Principles, Process and Practice of Professional Number Juggling

Alan R. Jones is Principal Consultant at Estimata Limited, an estimating consultancy service. He is a Certified Cost Estimator/Analyst (US) and Certified Cost Engineer (CCE) (UK). Prior to setting up his own business, he has enjoyed a 40-year career in the UK aerospace and defence industry as an estimator, culminating in the role of ChiefEstimator at BAE Systems. Alan is a Fellow of the Association of Cost Engineers and a Member of the International Cost Estimating and Analysis Association. Historically (some four decades ago), Alan was a graduate in Mathematics from Imperial College of Science and Technology in London, and was an MBA Prize-winner at the Henley Management College (… that was slightly more recent, being only two decades ago). Oh, how time flies when you are enjoying yourself.

"In the Working Guides to Estimating and Forecasting Alan has managed to capture the full spectrum of relevant topics with simple explanations, practical examples and academic rigor, while injecting humour into the narrative." Dale Shermon, Chairman, Society of Cost Analysis and Forecasting (SCAF)."If estimating has always baffled you, this innovative well illustrated and user friendly book will prove a revelation to its mysteries. To confidently forecast, minimise risk and reduce uncertainty we need full disclosure into the science and art of estimating. Thankfully, and at long last the "Working Guides to Estimating & Forecasting" are exactly that, full of practical examples giving clarity, understanding and validity to the techniques. These are comprehensive step by step guides in understanding the principles of estimating using experientially based models to analyse the most appropriate, repeatable, transparent and credible outcomes. Each of the five volumes affords a valuable tool for both corporate reference and an outstanding practical resource for the teaching and training of this elusive and complex subject. I wish I had access to such a thorough reference when I started in this discipline over 15 years ago, I am looking forward to adding this to my library and using it with my team." - Tracey L Clavell, Head of Estimating & Pricing, BAE Systems Australia "At last, a comprehensive compendium on these engineering math subjects, essential to both the new and established "cost engineer"! As expected the subjects are presented with the author’s usual wit and humour on complex and daunting "mathematically challenging" subjects. As a professional trainer within the MOD Cost Engineering community trying to embed this into my students, I will be recommending this series of books as essential bedtime reading." - Steve Baker, Senior Cost Engineer, DE&S MOD"Alan has been a highly regarded member of the Cost Estimating and forecasting profession for several years. He is well known for an ability to reduce difficult topics and cost estimating methods down to something that is easily digested. As a master of this communication he would most often be found providing training across the cost estimating and forecasting tools and at all levels of expertise. With this 5-volume set, Working Guides to Estimating and Forecasting, Alan has brought his normal verbal training method into a written form. Within their covers Alan steers away from the usual dry academic script into establishing an almost 1:1 relationship with the reader. For my money a recommendable read for all levels of the Cost Estimating and forecasting profession and those who simply want to understand what is in the ‘blackbox’ just a bit more." - Prof Robert Mills, Margin Engineering, Birmingham City University. MACOSTE, SCAF, ICEAA."Finally, a book to fill the gap in cost estimating and forecasting! Although other publications exist in this field, they tend to be light on detail whilst also failing to cover many of the essential aspects of estimating and forecasting. Jones covers all this and more from both a theoretical and practical point of view, regularly drawing on his considerable experience in the defence industry to provide many practical examples to support his comments. Heavily illustrated throughout, and often presented in a humorous fashion, this is a must read for those who want to understand the importance of cost estimating within the broader field of project management." - Dr Paul Blackwell, Lecturer in Management of Projects, The University of Manchester, UK."Alan Jones provides a useful guidebook and navigation aid for those entering the field of estimating as well as an overview for more experienced practitioners. His humorous asides supplement a thorough explanation of techniques to liven up and illuminate an area which has little attention in the literature, yet is the basis of robust project planning and successful delivery. Alan’s talent for explaining the complicated science and art of estimating in practical terms is testament to his knowledge of the subject and to his experience in teaching and training." - Therese Lawlor-Wright, Principal Lecturer in Project Management at the University of Cumbria"Alan Jones has created an in depth guide to estimating and forecasting that I have not seen historically. Anyone wishing to improve their awareness in this field should read this and learn from the best." Richard Robinson, Technical Principal for Estimating, Mott MacDonald"The book series of ‘Working Guides to Estimating and Forecasting’ is an essential read for students, academics and practitioners who interested in developing a good understanding of cost estimating and forecasting from real-life perspectives". Professor Essam Shehab, Professor of Digital Manufacturing and Head of Cost Engineering, Cranfield University, UK. "In creating the Working Guides to Estimating and Forecasting, Alan has captured the core approaches and techniques required to deliver robust and reliable estimates in a single series. Some of the concepts can be challenging, however, Alan has delivered them to the reader in a very accessible way that supports lifelong learning. Whether you are an apprentice, academic or a seasoned professional, these working guides will enhance your ability to understand the alternative approaches to generating a well-executed, defensible estimate, increasing your ability to support competitive advantage in your organisation." - Professor Andrew Langridge, Royal Academy of Engineering Visiting Professor in Whole Life Cost Engineering and Cost Data Management, University of Bath, UK."Alan Jones’s "Working Guides to Estimating and Forecasting" provides an excellent guide for all levels of cost estimators from the new to the highly experienced. Not only does he cover the underpinning good practice for the field, his books will take you on a journey from cost estimating basics through to how estimating should be used in manufacturing the future – reflecting on a whole life cycle approach. He has written a must-read book for anyone starting cost estimating as well as for those who have been doing estimates for years. Read this book and learn from one of the best." - Linda Newnes, Professor of Cost Engineering, University of Bath, UK.

• List of Figures List of TablesForeword Introduction and objectives Why write this book? Who might find it useful? Why five volumes? Why write this series? Who might find it useful? Why five volumes? Features you’ll find in this book and others in this series Chapter context The lighter side (humour) Quotations Definitions Discussions and explanations with a mathematicalslant for Formula-philes Discussions and explanations without a mathematicalslant for Formula-phobes Caveat augur Worked examples Useful Microsoft Excel functions and facilities References to authoritative sources Chapter reviews Overview of chapters in this volume Elsewhere in the ‘Working Guide to Estimating & Forecasting’ series Volume I: Principles, Process and Practice of ProfessionalNumber Juggling Volume II: Probability, Statistics and Other Frightening Stuff Volume III: Best Fit Lines and Curves, and Some Mathe-Magical Transformations Volume IV: Learning, Unlearning and Re-Learning Curves Volume V: Risk, Opportunity, Uncertainty and Other Random Models 1.5 Final thoughts and musings on this volume and seriesReferences2Methods, approaches, techniques and related terms2.1 What is the difference between a method, approach and technique?2.2 Estimating Process2.3 Estimating Approaches2.3.1 Top-down Approach2.3.2 Bottom-up Approach2.3.3 Ethereal Approach2.4 Estimating Methods2.4.1 Analogical or Analogous Method2.4.2 Parametric Method2.4.3 ‘Trusted Source’ Method2.4.4 Methods that are arguably not methods (in their own right)2.5 Estimating Techniques2.6 Estimating Procedures Combining Approaches and Methods Choice of Estimating Approach for a chosen Estimating Element 2.7.2 Choice of Estimating Method for a chosenEstimating Approach2.7.3 Choice of Estimating Technique for a chosenEstimating Method2.8 Chapter reviewReferences3Estimate TRACEability and health checks3.1 Basis of Estimate,TRACEability and estimate maturity3.1.1 Building bridges between two estimates3.2 Estimate and Schedule Maturity Assessments (or health checks)3.2.1 Estimate Maturity Assessment (EMA)3.2.2 Schedule Maturity Assessment (SMA)3.2.3 Cost and Schedule Integration Maturity Assessment (CASIMA)3.3 Good Practice Spreadsheet Modelling (GPSM)3.3.1 Level of documentation (T, M)3.3.2 No hidden worksheets, columns or rows (T, M) Colour coded cells and worksheet tabs (U, S) Locked calculation cells and protected worksheetsand workbooks (S) No hard-coded constants unless axiomatic (M) Left to Right and Top to Bottom readability flow (U) Avoid data generated by macros … Unless there is agenuine benefit (S,T) Avoid Array Formulae (T, U, M) Avoid dynamic links to external data (S) Use Named Ranges for frequently used table arrays (M, U) Use full syntax within Excel (M) Break complex calculations into smaller simpler steps (T, M) Column and row alignment across worksheets (T) Unambiguous units of measure (U) Input data validation (U) Independent model verification and validation (S) Inherent Risk in Spreadsheets (IRiS) Chapter review References Primary and Secondary Drivers; Accuracy and precision Thank goodness for Juran and Pareto What’s the drive behind the Drivers? Primary Drivers Internal and external Drivers Secondary Drivers Practical issues with Drivers Sub-classification of Primary Drivers Avoid pseudo-drivers Things are rarely black or white Accuracy and precision of Primary and Secondary Drivers Accuracy, precision and Drivers – A Pareto perspective Cone of Uncertainty 3-Point Estimates as a measure of relative accuracyand uncertainty Precision as an expression of appropriate or inappropriate exactness Chapter review References Factors, Rates, Ratios and estimating by analogy Estimating Metrics Where to use them The views of others 5.1.3 Underlying Linear Relationship5.2 Rates5.3 Factors5.4 Ratios5.5 Dealing with multiple Rates, Factors (and Ratios)5.5.1 Anomalous analogies5.5.2 Analogies with an additive model5.5.3 Analogies with a multiplicative model5.6 Sensitivity Analysis on Factors, Rates and Ratios Choosing a Sensitivity Range quantitatively Choosing a Sensitivity Range around a measure of Central Tendency The triangulation option Choosing a Sensitivity Range around a High-end or Low-end Metric 5.6.5 Choosing a Sensitivity Range when all else fails5.7 Chapter reviewReferences6Data normalisation – Levelling the playing field6.1 Classification of data sources – Primary, Secondary and Tertiary Data6.1.1 Primary Data6.1.2 Secondary Data6.1.3 Tertiary Data6.1.4 Quarantined Data6.2 Types of normalisation Methods and Techniques6.3 Normalisation can be a multi-dimensional problem Error related Volume, quantity or throughput related – Economies of Scale 6.3.3 Scale conversion – Fixed and Variable Factors6.3.4 Date or time related6.3.5 Life Cycle related6.3.6 Key groupings – Role related6.3.7 Scope related (subjective)6.3.8 Complexity – Judgement related (subjective)6.4 The estimator as a time traveller6.4.1 Use of time-based indices ‘Now and Then’6.4.2 Time-based Weighted Indices6.4.3 Time-based Chain-linked Weighted Indices The doubling rule for escalation Composite Index: Is that not just a Weighted Index by another name? Using the appropriate appropriation approach Use of time as an indicator of other changes Discounted Cash Flow – Normalisinginvestment opportunities Discounted Cash Flow – A form of time travel for accountants Net Present Value (NPV) Internal Rate of Return (IRR) Payback Period Strengths and weaknesses of different DCF techniques Special types of formulaic normalisation techniques Layering of normalisation for differences in analogies Chapter review References Pseudo-quantitative qualitative estimating techniques Delphi Technique Driver Cross-Impact Analysis A brief word or two about solution optimisation Chapter review References Benford’s Law as a potential measure of cost bias Scale Invariance of Benford’s Law Potential use of Benford’s Law in estimating Chapter review References Glossary of estimating and forecasting terms Legend for Microsoft Excel Worked Example Tables in Greyscale Index