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Parametric Estimate

19 January, 2016 - 17:35

If the project consists of activities that are common to many other projects, average costs are available per unit. For example, if you ask a construction company how much it would cost to build a standard office building, the estimator will ask for the size of the building in square feet and the city in which the building will be built. From these two factors—size and location—the company’s estimator can predict the cost of the building. Factors like size and location are parameters—measurable factors that can be used in an equation to calculate a result. The estimator knows the average cost per square foot of a typical office building and adjustments for local labor costs. Other parameters such as quality of finishes are used to further refine the estimate. Estimates that are calculated by multiplying measured parameters by cost-per-unit values are parametric estimates.

Example: Parametric Estimate for John’s Move

To estimate the size of the truck needed for John’s move, the parameter used by a truck rental company is the number of bedrooms (Figure 12.1 Parametric Cost  ). The company assumes that the number of bedrooms is the important parameter in determining how big a truck is needed for a move. John has a one-bedroom apartment, so he chooses the 14-foot truck. Once the size is determined, other parameters, such as distance and days, are used to estimate the cost of the truck rental.

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Figure 12.1 Parametric Cost