A method for estimating project cost and duration, used particularly in the Life Sciences, Engineering and Construction industries, in which the project is modeled using predefined algorithms.
Parametric estimation is often perceived as one of the more accurate and reliable estimation methods, but requires a high effort upfront.
What is Parametric Estimation?
Parametric estimation is one of the four primary methods that project companies use to produce estimates for the cost, duration and effort of a project.
For parametric estimation, the person in charge of the estimates will model (or describe) the project using a set of algorithms. For instance: let’s say that your project includes carrying out a survey of 300 people. Each interview contains 20 multiple-choice questions, and past experience has shown that they take 10 minutes to administer. According to parametric estimation, the total effort for this task will be: E = nb of interviews × 10 minutes = 3000 minutes = 5 hours
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How is Parametric Estimation different from Analogous Estimation?
Both Parametric and Analogous Estimation used historical data to construct the estimates. But the process they each use to perform the calculations are very different.
For Parametric Estimation, the project manager will break down the project into sub-components (usually a deliverable) and match them with the appropriate equation to obtain the estimates. Whilst the equations can be derived from past projects, the specific circumstances of these projects will be removed when the equations are created.
For Analogous Estimation, by contrast, the project manager will break down the project into tasks or deliverables and match them with similar tasks completed in past projects. The estimates will be based on the actuals for these past projects. But depending on the project that is selected, they will also be influenced by the specific circumstances of those past projects.