I came across an interesting article in the May/June 2009 issue of IEEE Software by Magne Jurgensen of the Simula Research Laboratory in Norway which touches on the age-old challenge of deciding whether the lowest estimate is actually a realistic estimate. From his research, Magne has derived 7 recommendations which I have paraphrased below (I suggest they have much validity for internal and external estimates):
- If price is an important selection criteria, dont invite too many bidders if your requirements specification is incomplete.
- Avoid using price as an important selection criteria if your ability to assess provider competence is low.
- Ensure sufficient competence in assessing provider competence by hiring external experts if necessary.
- When selecting bidders, compare the bids with your own independent cost estimate of the average of all bids.
- Let providers collect sufficient information to help them analyze the projects complexity.
- Don't include potentially misleading information that could affect the estimation process (especially your budget expectations).
- Be aware that a negotiation phase after receipt of bids may encourage even greater over-optimism.
Of course, "over-optimism" is Magne's polite way of saying "stupidity."Â If these recommendations resonate with you, I suggest that you should talk to us here at DCG about getting a professional, objective view of your estimates and/or your estimation process.