George Banks made several mental errors when estimating the cost of his daughter's wedding in "The Father of the Bride". He wanted to spend as little as possible, so he ignored factors that would increase the cost like many guests and an expensive cake. He also used an irrelevant reference point (the cost of a house) rather than considering wedding-specific expenses. Additionally, he was overconfident since it was a one-day event at his house. To avoid problems, estimators should gather data from others, make a thorough initial estimate accounting for all known costs, and plan for uncertainties. Accurate project cost estimation is challenging due to biases, incomplete data, and other psychological factors.

1. Estimations In Project
Management
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2. Estimations in Project Management
“The Father of the
Bride”: wrong
estimations of the
cost.

3. George Banks Mental Errors
1. 1. He wanted to spend as little as possible and therefore was motivated
to come up with an unrealistically cheap estimate. He ignored all evidence
that would have suggested the true cost of the wedding (expensive cake,
large number of guests, etc.) when he did his rough estimate.
2. 2. He used a reference point (the cost of a house) to come up with the
estimate. It was completely irrelevant to a wedding and therefore was
nonsensical for this particular estimate (though good for the movie). This is
a classis example of anchoring.
3. 3. He was overconfident. Weddings are a one-day event and it will take
place in his house, so he thought the amount of money required would be
manageable.

4. What Should Have George Banks
Done to Avoid a Nervous
Breakdown ?1. Ask some other people how much the
wedding would cost and use this number as a
reference point.
2. Make a rough estimate by summing up all
known expenses without ignoring any items.
3. Make necessary contingency plans by
continually asking, “What else could happen?”

5. Politics of Psychology?
Flyvbjerg Curve

6. Examples of Wrong Estimation
Project type Number of
cases
Average cost
escalation
Rail 58 44.7%
Fixed-link (bridges and
tunnels)
33 33.8%
Roads 167 20.4%
All projects 258 27.6%

7. Psychology of Estimations
• Rule of PI: Actual duration (cost) of an
activity will be about PI (3.1415…) bigger
than the original estimate, even if the
estimator was aware of this rule.
• Planning fallacy and the optimism bias
• Student syndrome: many people will start to
fully apply themselves to task just in the
wake of a deadline.
• Confirmation Bias

8. Availability Heuristic
Simple Psychological Exercise
1. Take three seconds to try to recall all of the projects or
large activities you were involved during the last year.
2. Now repeat step 1, but take 15 seconds.
3. Repeat steps 1 and 2 taking up to three minutes for
each step, and write down the results.

9. “What I see is what I want to see.”
Planners or project managers sometimes cease to
review data as soon as they find something that
supports their estimate. They can also discard
evidence that contradicts their estimates.
Selective Search of Evidence

10. Other Explanations Of Problems With
Estimation
· There is no established project estimation process.
· Inaccurate data is used, or historical data may not be
complete.
· The forecasting techniques and tools are inefficient.
· There is no ability to track actual project performance, which
can be used to refine estimates.
· The project planners are inexperienced.

11. Simple Remedies
• Never make a wild guess
• Collect Relevant Historical Data
• Reality checks
• Independent Assessment

12. Example of Reality Check
500 1000 1500 2000 2500
Mission Cost ($ mln)
0
0
20
40
60
80
100
120
140
160
180
MissionDuration(mo)
HEAD
Magillan
Landsat 7
URAS LISA
CGRO Chandra (AXAF)
Galileo
Terra
HST
GOES I-M
Aqua
NASA’s LISA Project cost estimation

13. Estimating Probabilities
1. Subjective judgment
2. Relative frequency approach
3. Combination of both

14. Method of Eliciting Judgment
• Direct assessment of an event’s probability
• Ask the experts two opposing questions: “What
is the probability that the project will be
canceled?” and “What is the probability the
project will be completed?”
• Probability wheel
25% No problem with the component
35% Full replacement of the component
40% Repair of the component

15. Probability Method
Low
estimate
High
Estimate
11 intervals
How many
instances
per each
interval

16. Building Consensus
• Come back to original questions
• Visualize range on opinions
• People usually good in technical estimations but not good
about cost
• Separation of compound events

17. Sensitivity to Probability
Maj. Ernest Y. Wong and Lt. Col. Rod Roederer of the U.S. Military
Academy (2006) reviewed the decision to attack Iraq from a decision
theory point of view. To make their point, they hypothetically assumed
that the decision to attack Iraq was based only on one criterion: the
existence of a stockpile of weapons of mass destruction (WMD). They
performed analysis using methods that we have discussed in this book.
They demonstrated that outcome of the decision to attack Iraq is very
sensitive to uncertainty in assessment of probability of Iraq having WMD
at this time.
If probability is greater than a certain break even number (say 75%), the
decision may be correct; and vice versa. However, if the probability is
expressed as a range (from 60% to 90%), and the break even point is
within this range, it is very hard to tell what course of actions should
have been taken.

18. Future Reading
Lev Virine and Michael Trumper
Project Decisions:
The Art and Science
Management Concepts, Vienna, VA, 2007
Lev Virine and Michael Trumper
Project Think:
Why Good Managers Make Poor Project Choices
Gower, 2013