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Estimation Accuracy

1. Deliberately underestimating a project is sometimes done to facilitate management approval or win a competitive bid. Targets are set artificially low, and initial efforts attempt to meet those targets. You might expect this strategy to increase the probability of saving time and money. In reality, it can cause significant cost and schedule overruns. 3. The cost of overestimation is linear and predictable even in a worst-case scenario. When adequate resources are allocated right from the start, errors and subsequent overruns are more easily avoided.
2. When an estimate is too low, the effect on actual cost and schedule is non-linear. As the project team attempts to shortcut an otherwise accurate estimate, the potential for planning errors and upstream defects increases exponentially. This can lead very quickly to unpredictable overruns. 4. Clearly the most desirable targets are close to the center of this diagram; based on accurate estimates, such targets are predictable and reliable. However, it is impossible to estimate a complex project perfectly, so remember that the cost associated with overestimating a project may be significantly less than that associated with underestimating it.

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