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Estimating is one of the most critical aspects of project management. A project management methodology will describe how to estimate. When estimating duration, you must start off with an estimate of effort hours. Duration is a factor of the effort hours and the resources to apply. Without an idea of the effort hours, you cannot accurately estimate duration.
One of the key factors in converting effort hours into duration is to define how many productive hours of work you can expect in a typical workday. For example, if you have an activity that you estimate will take forty effort hours; it is unlikely that it can be completed in five eight-hour calendar days. No one is 100% productive. Without taking this into account, it is likely that you will hit your estimates for effort hours, but you will exceed your duration estimates. You need a "reality factor" to convert the estimated effort hours to estimated duration.
A productivity factor takes into account the amount of time a typical person will actually work in a day. This productivity factor takes into account things like social interaction during the day, going to the bathroom and traveling to meetings. It also takes into account people that need a little time to get going in the morning, as well as people that start to fade in the late afternoon. You could try to come up with the number of productive hours per day for each person on the team, but it would be very tedious, if not impossible. A generally accepted rule-of-thumb for average productive hours per day is 6.5, based on an eight-hour day. This is an 80% productivity factor.
When you have contract resources, you should also take a productivity factor into account. Even though these resources are contractors, they will still experience many of the factors that lead to a less than 100% productivity factor. For instance, they are still going to socialize a little and they still need to go to the bathroom. However, you do not expect that contract people will have the same level of non-productive time as employees. A good rule of thumb for a contract resource is 7 to 7.25 productive hours per day. This factor recognizes that the contract resources are not robots and they will not be 100% productive every day. Of course, you still need to pay them for eight hours per day. However, for the purpose of your schedule, you should factor in the productivity factor as well.
Let’s look at an example. Let’s say you have an activity that is estimated to take 80 hours of effort. If an employee is applied full time, it may take him or her a little over twelve days (80 / 6.5 productive hours per day) to complete the work. If a contract resource is allocated full time to this same activity, the activity duration would be eleven days (80 / 7.25 productive hours per day).