Page 197 - Project+

I talked about analogous estimating when discussing schedule planning in Chapter 5.

For cost-estimating purposes, an analogous estimate approximates the cost of the
project at a high level by using a similar past project as a basis for the estimate. (You
may also hear this technique referred to as top-down estimating or as making an
order-of-magnitude estimate.) This type of estimate is typically done as part of the
business case development or during the early stages of scope planning when there

isn’t a lot of detail on the project. Analogous estimating uses historical data from past
projects along with expert judgment to create a big-picture estimate. Remember that
expert judgment relies on people who have experience working on projects of similar
size and complexity or who have expertise in a certain area. An analogous estimate
may be done for the project as a whole or for selected phases or deliverables. It is not
typically used to estimate individual work packages.

Analogous estimates are the least accurate of all the estimating techniques
but also the least costly. Analogous estimates rely on expert judgment.

Analogous estimating will likely be the best technique to use at the early stage of the
project because you’ll have very little detail to go on. The key here is to make sure that
everyone involved understands how imprecise this estimate is.

Parametric Estimating

Chapter 5 discussed parametric estimating. You’ll recall that this technique uses a
mathematical model to compute costs, and it most often uses the quantity of work
multiplied by the rate. Also, commercial parametric modeling packages are available
for complex projects or those performed within specialized industries.

Parametric estimating is dependent on the accuracy of the data used to create the
model. If your organization uses parametric modeling, spend some time learning about
the specific models that are available and whether this technique is appropriate for
your specific project.

Bottom-Up Estimating

The most precise cost-estimating technique is called the bottom-up estimate, which
assigns a cost estimate to each work package on the project. The WBS and the project

resource requirements are critical inputs for a bottom-up estimate. The idea is that you
start at the work package level of the WBS and calculate the cost of each activity
assigned to that work package. The sum of all the work package estimates provides the
estimate of the total project cost.

Bottom-up estimates are the most accurate of all the estimating

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