Differentiate between the consensus, ratio, and apportion methods? Provide an example for when each method is used.
Consensus, Ratio, and Apportion Methods
There are varieties of models for cost estimation in project management. Some of the commonly used methods include the consensus methods that are similar to Delphi technique, ration methods, and apportion techniques. Estimation involves the process of approximating timelines and costs of completing particular projects. The following is a brief overview of the three aforementioned methods of estimating costs in project management.
The consensus method estimates the project duration and cost by using the combined experience of senior and the middle level managers. Senior and middle level managers have a wealth of experience in management of various projects. The managers and other experts meet to discuss their opinions about cost and project duration. Top-down estimates are applicable in the initial stages of the project (Gray & Larson, 2008). Top-down estimates refer to an approach whereby managers start by defining the project goal, which is then subdivided into several planning chunks. The initial top-down estimates comprise of rough estimates since there is little information available during this period. Nevertheless, they assist the management in establishing whether the project requires detailed or more formal planning. This method is used in projects that concern members who have diverse social or ethnic backgrounds, and which involve high investment, for example, when building a church.
The ratio method is parametric in nature. Ratio methods are only applicable with appropriate set of data or information about the project (Gray & Larson, 2008). Ratio methods provide a blunt estimate of the costs and project duration. The ration methods are suitable for providing initial cost estimates. This is because they ignore some of the key details about a project. In applying the ration methods, the top-down approach is used to assess the initial project costs and time duration. Project managers can use a variety of approaches under the ratio method, such as finding the cost ratio or capital ratio. The ratio methods are common in new projects for which there is no basis for making comparisons (Gray & Larson, 2008). For example, Project managers can use the ratio method to estimate the project cost and time for building a new plant. For example, a construction plan may entail building a 3,000 square feet building. The estimated cost of building one foot is $150, meaning that the total estimated cost is $450,000.
This method bears some similarity to the ratio method. Application of apportion method is common in projects that follow or are similar to past projects (Gray & Larson, 2008). By analyzing the historical time and cost data involved in known projects, it is possible to estimates the time and project costs of future projects. Apportionment is a relatively accurate way of estimating cost and time deliverables of a future project. The method is common in projects that have small variations to past projects. For example, after building the new plant as mentioned above, the project managers can fairly estimate the cost of a similar plant or one that varies to some degree. For example, estimation of certain costs such as plumbing costs, electricity installation costs, heating costs, and others may rely on historical data. If plumbing costs for the 3,000 square feet plant building were $200,000, then the new plant building may incur similar costs if it is the same size.
Gray, C. F., & Larson, E. W. (2008). Project management: The managerial process. Boston: McGraw-Hill/Irwin.