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Blog AuthorVaibhav
PublishedOct 09, 2024
Views2,299
Read Time15 mins
Table of Content
The main capability that I have developed as a project manager over the years is cost and time estimation of the project. Looking at the various methods available, one that can be noted to be most accurate and efficient is parametric estimating in project management. This technique has proven beneficial when it comes to handling my projects in a way that estimates the results from past data and the probability of relationships between different variables.
In this article, I will shed some light on my vision of the topic and will consider my experiences regarding parametric estimating as well as its application, benefits, and possible drawbacks.
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Considering the parametric estimating definition we can say that as a quantitative technique, parametric estimating determines the relationship of other variables with the past data to forecast future events. It centers on relating certain cost and time-controlling factors that are used as parameters in setting estimates.
For instance, when I was planning and implementing construction projects, the size measurement parameter I used was the square footage. In prior projects, I could estimate a cost that would reflect per square footage, and in a new project, I could just add on it for special concerns.
In another area of this work, I used a parameter known as lines of code (LOC) when working on a software development project. Based on historical data of previous projects, we calculated the development time for every one thousand lines of code. However, this approach offered us not only a realistic timeline but also assisted with the allocation of resources and offered probable estimation.
The formula for parametric estimating is straightforward but requires accurate historical data. Here is the formula:
E_parametric = a_old/p_old x p_curr
where:
For example, if the historical data shows that the cost per square foot for a building is $200, and the new building is expected to be 1,500 square feet, the estimated cost would be:
1,500 sq ft×$200/sq ft=$300,000
For instance, in a real-life scenario, I was heading a project that required the assessment of the cost of laying down a pipeline. The parametric estimating approach, which involved using the current cost per kilometer of pipeline laid, and multiplying it by the new project’s total kilometer requirement, was employed. This allowed us to get a reasonably accurate and fast estimate of the cost which was useful for cost approval and planning.
While analogous estimating relies on historical data relating to similar projects to cost and time estimates, parametric estimating in project management uses statistical data/parameters. Analogous estimating is less precise, it is generally based on the experience of the project manager. Nonetheless, the result produced by parametric estimating in project management is more accurate, and therefore, more consistent.
What I have seen in the practice is the fact that there may be an increase in the degree of accuracy when both methods are used. For instance, analogous estimates are used to get an initial sense of the amount of work to be done and then follow it up with a parametric estimate that guarantees thoroughness.
Parametric estimating in project management is used to:
1. Estimate Costs: Assessing parameters like the number of labor hours to be utilized, the quantity of material to be used, or the production rate to be achieved.
2. Predict Durations: The use of data from productivity parameters such as the amount of time it took to complete the last similar task or the efficiency of the members of the project team.
3. Allocate Resources: To cover the costs, the company should guarantee that it will secure resources in the correct amounts, based on estimates.
Usually, when I had to come up with project budgets and schedules in the planning process, I employed parametric estimating in project management. It is useful in the management of projects by establishing realistic timelines and working towards preventing the projects from overrunning. For instance, while working on a campaign of marketing projects, the utilization of the number of advertisements as a parameter was adopted. Given the actual cost per advertisement which may be deduced from the previous campaigns, it was possible to arrive at the overall cost of the new campaign with a lot of precision.
The advantages of parametric estimating in project management are as follows:
1. Accuracy: It offers accurate estimates if it is developed based on historical statistics records.
2. Consistency: Reduces variability in estimates. Hence it makes all projects have a standard range.
3. Efficiency: Faster than detailed bottom-up estimates, though it takes comparatively longer than commission amounting.
4. Scalability: May be used to identify work in small and large scale, simple and involved projects.
5. Transparency: Considers logical basis to make the estimation easier, thus helping justify budgets to stakeholders.
The disadvantages of parametric estimating in project management are as follows:
1. Data Dependency: Where it needs historical type data it has to be precise and pertinent. However, these estimates are rather inaccurate if obtained without a basis in reliable data.
2. Complexity: Sometimes it can be difficult to implement and usually needs the help of a statistician. Understanding and applying the right parameters need experience and skill.
3. Inflexibility: This may not account for unique project factors not reflected in historical data. Special circumstances or innovations in the project may not be covered by past data.
Parametric estimating in project management is best used when:
For instance, when I was involved in a project dealing with the implementation of a new software application across the departments, I highly benefited from parametric estimating in project management techniques. We could propose the number of users as one of the parameters and find out the approximate costs of this work with the help of the information on previous rollouts, which in turn helped us to adopt a suitable plan and avoid unprovoked costs.
In a software development project, I was a project manager, with pools of lines of code (LOC) as a parameter of development time. Looking at previous processes, we were able to identify the time it takes to complete one thousand lines of code. This helped us to determine the probable time slot for new projects according to the anticipated LOC for the project and realistic schedules and time frames could be offered to the stakeholders.
Another example that can be presented about one manufacturing project where the number of units produced will work as a parameter. This way, by observing historical information, one could approximate the work cost per unit and use it in predicting the total costs of a new batch of production. This method turned out to be very helpful in the issues of assigning, managing, and allocating funds for manufacturing the required quantities of a product without going over the set budgets.
Parametric estimating in project management is one of the powerful tools that enables project managers and planners to improve the accuracy and reliability of their project plans. Information from previous projects and the established statistical dependencies can be used to develop accurate estimates for the successful completion of the project.
This means that, no matter whether undertaking cost or duration estimates in a given project, this way will always give a sound base for planning. For those who are preparing for PMP Certification or enrolled in PMP Training, this method of estimating is going to be a reliable asset for enhancing the results of the project. PMP Certification Training helps to learn this method very well.
Through this guide, I have shared my narrations of using and implementing the topic of parametric estimating in project management, expositions of experiences, and key tips. I can assure you that this guide will give you a holistic and engaging approach to parametric estimating. This method is one of the most effective tools in my toolbox for the management of projects; it delivers both a good and practical accuracy all the time than most of the other estimating techniques.
Where there is Historical data, clarity of the parameters, and when there is the need to achieve quick and consistent estimates, parametric estimating should be applied. Such a model is particularly helpful in situations where comparable work has been achieved, which creates a basis for deriving pertinent estimates.
Typically, factors like cost or price per unit, labor hours per task, material requirements, production rates, and any other quantitative factors that are associated with the activities of the project are used in parametric estimating. Nevertheless, the accuracy of the estimates depends on the selection of the parameters in my opinion.
One way that can be used to estimate costs is through the application of parameters whereby statistical analysis between the previous cost data and other parameters is used to establish the cost for a particular period. For instance, the approximate cost of construction is dependent on the cost per square foot. This approach of estimation is fast and accurate and enables a project manager to make the right estimations within a short time.
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