The Project Estimation Approach that is widely used is Decomposition Technique. Decomposition techniques take a divide and conquer approach. Size, Effort and Cost estimation are performed in a stepwise manner by breaking down a Project into major Functions or related Software Engineering Activities.

Step 1 − Understand the scope of the software to be built.

Step 2 − Generate an estimate of the software size.

• Start with the statement of scope.
• Decompose the software into functions that can each be estimated individually.
• Calculate the size of each function.
• Derive effort and cost estimates by applying the size values to your baseline productivity metrics.
• Combine function estimates to produce an overall estimate for the entire project.

Step 3 − Generate an estimate of the effort and cost. You can arrive at the effort and cost estimates by breaking down a project into related software engineering activities.

• Identify the sequence of activities that need to be performed for the project to be completed.
• Divide activities into tasks that can be measured.
• Estimate the effort (in person hours/days) required to complete each task.
• Combine effort estimates of tasks of activity to produce an estimate for the activity.
• Obtain cost units (i.e., cost/unit effort) for each activity from the database.
• Compute the total effort and cost for each activity.
• Combine effort and cost estimates for each activity to produce an overall effort and cost estimate for the entire project.

Step 4 − Reconcile estimates: Compare the resulting values from Step 3 to those obtained from Step 2. If both sets of estimates agree, then your numbers are highly reliable. Otherwise, if widely divergent estimates occur conduct further investigation concerning whether −

• The scope of the project is not adequately understood or has been misinterpreted.
• The function and/or activity breakdown is not accurate.
• Historical data used for the estimation techniques is inappropriate for the application, or obsolete, or has been misapplied.

Step 5 − Determine the cause of divergence and then reconcile the estimates.