# Parametric Estimating

Dick Billows, PMP
CEO 4pm.com
Dick’s Books on Amazon

Parametric estimating is one of the most accurate techniques for determining a project’s costs and duration. Luckily, parametric estimating is relatively easy to implement. You define the specifications of each deliverable and then research published information about how many hours of work are required for each unit of the deliverable as well as the cost. The units could be linear feet of wall surface to paint or interviews where you ask customers about their satisfaction with your company’s service. If available, you can use these rates for estimating the duration and cost for the entire project and the individual tasks/deliverables.  Project Estimating Main Page

## Parametric Estimating – Published Rates

Parametric estimating requires published rates. Let’s say you need to estimate the cost of building a high-rise office structure. You might consult an estimating publication and find that the cost of building a six-story, pre-stressed concrete building with a luxurious finish for the offices, plus  many other specifications, would be \$175 per square foot. You would select the appropriate rate and multiply it by the number of square feet of your building. That would give you the estimated cost.

You could also use parametric estimating if published rates were available to estimate the hours of work required to paint one of the offices. You would look up the specifications for an office with 12-foot ceilings. You might paint it with a latex paint after first putting down a primer. You would look up the rate in a published estimating book and find that each linear foot of wall in this office would require .25 hours of labor. If you had 2,000 linear feet, you would estimate the work at 500 hours (2,000 x .25 = 500). Parametric estimating is successful for often-repeated tasks, like building a six-story office building or painting office walls. Because these tasks are common and frequent, there is a lot of data available.  It is worthwhile for industry sources to compile and publish parametric estimating data.

Parametric estimating is less successful with tasks that don’t produce tangible outputs. You can count the number of square feet in a building or the number of customer interviews you’re going to conduct. They are tangible. It’s much less accurate when you try to develop parametric rates for judgmental tasks with intangible outputs. For example, there are rates for writing computer code and editing pages for a report but these rates are much less accurate.

When compared to other estimating techniques, parametric estimates are more credible to executives than estimating techniques based on people’s judgments. Because the parametric rates come from sources published by large reputable organizations, the rates are seen as very reliable. The other half of the equation, the number of units you will produce, is also credible. You base the units on a planned count that you can compare to the actual count as you execute the project. The combination of these two features make parametric estimating seem to be rock solid.

Here’s another example. Let’s say you have 400 customer surveys to conduct and you will ask 35 yes/no questions during the interview. You find a published source that says the rate for a 30-40 yes/no survey is 15 minutes per survey. Using this rate, you calculate the total work: 15 minutes x 400 = 600 minutes or 10 hours of work.

While parametric rates are readily available in the commercial and residential construction industries, that is not true everywhere. Parametric rates are not available for projects in manufacturing, healthcare, information systems, marketing, human resource management and general operations. That’s because these projects are too varied to establish reliable rates.