The Difference Between Parametric vs Analogous Estimating PMP

Estimating is a key skillset for any project manager in any industry. There are multiple estimating tools project managers can combine to better refine the final estimated value for resources, effort, budget, timelines, and even risks. No project plan can happen without estimating. The analogous estimating (or “top-down estimating”), parametric estimating, and three-point estimating tools each have their own characteristics which shape the decision of when to use what combination of them. The Project Management Institute (PMI) may include questions in their Project Management Professional (PMP)® certification exam requiring candidates to know project estimating tools and how to use them for a given project. In this article, we will compare and contrast the differences between Parametric vs Analogous Estimating PMP.

Project Estimation for Project Managers

Project estimation encompasses more than just a best guess. It is the process by which estimation techniques are used for a given situation to reach the strongest, “most likely to occur” estimate. Just as a single estimating tool will not generate the best result, so too “it is important to use the ones that suit the project characteristics the best.” In consideration of the PMP® certification exam, know  PMI® provides this definition of estimate:

Estimate

A quantitative assessment of the likely amount or outcome of a variable, such as project costs, resources, effort, or durations – Source PMBOK® Guide (2021)

Some may say completing multiple estimates takes up too much time and it is faster to use one estimating tool to get a single estimate. However, as noted in the PMI.org conference paper “Project Estimating Accurate Labor,” estimating is more than just getting a number to plug into a plan, in fact:

To combine estimating tools for a validated estimate, project managers should be familiar with the estimating tools and how they compare:

• top-down estimating
• analogous estimating
• parametric estimating
• parametric vs analogous estimating
• analogous estimating vs 3 point estimate
• analogous vs parametric estimating vs three-point estimating

Note there can be different spellings, such as 3-point vs three-point. And in some informal materials, the “PMP” designation will be added for “parametric vs analogous estimating PMP” or “top-down estimating PMP.” Within the PMP® certification exam and PMI’s literature, however, the formal names do not include the “PMP” label.

Analogous Estimating

An analogy is where you use one idea to explain or clarify something similar. The comparison of like things to find meaning, or in the project management context, budget, is an analogous estimation.

The analogous estimate tool can help with projects in which there is limited information for the current work if the project manager has a deep understanding of the current work and the compared work. Rather than spending time researching and trying to figure out everything from the beginning, analogous estimation is a way to “fast track” budgeting and leverage actual and known costs.

And yet, project managers must have a strong understanding of their project to successfully use analogous estimation because if the project compared is not similar or does have enough similarities, the estimate may lead to problems later. Or there may not be a project of a similar nature in which budgets can be compared. In those instances, project managers should find similarities where they can, in terms of segments of past work, work activities from past work, or similar materials from past work. Project managers with historical experience with similar projects can provide the “expert judgment” used in analogous estimates, which can speed up the estimating timeline.

Analogous Estimating Defined

Analogous estimating is used when expert judgment is available for a comparable project.

Analogous Estimating

A technique for estimating the duration or cost of an activity or a project using historical data from a similar activity or project. – Source PMI Online Lexicon https://www.pmi.org/pmbok-guide-standards/lexicon

Analogous Estimating Example

You have painted 2 bedrooms in your house by yourself and are planning to paint the office. Start at the “top” of the project which in this example is the painting of all walls in a residential bedroom. Break the project down into smaller tasks, such as getting the paint from the store, protecting the flooring in the room from the paint, etc. The office is the same size as the bedrooms which both took you 2.5 days to complete and 1 gallon of paint. You, as the expert, painting interior rooms of this size at this location have started at the top of the project task list and gone down to the final step to estimate painting the office will take 1 gallon of paint and 2.5 hours if you are working alone.

Analogous Estimating Application, Accuracy, and Effort

Analogous estimating involves using the numbers (cost, resources, and duration) from a similar past project to create a “general” estimate for a new project. As such, the speed of getting the estimate is gained while accuracy is lost.

Application	Projects with limited information available; projects that are in planning or early in work processes
Accuracy	Directly tied to the level of similarity of the historical project; as no two projects are exactly the same, accuracy is limited at best
Effort	Limited duration due to limited calculations or research; rough guess grounded by expert’s opinion

As part of PMP® certification exam questions, project managers may be asked when to use analogous estimation.

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Top-Down Estimating

Project managers who look at the overall scope to make an initial “expert estimate” and continue to break down the work into smaller tasks, for which similar project tasks are compared to generate an estimate, are completing a “top-down” estimation. They start at the “top” of the project and break it into component pieces moving down the task lists. “Top-down estimating PMP” is another description for analogous estimating.

Parametric Estimating

Parametric estimating compared to analogous estimating reveals the use of historical data for both, but higher accuracy of the estimate using the parametric tool due to the scaling of data points. Parametric estimating identifies “the unit cost/duration from the past projects/activities and scales the estimation to the required number of units for the current project/activity.”

Parametric Estimating Defined

If there is limited data for the historical project, or no comparable project is available in the knowledgebase, parametric estimating cannot be used. A statistical relationship between historical and current must be established.

Parametric Estimating

An estimating technique in which an algorithm is used to calculate cost or duration based on historical data and project parameters. – Source PMI Online Lexicon https://www.pmi.org/pmbok-guide-standards/lexicon

Parametric Estimating Example

Consider this example from plainsware.com of the parametric estimation:

Let’s say your project includes carrying out a survey of 300 people. Each interview contains 20 multiple-choice questions, and past experience has shown they take 10 minutes to administer. According to parametric estimation, the total effort for this task will be:

E = number of interviews × 10 minutes = 3000 minutes = 5 hours

A PMP® certification holder should know there are several ways to source the parametric value: previous internal project, previous external project, and industry data. The access to and quality of data from each source is dependent upon the industry and size of the company.

Parametric Estimating Use, Accuracy, and Effort

For estimates of budget, cost, and project duration, the project manager will “break down the project into sub-components and match them with the appropriate equation to obtain the estimates.” It can be a time-consuming process, but when done correctly can result in accurate estimates.

Application	must be able to establish a statistical connection between historical and current work; requires scalable measurements
Accuracy	more reliable than analogous; accuracy directly dependent upon how closely aligned the historical and current projects are
Effort	researching historical data and conducting the statistical analysis can be time-consuming

Three-Point Estimating

In comparing analogous vs parametric estimating vs three-point, the most accurate estimating technique is three-point. Rather than depending on the level of similarity of historical work, three-point uses estimates for most likely, pessimistic, and optimistic to determine the final estimate. The Project Evaluation and Review Technique (PERT) formula, something all PMP® certification holders and PMP® candidates should know, is:

• (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

The use of most likely and least likely ensures the three-point estimate accounts for potential risks.

Three-Point Estimating Defined

The PMI’s A Guide to Project Management Body of Knowledge (PMBOK® Guide) online lexicon provides this definition for the three-point estimating technique:

Three-Point Estimating

A technique used to estimate cost or duration by applying an average or weighted average of optimistic, pessimistic, and most likely estimates when there is uncertainty with the individual activity estimates. – Source PMI Online Lexicon https://www.pmi.org/pmbok-guide-standards/lexicon

Note within the PMBOK® Guide’s definition, there are multiple types of three-point estimating tools. The Program Evaluation and Review Technique (PERT), informally known as “PERT PMP,” is one type.

Three-Point Estimating Example

Consider this example: determining how long it will take for a new roof to be installed on a home. Three estimates are received for getting a new roof installed on a home. Calculating the average of the three cost estimates provides insight into approximately what the final cost should be. Also, finding the average of the three expected durations of the work effort will provide insight into how long the project should take. Analysis using a 3-point estimate provides insight into the expected cost and duration for the planned work.

Three-Point Estimating Use, Accuracy, and Effort

The 3-point estimating tool can be used for cost or duration estimates for almost any type of project.

Application	if all three estimates (Most Likely, Pessimistic, and Optimistic) are available, the tool can be used
Accuracy	more accurate than other estimating tools due to consideration of risk
Effort	collecting three data points for each task can be time-consuming

Parametric vs Analogous Estimating for the PMP

Preparing for the certification exam and looking for “Parametric vs Analogous Estimating PMP”? These two estimating tools are often compared. In short, analogous estimating is usually fast by using top-down and past work to get to a quick estimate. Parametric is more accurate than analogous even though it also uses historical data for comparisons; the use of scale to factor in risks increases the accuracy.

Analogous Estimating vs 3-Point Estimate

The three-point estimating tool can be used in conjunction with the analogous estimating tool to enhance the accuracy of the overall estimate. The three-point tool uses statistical models to increase the accuracy not possible with just the expert judgment of the analogous estimating tool.

Parametric vs 3-Point Estimate

Rather than a parametric vs three-point estimate comparison, these tools can be effectively used together. Use the parametric estimate output as an input for 3-point estimating. “If the size estimate used for a parametric estimate is with a possible variance of 25%, scenarios can be created which illustrate the relative costs at the highest and lowest size values, assuming other parameters such as duration remain constant.”

Comparing Estimating Tools: Analogous vs Parametric vs Three-Point

Tool	Source Data	Uses	Strength	Weakness	Accuracy
Parametric	historical data, expert judgment	cost, duration, resource, effort	low cost to complete; use of statistical model increases accuracy	time-consuming, need a similar project with data to make a comparison, must have “scalable” data points	more than analogous
Analogous Estimating	historical data, expert judgment	cost, duration, resource, effort	quick, low cost to complete	no documentation, requires an expert who has a similar past project to compare to current	expert guess
Three-Point Estimate	most likely, pessimistic, optimistic	cost, duration, effort, resources	statistical model and consideration of risks increases accuracy	time to collect three data points for each estimate	more than analogous; use with other estimating tools to increase accuracy

Parametric vs Analogous Estimating for the PMP

Those seeking to earn the PMP® certification should be able to list key differences between analogous vs parametric vs three-point estimating tools. Additionally, the wide use of the tools, for projects of all sizes should be recognized along with the importance of combining the estimating tools to increase accuracy.

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