Parametric Estimating

Definition

Parametric estimating is a technique used in project management to estimate project costs or durations based on the relationship between variables, often leveraging historical data and statistical relationships. This method allows for quick and reliable estimates by applying formulas or algorithms that correlate measurable parameters to overall project metrics. It emphasizes the importance of using accurate data to create reliable forecasts, connecting closely to cost estimation processes, work breakdown structures, and project control methodologies.

5 Must Know Facts For Your Next Test

1. Parametric estimating relies heavily on quantitative data, making it essential to have accurate historical data available for effective predictions.
2. This technique can be used not only for cost estimation but also for estimating project durations and resource requirements.
3. It can improve accuracy significantly compared to expert judgment methods, especially for large projects with well-defined parameters.
4. Parametric estimates are often expressed per unit of measure, such as cost per square foot or time per task completed, which allows for easy scaling.
5. Regular updates to the parameters used in parametric estimating are crucial as project conditions and historical data change over time.

Review Questions

• How does parametric estimating differ from analogous estimating in terms of accuracy and application?
  • Parametric estimating is generally more accurate than analogous estimating because it relies on specific quantitative relationships derived from historical data. While analogous estimating uses previous similar projects as a reference point for estimations, it can lack the precision that parametric estimating provides by using defined metrics. Parametric estimating applies formulas based on measurable variables, making it suitable for complex projects where precise calculations are needed, whereas analogous estimating may be quicker but less reliable.
• Discuss how parametric estimating can enhance the creation and organization of a work breakdown structure (WBS) in project planning.
  • Parametric estimating enhances the creation of a work breakdown structure by providing data-driven insights into the costs and durations associated with each component of the WBS. By applying historical metrics to specific tasks within the WBS, project managers can generate more precise estimates that reflect realistic resource requirements and timelines. This not only improves the overall planning accuracy but also helps identify potential risks and areas requiring additional attention based on historical performance data.
• Evaluate the role of parametric estimating in the context of earned value management (EVM) for ongoing project control.
  • In the context of earned value management, parametric estimating plays a critical role by establishing a baseline for measuring project performance. By generating detailed estimates for costs and schedules through parametric methods, project managers can effectively compare planned versus actual performance. This allows for timely identification of variances and enables informed decision-making to correct course if necessary. Furthermore, as EVM relies on accurate forecasting for progress tracking, parametric estimating provides a robust framework to enhance overall project control.

Related terms

Cost Baseline: The approved version of the project budget, which includes all planned expenditures and serves as a benchmark for measuring performance.

Analogous Estimating: A technique that uses historical data from similar projects to estimate the cost or duration of a new project, often less accurate than parametric estimating.

Earned Value Management (EVM): A project management technique that integrates scope, schedule, and cost measures to assess project performance and progress.