Asked • 04/30/19

How to calculate budget margin?

Say a work package (containing several tasks) is estimated to take between 320 (Most likely) and 480 (Worst case) hours of work (not duration) to complete. Because of some dependencies and the schedule and budget risk involved, you think it is wise to add an **intermediate buffer** at the end of this work package, besides an overal margin at the end of the project. How do you determine or calculate this individual work package **margin**?Do you use: - 2 x the standard deviation, as proposed by Mike Cohn in his book "Agile planning and Estimating", chapter 17. - PERT (in that case you also need an optimistic estimate): calculating the expected value for the schedule and a 2 x standard deviation for the margin - Just the difference between the Most Likely and the average of the two - Monte Carlo simulation, but this calculates schedule margin for the whole project. How can I determine which intermediate margins to use? - Any other formulaAnd what would be your justification for the proposed method? And your success rate ;-)Thanks

1 Expert Answer

By:

Henry J. answered • 05/01/19

33 + years of experience, PMP Cert, and Masters in Project Management

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