Top-down estimating definition
/What is Top-Down Estimating?
Top-down estimating occurs when company management imposes a cost and/or duration on a project, usually without a detailed cost analysis. The estimating process is derived from the opinions of a group of experienced managers, possibly supplemented by outside experts. Or, estimates may be copied forward from the actual information from similar projects that the company has completed in the past, adjusting for any unique aspects of the project under consideration. Despite its inaccuracy, top-down estimating is frequently used, typically at the beginning of a project when the details are still being examined. Over time, more detailed bottom-up estimates then replace the original top-down estimate.
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Disadvantages of Top-Down Estimating
These estimates tend to be inaccurate, since there is no detailed analysis to support them. Instead, they are derived from general ratios, such as the average cost per square foot that the firm has experienced in the past.
Bottom-Up Estimating
A better approach is a bottom-up estimate that employs a careful analysis of a project at the work package level, made by those people with the most experience in relation to the project. These estimates tend to be more accurate than estimates derived from the top-down process.