According to the PMBOK® Guide, specifically within the Estimate Costs and Estimate Activity Durations processes, Parametric Estimating is a highly accurate technique that uses a statistical relationship between historical data and other variables.
How the Algorithm Works: This technique calculates cost or duration based on historical data and project parameters. It identifies a " unit " (e.g., cost per square foot, lines of code, or hours per installation) and multiplies it by the quantity required for the current project.
Higher Accuracy: Because it is based on quantitative data and mathematical models, it is generally more accurate than analogous estimating, provided the underlying data is reliable.
Application: It can be applied to entire projects or specific levels of a project, and it is often used in construction, software development, and manufacturing where standardized units of work are common.
Analysis of other options:
Three-point estimating (Option A): This uses three values (Optimistic, Most Likely, and Pessimistic) to calculate an average ($Expected = \frac{O + M + P}{3}$ or the Beta/PERT distribution). While it uses math, it is based on expert judgment of range rather than a standardized historical algorithm per unit.
Analogous estimating (Option B): This uses the actual cost/duration of a previous, similar project as the basis for estimating the current one. It is a " top-down " approach and is considered a form of expert judgment. It is faster and less costly than parametric but also less accurate because it doesn ' t use a granular algorithm.
Relative estimating (Option D): Common in Agile (e.g., Story Points), this involves comparing the size of a task to other tasks rather than using historical data algorithms to find an absolute cost.
Per PMI standards, Parametric Estimating is the preferred method when historical data is available and the relationship between variables can be quantified, as it provides a data-driven foundation for the Cost Baseline.
Submit