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What is Three-Point Estimation Technique?

Three-Point Estimation Technique in Project Management

The accuracy of single-point estimates (cost or duration) may improve by considering estimation uncertainty and risk by using three estimates in order to define an approximate range for an activity. Hence, The purpose of this article is to elaborate on the three-point estimation technique as per the PMBOK Guide 6th Edition.

  • Most Likely (M): For instance, The estimates of cost or duration on analysis that the given resources are likely to assign, their productivity, realistic expectations of availability for the activity, dependencies on other participants, and interruptions.
  • Optimistic (O): The estimates of cost or duration based on analysis of the best-case scenario for the activity.
  • Pessimistic (P): The estimates of cost or duration based on analysis of the worst-case scenario for the activity.

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How To Calculate the Three-Point Estimate?

So, Depending on the distribution of values within the range of the three estimates, the expected cost or duration, E, can calculate using a formula. Two commonly used formulas are triangular and beta distributions. The formulas are:

Two commonly used formulas are triangular and beta distributions

Cost and Duration Estimates based on three points with an assumed distribution provide an expected cost & schedule. It is to clarify the range of uncertainty around the expected estimates.

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Example Of Three-Point Estimate Technique

The examples mentioned below are based on estimating the duration; So, the same method can be followed for estimating the cost. During a brainstorming session for estimating the efforts required to develop, test, and implement changes suggested by the client. For instance, Project team members started giving their efforts by creating essential documents for Project Management activities. They were supposed to work on. Jack, one of the team members, mentioned that the optimistic duration to complete his activity (let’s call it J) was 14-person days. It is most likely duration was 10-person days and pessimistic duration was 18-person days.

The expected duration of the activity can calculate using the formula mentioned in equation (I) for Triangular Distribution. It comes to be 14-man days.

The expected duration of the activity can calculate using the formula mentioned in equation (II) for Beta Distribution. It comes to be 12-man days.

Conclusion

Investigate these methods to see which ones are appropriate for your company, and then revamp your current operations. Hence, The sooner you set up a good Three-Point Estimation Technique process for your company. The sooner you’ll be able to enjoy projects that are completed on time and on budget.

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