## 3-Points Estimation Technique

The most useful scheduling technique which, in my opinion, has to be used in each project is 3-Points estimation technique. It is simple to use, it improves team productivity and project performance.

As projects complexity level keeps growing, projects become less predictable and project plans are usually built based on expert opinion, rather than accurate historical data. Very complex projects are so unpredictable that companies move from Waterfall to Agile delivery methods, where 100% of activity estimation is based on expert opinions.

Regardless of a delivery method, when team members are forced to provide a single estimation (duration or story point) for each activity, they have to include a “risk factor” as a hidden contingency. This is leading to a number of challenges:

• PM is not aware of activities with a high-risk factor
• PM doesn’t control contingency
• Opportunities to complete activities earlier decreased due to Parkinson’s Law
• Risk to activities delay increased due to Student Syndrome

## Parkinsons’s Law

Parkinson’s Law
work always expands to fill the time available for its completion.

Some team members will use allowed durations even if the risk is not actualised.

## Student Syndrome

Student Syndrome
An activity owner is likely to delay a start of activity as “hidden contingency” creates an illusion that there is still enough time to complete this activity on time. However, if the risk is materialised there is no sufficient time to complete the activity on time as hidden contingency has already been spent.

## 3-Point Estimation

3-Point Estimation:

When activity estimation is based on an expert opinion, it’s always preferable to capture three estimations to understand potential variance of durations

a) What is the BEST possible (optimistic) scenario to complete the activity?

b) What is the WORST possible (pessimistic) scenario to complete the activity?

c) What is the MOST LIKELY scenario to complete the activity?

• It doesn’t take much longer to capture 3 numbers instead of 1, but it enables immediate understanding of activities with hidden risks;

• It is important to capture BEST and WORST estimations before the MOST LIKELY estimation. It forces an estimator to think about potential issues before MOST LIKELY duration is provided;

• Activity TARGET duration could be calculated based on 3 estimations. PERT formula could be used as an initial proxy.

• The key project delivery dates could be calculated with two different approaches:

a) based on TARGET durations;
b) based on OPTIMISTIC durations with overall contingency bucket;

• Regardless of a target approach an activity owner has to plan an OPTIMISTIC duration as his own target, but not to be punished if it takes longer to complete the activity.

• It’s always useful to run analysis on the deviations from optimistic and target durations. Usually after 20% of project progress is achieved, as normally there is sufficient data to understand if target dates of outstanding activities need to be adjusted.

• Activity owners always appreciate 3 points estimation technique, as it takes pressure from them.

• The method is a great alternative to story points technique in Agile projects.

• 3 estimations are also a base for more advanced scheduling methods: Monte Carlo Risk Analysis, 3 Scenarios Method, Probability of Success.

## Target Durations

A target activity duration could be calculated with or without a weighted factor:

a) Triangular technique recommends using average of three estimations:
Target = (O + ML + P) / 3

b) PERT technique recommends using a weighted approach:
Target = (O + 4 * ML + P) / 6

PERT = Program Evaluation and Review Technique

I prefer PERT, as it gives a more accurate prediction. Optimistic and Pessimistic scenarios may occur but usually, it doesn’t happen as often as Most Likely scenario and PERT address it.

Example: Travel to office

In an ideal scenario with all green lights and no traffic, I can reach my office in 25 minutes. In very bad traffic it’s never been longer than 60 minutes. Typically, it takes 35 minutes.

O = 25 mins
P = 60 mins
ML = 35 mins

Target travel time (average): (25+ 60 + 35) /3 = 40 mins
Target travel time (PERT): (25+ 60 + 4* 35) /6 = 37.5 mins

## Analysis

PERT formula is a good proxy if there is no actual data available. However, after ACTUAL completion dates become available for analysis, the formula could be adjusted to address specifics of the project, organisation or even experience of an estimator. Some estimators are too optimistic, others are too conservative.

For example:
T = (2 * O + 5 * ML + P) / 8

In some cases, I had to revise outstanding target dates for the whole project, in some for end of current phase and in some just for one or two estimators.

## Scheduling Tools

Huge advantage if this technique is that TARGET estimations could be easily calculated in Excel. However, it is very convenient to use a scheduling tool instead. It saves time, support “What if analysis” and could be used for more advanced risk evaluation methods.

MS Project versions 2013 support PERT analysis. Target durations could be calculated based on PERT formula or the formula could be adjusted.

MS Project version 2016+ doesn’t support PERT (!!!). However, Project 2016 PERT Add-in is available.

Primavera doesn’t support PERT analysis. Target calculation has to be completed in Excel and then entered as planned durations.
However, external tool – Primavera Risk Analysis (previously known as PERTMASTER®) has integration with Primavera and could be used for PERT or Monte Carlo analyses.

Spider Project has built-in 3 points estimations and supports advanced risk methods: Monte Carlo Risk Analysis, 3 Scenarios Method & Probability of Success method.

For more mature projects Spider Project allows to link Optimistic, Pessimistic and Most Probably versions of a schedule together. The versions could vary not just with different activity durations but also with different activities and different logic between activities to address risk contingency and risk management plans.

Spider Project has a free fully-functional version limited by 40 activities. This version could be used to develop a fragment of a schedule with 3 points estimation. The fragment then could be exported to Primavera or MS Project.

Spider Demo version:

A lot of 3rd party tools available for PERT and Monte Carlo analysis.
Acumen Risk is quite popular enchantment. Especially for scheduling tools, like Primavera, which don’t have built in risk management.

## Agile

I will write a separate topic on how to enhance Agile delivery with 3 points estimation technique. As a simple alternative ask to provide 3 durations and calculate Story Points based on these estimations. It gives much better visibility of a risk factor and improves team performance.

## Summary

• When activity estimation is based on an expert opinion, it’s always preferable to capture three estimations instead of one.

• Project may continue to use only Most Likely estimations but knowledge of Optimistic and Pessimistic scenarios should improve project performance as “Parkinson’s Law” and “Student Syndrome” issue are going to be mitigated.

• Target durations are more accurate comparing to Most Likely option as it takes risk and opportunities into account. Target durations could be calculated based on 3 estimations. PERT analysis could be used as a good proxy to start from.

• More advanced risk methods could be applied to use 3-points estimation data.

#### Alex Lyaschenko

PMO | Portfolio Planning & Delivery | PMP | P3O Practitioner | AgilePM Practitioner | Six Sigma