Parametric estimating is a cost estimation technique that utilizes an algorithm or a mathematical equation to determine the cost of a project, activity, or work package based on historical data and key project characteristics. It uses well-established relationships between input variables, such as …Parametric estimating is a cost estimation technique that utilizes an algorithm or a mathematical equation to determine the cost of a project, activity, or work package based on historical data and key project characteristics. It uses well-established relationships between input variables, such as scope, scale, and complexity, along with relevant cost factors, either industry-specific or derived from comparable projects. This technique involves identifying units of measurement for each input variable, determining relevant cost drivers, and creating a reliable model to produce cost estimates. By running the model with various scenarios and assumptions, it is possible to assess the potential impact of different parameters and constraints on the estimated costs. Parametric estimating is generally more accurate than analogous estimating, but its effectiveness depends on the availability of accurate, relevant, and up-to-date historical data, as well as a robust and validated model set up reflecting the represented variables.
Parametric Estimating Guide
Parametric Estimating is an essential technique in project management, especially in cost and time management.
Importance: This technique is important because it provides a quick, accurate, and easily verifiable method of estimating cost, time, or resource requirements for a project. The technique depends on the relationship between variables, thus providing more accurate estimates as more data becomes available.
Definition: Parametric Estimating is a quantitative method of estimating where you use statistical data about previous similar projects as the basis for estimating the same parameter or measure for a future project. It leverages historical data and mathematical equations to calculate estimates.
How it works: In parametric estimating, a unit or parameter is identified, then a per-unit cost or time is assigned. By multiplying the known elements by the per-unit cost or time, you can estimate the total cost or duration.
Exam Tips: Questions on parametric estimating in the exam will more than likely focus on your understanding of how the technique works. Many questions will present a scenario requiring you to apply the technique. Be sure to know how to estimate project costs or duration correctly using parametric estimating. Remember, if you are given a scenario where there is a lot of historical data available and you need to calculate a cost or time estimate, parametric estimating is likely the best technique to apply. Another common mistake is confusing parametric estimating with analogous estimating. Parametric estimating uses mathematical models and typically involves a statistical relationship, whereas analogous estimating is more of a 'guesstimate' based on past experiences.
Answering Questions on Parametric Estimating: To answer questions regarding Parametric Estimating, it's essential you understand its process - identifying the parameter, assigning unit cost/time, and then calculating the total. Always make sure to scrutinize the given data before choosing your approach.
Remember, Parametric Estimating is most suitable when there's ample historical data. So, maintain your calm and let the data guide your answers. Always double-check your calculations and ensure you've applied the correct units throughout. Keep an eye out for 'trap' questions that may want to confuse Parametric with Analogous or Bottom-up Estimating.
You are tasked to estimate the cost of a printing project that involves printing 300 books. Each book costs $5 to print and there's an expected 5% contingency cost. What's the best estimate using parametric estimating?
Question 2
A project manager needs to estimate the time required for executing a series of tasks. There are 15 tasks and grant permission takes about 2 hours. The contingency time is 5%. What is the total estimated time using parametric analysis?
Question 3
You are assigned to a project with a strict deadline. You intend to use parametric estimating to ensure project success. Which of the following conditions should be considered to successfully apply parametric estimating?
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