From the Help (which you may be referencing):
Duration (Optional field): The time required for learners to complete the project. Adobe Captivate prepopulates this field with an approximate value. However, if your project is ‘heavy’, for example, if it contains videos or animations, you can revise this value.
So it would seem the latter, the 'time it is expected to take', though I'd take that further and suggest it may be for the time it is required to take for the user to pass/complete the course'. If that's the intent, then whether that actually works or not is surely dependant on LMS support.
The 'standard scorm element duration' you mention should be counted by the LMS by default, though if the lesson tracks this it should be able to override the LMS count. But that's just for reporting, it doesn't have a direct relationship to passing/completion requirements...unless you can specify that in the lesson's properties in the LMS.