There is a great blog with two very powerful pictures about planning, estimating, and revising those estimates. Let's start with the classic picture of forecasting the future. This is similar to the weather track for hurricanes that is often used. The further out in the future the lower the confidence - the higher the variability - of the estimate.
The next picture shows that if we get feedback on periodic boundaries, we can refine the estimates. This iterative estimating is a nice starting point as long as several things are in place:
- The scope of relatively stable as knowledge is gained. This can be bounded by the "capabilities based planning," process.
- Reassessment of "to complete performance index" is used to calibrate the work effort needed to continue delivering on the next iterations.
- The question remains what is the total forecast cost of the project and what is the planned completion date - each within the error bands?