the overall project and breaks it down into individual components
Breaks the project down into components, assesses them individually and sums up the results to retrieve estimations for the overall project
Standpoint of Overall business
Focus on Project team
Concrete and verifiable
Estimations made by an expert with extra-project knowledge
The manager or the managerial team
Easily accessible information
Consideration of all components
High levels of precision
Future compliance with the established time and resource restrictions
Based on past characteristics and needs
Mistakes can occur if past reports are not reviewed
Tedious work and increased resource consumption
Possibility to overlook components (future negative impact on the project)
Given the combined advantages and disadvantages of the top-down and bottom-up estimation techniques, it is best for the deciders of a project to use both methodologies in assessing the implications of future endeavors (Cobb, 2005).
Cobb, a.T., 2005, Leading Project Teams: An Introduction to the Basics of Project Management and Project Team Leading, SAGE, ISBN 1412909473
Goodpasture, J.C., 2003, Quantitative Methods in Project Management, J. Ross Publishing, ISBN 1932159150
Heldman, K., 2007, Microsoft Office Excel 2007 for Project Managers, John Wiley and Sons, ISBN 0470047178
Lock, D., 2007, Project Management, 9th Edition, Gower Publishing Ltd., ISBN 0566087723