Analogous Estimating vs Parametric Estimating for PMP Exam

Already updated/will be updated for PMP Exam in 2023.

Planning, in particular, project cost and time planning, requires a lot of estimation as the work involved has not happened yet. In real-world project management and the PMP Exam, estimation usually involves two distinct types of methods: Analogous Estimating and Parametric Estimating. This post will expound on the similarities and differences of the two kinds of estimation methods.

Analogous Estimating vs Parametric Estimating

• Analogous Estimating: the estimation is made by simply taking the values from past projects/activities with similar scope to the current projects/activities (somewhat like making an analogy)
  • the fastest and easiest estimation method to give a rough estimation
  • requires a combination of historical information and expert judgment (the information from past projects can be adjusted with consideration of the special circumstances of the current project, e.g. including inflation, etc.)
  • however, the estimation is least reliable as no two projects are identical
  • used in cases where there are only limited amounts of available information early in the project
  • also known as “Top-Down Estimating“
• Parametric Estimating: the estimation is based on historical information of very similar projects with consideration of the scale differences
  • by first identifying the unit cost/duration from the past projects/activities and scale the estimation to the required number of units for the current project/activity
  • the estimation is more reliable
  • used only when a statistical relationship between historical data and current work can be established; often have limited use as the nature/details of the current project/activity may differ significantly from previous ones and thus makes parametric estimating not feasible

Though both Analogous Estimating vs Parametric Estimating is based on the historical information from the organization/industry to estimate cost/duration of the project/activity, there are some very noted differences between them:

• Analogous Estimating is considered a top-down approach which is much less accurate than parametric estimating in which Analogous Estimating is based on simple “analogy”;
• Parametric Estimating is more accurate for projects/activities with components which are similar and “scalable”, it is based on a unit cost/duration of historical data which is scaled  to give the estimation;
• Analogous Estimating is used early in the project where there are only limited amounts of information available while Parametric Estimating is used if the project/activity is “scalable”.

In addition to the two types of estimation methods detailed above, the PMBOK® Guide has also mentioned two other estimation methods:

• Bottom-up Estimating — (also known as the “definitive technique”) the most accurate and time-consuming of all estimation methods in which every single activity is broken down into details at the bottom level and aggregate the estimations of each individual components to give an overall estimation.
  • (already updated/will be updated for new PMP Exam in 2023) note that the PMBOK® Guide 6th Edition has included Bottom-up Estimating as one of the tools and techniques for “Estimate Activity Durations” process in addition to “Analogous Estimating”, “Parametric Estimating” and “Three-point Estimating”.
• Three points Estimating — this more accurate estimation is developed from three estimates using the PERT (Program Evaluation And Review Technique) formula:
  • (Eo + 4Em + Ep)/6
    • Most Likely Estimate (Em): The estimate when everything goes as normal
    • Pessimistic Estimate (Ep): The estimate when everything goes (almost) wrong
    • Optimistic Estimate (Eo): The estimate when everything goes (almost) smoother than expected
  • risks and uncertainty are taken into accounts
  • more accurate than  Analogous Estimating and Parametric Estimating

Illustrated Example

For the exam prep project, before the actual preparation, Aspirants are highly advised to make a project plan for their exam studies by detailing the scope and estimated timeframe.

There are 10 Knowledge Areas identified in the PMBOK® Guide. Suppose it is known that it would take 10 hours for going through 1 project management Knowledge Area, the time taken to go through all the 10 Knowledge Areas would be:

10 hours/Knowledge Area x 10 Knowledge Areas = 100 hours

Parametric Estimating is employed here since we have the data to know the “unit duration” for the exam project (but beware that the length and difficulty of each individual Knowledge Area for the PMP Exam is different from the others, the actual time spent on each Knowledge Area would be quite different in my experience).

Suppose you have taken the CAPM® Certification Exam in the past with a total of 300 hours of preparation. And since the CAPM® and PMP Certification Exams are both offered by PMI, you try to make use of Analogous Estimating here to estimate it would take 300 hours for the exam preparation.

Mock Exam Question

1. Sue is currently estimating the cost of a deliverable based on a project with a similar product 2 years ago. Sue puts down the estimate by copying directly from the actual cost of the product found from project documents. Which estimation technique does Sue make use of?
   1. Three-point Estimating
   2. Parametric Estimating
   3. Analogous Estimating
   4. Bottom-up Estimating
   Solution: C
   Since the estimate is based on historical figure copying directly from a past project without adjusting for scale and scope, etc., the estimation technique is “Analogous Estimating”. Note that the estimate is very rough and may be inaccurate. Sue may just be at the very beginning of the cost estimation process in which accuracy does not need to be very high.

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Summary

• Analogous Estimating: the estimation is made by making an analogy with similar project from the past; however, the accuracy is quite low
• Parametric Estimating: the estimation is based on adjusting “parameters” from historical information; the estimation is more reliable

Additional FREE PMP resources: 47+ Commonly Confused Term Pairs with detailed explanations. If you found this article useful, you may wish to reference other Commonly Confused Term articles.