Lessons · Project management · estimating: analogous, parametric, bottom-up
Estimating: by comparison, by rate, or by adding up the pieces
An analogous estimate scales a past project, a parametric estimate multiplies a quantity by a rate, and a bottom-up estimate adds up every work package; each is more accurate, and slower, than the one before.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
What it is for
In week one the sponsor wants a number; in week six he wants a number he can hold you to. The first is analogous, in an hour. The second is bottom-up, from the WBS, in a week. Giving the week-one number in week six is how a budget is wrong before it starts.
How to think about it
Say which method you are using and how far it can be trusted. Analogous: like the last one, scaled. Parametric: this many units at this rate. Bottom-up: every package, added. Label the estimate with its method so nobody treats a guess as a commitment.
Worked example
Analogous: last year's 800 m² fit-out cost $72,000; this one is 1,100 m²72,000 / 800 = $90 per m²; 1,100 × 90 = $99,000. A morning's work; trust it to about ±30%.
Parametric: 40 network points at $160 each = $6,400A quantity times a known rate. Good when the rate is real history.
Bottom-up: 1.2.1 $6,400 + 1.2.2 $9,600 + 1.2.3 $12,000 + 1.2.4 $2,000 = $30,000Every work package, added up. The number the baseline is built from.
Your turn
Write the parametric line for 25 doors at 2 hours each and $48 per hour.
25 × 2 × = $2,400
Solve one, graded on the server
The trap
Reporting an analogous estimate without its range. $99,000 sounds like a price; $99,000, give or take 30%, until the WBS is done, is the truth.