Analogous Estimating

5 minutes 5 Questions

Analogous estimating is a cost estimation technique in which the cost of a project, activity, or work package is determined by applying historical cost information from analogous (similar) projects. This technique is commonly used when there is limited data available for the current project. It rel…

Guide on Analogous Estimating: PMP Cost Estimating

Analogous Estimating is a critical concept in the PMP exam, deriving from the PMBOK Guide Seventh Edition. It is defined as a technique that uses the values of parameters from previous similar projects to estimate the cost or duration of the current project.
It's often referred to as 'Top-down' estimating and it can be applied to the total project or to segments of a project, usually making use of historical data.
How it works: Project managers and team members review past projects that are similar and use the actual cost or duration of those projects to give bid estimates for the current project.
'+'Why it's important: It provides a quick and less costly method for estimation, especially during the early stages of a project. It helps to narrow down the cost or duration estimates with minimum information about the project.
Exam Tips:
1. Understand what Analogous Estimating is: Understanding the concept is key. If you know that it is based on historical data and used for quick estimations, you can easily identify the correct answers.
2. Relate it to real-world scenarios: Practical application helps you to answer scenario-based questions. You might face situations where you need to decide when to use Analogous Estimating.
3. Remember its limitations: It is less accurate than other methods because it assumes past project estimates are applicable to the new project.
If the question implies the need for a fast and comparatively accurate estimate, or if there is a past similar project, Analogous Estimating might be the best choice.

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PMP - Analogous Estimating Example Questions

Test your knowledge of Analogous Estimating

Question 1

A project manager uses Analogous Estimating to give a quick cost estimate for an upcoming project. The estimate turns out to be highly inaccurate after the completion of the project. What could be the primary reason for this inaccuracy?

Too many expert opinions Overdetailed work breakdown structure Lack of historical data from similar projects Overreliance on quantitative methods

Correct Answer: Lack of historical data from similar projects

Analogous Estimating is a technique that uses the values of parameters from previous similar projects for estimating the same parameter or measurement for a future project. The key to the accuracy of Analogous Estimating lies in the similarity of the projects that have been analyzed. Hence, the primary reason for the inaccuracy could have been 'Lack of historical data from similar projects'. 'Too many expert opinions' is not relevant because Analogous Estimating relies more on historical data than on expert opinions. 'Overdetailed work breakdown structure' and 'Overreliance on quantitative methods' wouldn't typically lead to inaccuracies in Analogous Estimating. The primary dependency of Analogous Estimating is on the availability of accurate and relevant historical data.

Question 2

You are a project manager overseeing a bridge construction. A similar project was completed in the past at a cost of $2 million. However, this new project involves a bridge that is 50% larger. How should you use the Analogous Estimate in this scenario?

Decrease the cost of the previous project by 50%, assuming economies of scale. Increase the cost of the previous project by 50% to account for the larger bridge size. Use the cost of the previous project directly without any modifications. Double the cost of the previous project regardless of the actual increase in size.

Correct Answer: Increase the cost of the previous project by 50% to account for the larger bridge size.

The Analogous Estimate method in project management involves using the data from past projects to estimate the cost of current projects. Given the new bridge is 50% larger, the most reasonable approach is to increase the cost of the previous project by 50% (Answer 155234). The assumption is that there is a direct correlation between size and cost. The other answers are incorrect. Using the cost of the previous project directly without modifications (Answer 155235) would not consider the increased size of the new bridge. Decreasing the cost of the previous project by 50% (Answer 155236) would not make sense in this context, as the new bridge is larger, not smaller or the same size. Doubling the cost of the previous project (Answer 155237) would be excessive unless there were other factors (not mentioned in the question) that would justify such an increase.

Question 3

You have recently finished the renovation of a two-story building which took 5 months and cost $70,000. Your next project is renovating a similar four-story building. How would you estimate the cost and duration for this project using Analogous Estimating?

Since the new project is twice as large, you would proportionally double the cost and duration from the previous project. Assume the four-story building will cost less due to the presence of more floors and thus more allocated budget. Exclude the cost and time taken for the previous project while estimating for the new project. Assume the new project will cost and take the same amount of time as the previous project because they are both renovation projects.

Correct Answer: Since the new project is twice as large, you would proportionally double the cost and duration from the previous project.

Analogous Estimating is a technique for estimating the duration or cost of an activity or a project using historical data from a similar activity or project. In this case, we have the cost and duration for a renovation project of a two-story building. The next project is a four-story building, which is twice as big as the previous one. Therefore, assuming all else stays the same, it would be logical to proportionally double both the cost and duration from the previous project, which leads to the answer 'Since the new project is twice as large, you would proportionally double the cost and duration from the previous project'. The other options like suggesting the new project will cost and take the same amount of time as the previous, or to exclude the cost and time taken for the previous project while estimating for the new project or to assume the four-story building will cost less, are incorrect because they do not apply the principles of analogous estimating correctly.

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