PMBOK® Guide, 4th Edition
6.4 Activity Duration Estimates
Competitive bidding has become an integral part of the project management responsibility in many industries. A multitude of estimating techniques are available in such fields as construction, aerospace, and defense to assist project managers in arriving at a competitive bid. If the final bid is too high, the company may not be competitive. If the bid is too low, the company may have to incur the cost of the overrun out of its own pocket. For a small firm, this overrun could lead to financial disaster.
Perhaps the most difficult projects to estimate are those that involve the development and manufacturing of a large quantity of units. As an example, a company is asked to bid on the development and manufacture of 15,000 components. The company is able to develop a cost for the manufacture of its first unit, but what will be the cost for the 10th, 100th, 1,000th, or 10,000th unit? Obviously, the production cost of each successive unit should be less than the previous unit, but by how much? Fortunately there exist highly accurate estimating techniques referred to as “learning” or “experience” curves.
Experience curves are based on the old adage that practice makes perfect. ...