Three point estimation
A three-point estimate is a method used to estimate the cost or duration of a project task or activity. It is commonly used in project management, and it is particularly important in the construction industry, where projects can be complex and involve many different tasks
It involves using three estimates: an optimistic estimate, a most likely estimate, and a pessimistic estimate.
- The optimistic estimate is the best-case scenario for how long the task will take or how much it will cost.
- The pessimistic estimate is the worst-case scenario.
- The most likely estimate is the estimate it is believed is the most accurate representation of how long the task will take or how much it will cost based on their experience and expertise.
To calculate the three-point estimate, the three estimates are first added together and then divided by three to give an expected value. This expected value can be used to help project managers plan resources and schedule tasks more accurately.
Should cost modelling, Development Guidance, Version 1.0, published by Government Commercial Function in May 2021 states: ‘This technique uses three different estimates of potential costs, the most likely, optimistic and pessimistic profiles. These estimates are then aggregated and averaged to provide estimates that are adjusted for extremes. It is often applied in the context of Monte Carlo simulation to produce probabilistic outputs.’
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