Parametric Estimating

Definition

Parametric estimating is an estimating process that relies on a statistical relationship between historical data and other variables to predict the cost and duration of future projects.

Purpose

The purpose of parametric estimating is to provide accurate and efficient cost and time estimates for projects by using mathematical models based on historical data and relevant project variables. This method helps in making informed decisions during the planning and budgeting phases.

Examples of Use

• Construction Projects: Estimating the cost of building a house based on the cost per square foot from previous similar projects.
• Software Development: Predicting the duration of software development projects based on the number of lines of code and historical data on development time.
• Manufacturing: Estimating the production cost of new products based on the cost of materials and labor from past production runs.

Related Terms

• Analogous Estimating: An estimation technique that uses the actual cost of previous, similar projects as the basis for estimating the cost of the current project.
• Bottom-Up Estimating: A detailed estimating technique where costs are estimated for each activity and then aggregated to determine the total project cost.
• Top-Down Estimating: An estimating method where the overall cost is estimated first and then divided among the various project components.

Notes

• Accuracy: Parametric estimating can be very accurate if the historical data is relevant and the model is well-calibrated.
• Complexity: Developing parametric models can be complex and may require statistical analysis and expertise.