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.
In beta. This lesson was written for Hone and has not yet been checked by an experienced project manager. Practice material, not professional advice. What that means.
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.