Parametric Estimating In Project Management

Parametric Estimating In Project Management

Parametric estimating is a project estimation technique used to estimate cost, duration and effort on a project. It is well-established and can be found in the Project Management Institute's Project Management Body of Knowledge (PMBOK). It works by correlating a parameter with a cost or time value, and is scaled to the size of the project. It requires historical data, market data, and statistics for benchmarking. There are two types of parametric estimating results: deterministic estimates and probabilistic estimates.

Deterministic estimates are a single number for the project resources, while probabilistic estimates are a range that comes from the probability of different costs and durations. Parametric estimates are based on parametric scaling and are usually based on a probability density curve with three benchmarks: most likely estimate, optimistic estimate and pessimistic estimate. To illustrate the parametric formula, let's use a simple example of building a dog house. The current area for the dog house is 10 feet and the cost of materials and labor is $100. The new dog house will cost ~$200 to build, but projects are rarely so straightforward and will take more research.