Improving your estimates for fixed price projects

Improving your estimates for fixed price projects

On June 8th and 9th, 2016 I hosted two webinars about estimation at Professional Services Firms. My favorite question from a viewer  was, “how do you organize your data for Monte Carlo simulations of duration?”

For some context, here’s a short recording from the part of the presentation about Monte Carlo simulations.

I am currently using Monte Carlo simulations for calculating the durations of fixed-price, fixed-deliverable consulting packages. This means that a client is paying a set amount of money for a specified number of activities and outputs. For example, one of the packages I developed years ago with the Monte Carlo simulation method includes computer-based training, a brief design session with associated documentation, and then implementation of software on a small subset of an organization’s computers.

However, that package was not developed overnight. My team performed this set of tasks at five or more customers’ organizations before we settled on the necessary deliverables and had sufficient duration data to load into the calculator. When we were collecting and processing our data, we included:

  • Client name
  • Dates of service
  • Estimated hours
  • Actual hours (including billable and non-billable hours)
  • Deliverables listed in Statement of Work
  • Deliverables delivered (in cases of change orders)
  • Consultant name

After we had finished the consulting package definition, we reduced the amount of data collected to:

  • Package type (we have a Monte Carlo simulator for each package type)
  • Client name
  • Dates of service
  • Actual hours (including billable and non-billable hours)

This makes it very easy to do post-engagement analysis, as you can collect the required data from time sheets or a Professional Services Automation (PSA) system.

When we resume the webinar series in September, we’ll look at other considerations for building packaged consulting services, and how this makes it easier for an outside sales team to sell Professional Services off a sales sheet. In the interim, you can start collecting data to improve your estimation accuracy.

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