This technique is somewhat similar to Analogous estimating as it also uses the historical data in the process of estimating. However, there are differences.
Unlike Analogous estimating, Parametric Estimation uses Project parameters along with historical data to calculate the cost or duration estimates. For example, If it takes $1000 and 10 days to build a 5 foot wall. How many days it will take to build a 10 foot wall of the same length ? How much will it cost ? Well !! you multiply the previous cost and time by two (size of new wall is twice) to get the cost and time for the 10 foot wall i.e.. $2000 and 20 days.
Parametric Estimating uses a statistical relationship between historical data and other variables to calculate an estimate for activity parameters such as cost, duration. In simple words, Parametric estimating looks at the relationships between variables on an activity to calculate time and cost estimates.
Accuracy of parametric estimates is less, but better than Analogous estimates. However, higher levels of accuracy can be achieved depending upon the sophistication and the underlying data built into the model.
How to do Parametric Estimating ?
- Regression Analysis (Scatter Diagram) : In this, track two variables to see if they are related, and create a mathematical formula to make future estimates.
- Learning Curve : this can be explained with a simple example. Eg: painting 100th room takes less time than what 1st room took due to improved efficiency.
Parametric Estimating – Important Points to Remember
- Can be used to estimate both Cost, Duration and resources.
- Uses Historical data and project parameters to calculate the required estimates.
- Accuracy better than Analogous estimates.
- Can be applied to a total project or to parts of a project.
- Can be used in conjunction with other estimating methods.
Other commonly used estimating techniques are –
Also check the comparison of the Estimating Techniques.