The OSBR Handbook

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Cost Estimation ​

This is the standard OSBR holds its cost and effort estimates to: how we produce them, how we express them, and how we record them. It sits next to the Development Guide's Planning & Shaping work and the IT Investment Evaluation guide — those describe how we shape work and judge whether it is worth doing; this describes how we put a number on doing it, and how honest that number is allowed to be. Estimates are part of the reviewable surface the Quality Gate holds work to, not a private guess that skips review.

An estimate is a communication to the client that serves a decision — go/no-go, scope trade-off, sequencing, budget approval — not a promise extracted from us. A number with no traceable reasoning behind it, or a single figure that hides how little we know, is not honest work. It fails Be Nice (we set the client up to be surprised), Be Kind (we let a teammate inherit a commitment nobody could keep), and Be Strong (we did not do the hard thinking). Humans and AI agents estimate here as collaborators — and that partnership carries a specific hazard this policy names head-on (§3-4).

How to read this policy ​

  • Requirement levels follow RFC 2119. MUST / MUST NOT are absolute. SHOULD / SHOULD NOT state a strong default overridable only with a documented reason. MAY marks a free choice.
  • Named practice. Where a rule adopts a published estimation practice, the practice is named inline and cited under References — chiefly Steve McConnell's Software Estimation: Demystifying the Black Art. We adopt the criteria of these practices and right-size them for an SME. Deviations are allowed but must be deliberate and justified in the project's design notes and the meeting record.

1. Goal ​

Produce estimates a client can trust because they can see the reasoning, and that a team can be held to because the uncertainty in them was stated up front rather than discovered later. Concretely, every OSBR estimate must:

  1. Carry a traceable breakdown — a reader can see what tasks the number is composed of, not just the total.
  2. State scope explicitly — what is included, and just as importantly what is excluded.
  3. Express uncertainty as a range, never a single figure presented as fact.
  4. Budget for AI-productivity variance — the same task costs very differently with and without agent scaffolding, and the estimate must say which world it assumes.
  5. Be recorded in the meeting record as an agreement, with its assumptions attached.

The point is never false precision. "Seven days" is a worse answer than "five to twelve days, most likely eight, assuming X" — because the second one is true.

2. Responsibility ​

  • The estimator (the engineer scoping the work) builds the breakdown, states the assumptions and scope boundaries, gives a range rather than a point, and flags which AI-scaffolding assumption applies. They own the honesty of the number.
  • The reviewer (a second engineer) sanity-checks the breakdown and the range independently before it reaches the client. Estimates are reviewed like code — the same AI code review the Quality Gate requires.
  • The project lead ensures the estimate reaches the client as a range with its assumptions intact, and that the agreement and its assumptions land in the meeting record. They own that we do not quietly collapse the range to its low end under pressure.
  • The whole team feeds actuals back so future estimates improve. An estimate nobody checks against reality is a guess we keep repeating.

3. Practices ​

3-1. Every estimate carries a traceable breakdown ​

  • Estimates MUST be built bottom-up where the work is understood: decompose into tasks small enough to reason about (McConnell's guidance: aim for pieces of roughly 1–3 days). Decomposition itself reduces error, because independent over- and under-estimates partially cancel.
  • Where the work is not yet understood well enough to decompose, use analogous estimation — size it against a comparable past OSBR project — and say so. An analogous estimate is a legitimate early-phase tool; passing one off as if it were bottom-up is not.
  • The breakdown MUST be preserved, not discarded once a total is reached. The client — and the next engineer — is entitled to see the parts.
  • A bare total with no visible composition MUST NOT be sent to a client.

3-2. Scope inclusions and exclusions are explicit ​

  • Every estimate MUST list what it includes and what it excludes. Silent scope is the single largest source of estimate disputes.
  • Common exclusions to state explicitly when they apply: data migration, third-party integration work, content population, non-functional hardening, infrastructure provisioning, client-side review cycles, and post-launch support.
  • Assumptions MUST be written down beside the estimate — this is the explicit-assumptions discipline. Every "we assume the API is documented / the design is final / the client provides X by date Y" is a load-bearing condition. When an assumption breaks, the estimate is void and is re-quoted; that is the deal, and stating the assumption up front is what makes re-quoting fair rather than a fight.

3-3. Uncertainty is expressed as a range, not a single figure ​

  • Estimates MUST be given as a range (low–high), not a single number. A single number is a claim to knowledge we do not have.
  • The width of the range MUST reflect where we are on the Cone of Uncertainty (McConnell): early in a project, estimates are legitimately off by a factor of several in either direction; that spread narrows only as real decisions are made and unknowns are closed. Early estimates therefore carry wide ranges, and narrowing the cone is earned by doing the discovery work, not by wishful confidence.
  • For individual tasks with real uncertainty, use three-point / PERT estimation: capture optimistic (O), most-likely (M), and pessimistic (P); the expected value is (O + 4M + P) / 6 and the spread (P − O) / 6 gives a usable sense of the risk on that task. Summing PERT expected values across a breakdown gives a defensible project figure with a defensible spread.
  • For whole-project figures, prefer reference-class forecasting over pure bottom-up when comparable past projects exist: anchor on what similar OSBR projects actually cost, then adjust. This counters the optimism bias and planning fallacy that make inside-view bottom-up estimates systematically too low.
  • Presenting a range's low end alone, or averaging a range down to one number to "look competitive," manufactures a surprise for the client later. That is a violation of Be Nice, and we MUST NOT do it.

3-4. Budget for AI-productivity variance ​

AI coding agents change task cost dramatically — but unevenly, and mostly as a function of whether the ground is prepared. This variance is a first-class term in our estimates, not a footnote.

  • An estimate MUST state which world it assumes: scaffolded (agent-ready — clear specs, existing patterns to follow, good test coverage, tight feedback loops, established conventions in the repo) or unscaffolded (greenfield ambiguity, no tests to check against, a novel domain, poor or absent conventions).
  • Scaffolded work SHOULD be estimated lower, reflecting realistic agent leverage — but the range MUST still be a range, because agent output on a bad day still needs human correction.
  • Unscaffolded work MUST NOT claim the scaffolded speed-up. The agent productivity gain is real where the scaffolding exists and largely absent where it does not; assuming the best case on unprepared ground is exactly the optimism bias §3-3 warns against.
  • Where scaffolding could be built first (writing the specs, the tests, the conventions) and would move the work into the cheaper world, the estimate SHOULD surface that as an explicit option with its own cost — "N days as-is, or M days to scaffold + cheaper thereafter." That is a real decision the client is entitled to make.
  • The AI-productivity assumption is itself an assumption under §3-2 and MUST be recorded as one.

3-5. Choose the method to fit what is known ​

  • Bottom-up when the work is decomposable and understood (§3-1) — most accurate, most effort.
  • Analogous when it is not yet, early in a project — fast, coarse, honest about being coarse.
  • Reference-class when comparable past projects exist — the strongest defence against optimism bias at the whole-project level (§3-3).
  • Use more than one method when the stakes justify it, and compare: convergent estimates raise confidence; divergent estimates have found a hidden assumption worth chasing before quoting.

3-6. Story points, #NoEstimates, and where they fit ​

  • For internal iteration planning, teams MAY use relative story points and velocity to forecast sprint throughput. Points measure relative size for flow forecasting; they are an internal planning aid.
  • Story points MUST NOT be handed to a client as a cost. Clients decide in time and money, not in a relative unit only meaningful inside one team's velocity.
  • The #NoEstimates argument — that fine-grained upfront estimation is often waste, and that slicing work small and shipping continuously forecasts better than estimating — is a legitimate influence on how we work (thin vertical slices, frequent delivery, empirical forecasting from actuals). But OSBR clients contract for scope against budget, so a defensible range-based estimate with stated assumptions remains required for client-facing commitments. We take #NoEstimates' discipline without dropping the client's right to a bounded number.

3-7. Record the agreement in the meeting record ​

  • The agreed estimate — its range, its breakdown, its scope inclusions/exclusions, its assumptions (including the AI-scaffolding assumption), and the method used — MUST be captured in the meeting record when it is agreed with the client.
  • What is recorded is the agreement, not a single negotiated-down number stripped of its conditions. If the range narrowed or scope changed in the meeting, the record reflects why.
  • When an assumption later breaks, the meeting record is what makes re-quoting straightforward and fair rather than a dispute over memory. This is the Be Kind clause: it protects the teammate who inherits the project and the client who signed off.
  • Estimates SHOULD be revisited as the Cone of Uncertainty narrows; a materially updated estimate is a new agreement and is recorded as one.

4. Anti-patterns ​

  • False precision — "12.5 days." Presenting a single figure as if the uncertainty were resolved. Give the range.
  • Silent scope — a number with no stated inclusions/exclusions. Disputes live here.
  • Ranges quoted at the low end — sending "5 days" from a "5–12 day" estimate to win the work. Dishonest by omission.
  • Best-case AI assumption on unprepared ground — claiming agent speed-ups for unscaffolded, ambiguous work.
  • Inside-view optimism — bottom-up summing with no reference-class sanity check on a project type we have history for.
  • Estimate as commitment — treating an early, wide-cone estimate as a fixed promise, then blaming the team when reality lands inside the range we stated.

References ​

Core

  • Steve McConnell, Software Estimation: Demystifying the Black Art (Microsoft Press, 2006) — Cone of Uncertainty, decomposition, estimate-vs-commitment, method selection.

Techniques

  • Three-point / PERT estimation — expected value (O + 4M + P)/6, spread (P − O)/6 (Program Evaluation and Review Technique).
  • Range estimation — expressing estimates as intervals that reflect position on the Cone of Uncertainty.
  • Reference-class forecasting — the outside-view corrective to optimism bias: Daniel Kahneman, Thinking, Fast and Slow (2011); Bent Flyvbjerg on the planning fallacy and outside-view forecasting.
  • Bottom-up vs analogous estimation — decomposition vs comparison-to-past- project methods (McConnell, above).
  • Explicit-assumptions discipline — assumptions recorded beside the estimate as the basis for re-quoting when they break.

Agile / debate

  • Story points & velocity — relative sizing for empirical iteration forecasting.
  • #NoEstimates — Vasco Duarte and others; the argument for small slices and forecasting from actuals over fine-grained upfront estimation.

Related OSBR standards