Parametric Estimating – PMP Concept, Formula, Examples

Editorial Team

Parametric Estimating PMP

When you want to assess the expense of undertaking a whole or part of a project, you inevitably have to come across the term parametric estimation. Parametric estimation is described as a quantitative approach that helps an individual to know the expected cost of a project depending on market or historic information. It is a technique mostly used in the process of cost estimation in project management and might be asked during PMP exam. Project Management Professional (PMP) is a product of Project Management Institute (PMI). This article will discuss the concept of parametric estimation as well as offering guidance including the practical use of the technique.

What Is Parametric Estimating

Parametric estimation is a fundamental strategy mostly used by project managers in project management. It is essential for it gives out valuable guidance in the implementation of the project. It can be referred to as an estimation technique that uses the statistical relationship existing between series of historical information and specific other variables. Some good examples of other variables are square footages in the contraction project, number of code/ lines existing in a software app among other variables. This data is then executed to calculate and demonstrate parameter estimation. One of the most profitable aspects of parametric assessing is the high level of accuracy that can be generated depending on how sophisticated the primary information was.

Parametric estimating can also be referred to as a statistic-based method to evaluate the expected time and number of resources that are needed to perform and finish a project, activity, or part of a project. It is an established practice in most of the project frameworks including PMI (Project Management Institute) where it’s registered under the techniques and tools of the estimate activity duration and estimate cost’ processes.

Parametric Estimating Technique/Method

To be precise, an estimation can be described as a rough evaluation of something. For instance, a project expense estimate can be seen as a general clue of the amount needed to complete a project or parts of a project. Estimation techniques are methods of coming up with project estimates.

However, parametric estimating is a more accurate method for determining the duration and cost of a project. This technique utilizes the relationship between valuables to determine the duration or cost of a project. Basically, a parametric estimate is achieved by duration or cost and the total units needed for an activity or a project. 

Parametric Estimating Formula

Here is the parametric estimating formula and meaning:

E_parametric = A_old / P old x P curr,


E parametric = parametric estimate

A old = historic amount of cost or time

P old = historic value of the parameter

P curr = value of that parameter in your current project

Parametric Estimating Examples

This section consists of two examples that will assist you to comprehend the concept of parametric estimating better. However, it is good to note that the statistical and model’s analysis is generally more complicated in practice.

Example 1: 

This example concerns evaluating construction costs through a parametric estimate. A project team in a certain construction company has been tasked to get a cost estimate of a new modern office building. This company has done similar projects in the last few years. The team will go ahead and use the in-house database to track the costs and durations that the previous projects took.

For an initial evaluation, the company will take a parametric assessment using the building cost for every square ft as the appropriate input parameter. The assessment will then be done using the rule of 3. For exact types of buildings, the cost had amounted to $200 for every square ft in the past- the cost for every parameter unit. The current building is intended to occupy a space of 3000 sq ft – parameter value for the new project. The calculation of the construction using parametric deterministic using the rule of three will be as follows.

Estimated construction cost (ECC) = $200×3000 square foot = $6000.

In reality, there are other factors to put in mind. It is also good to know that the model is complex. The calculation above is just a clue of what should be done during the project’s initial stage.

Example 2:

This example concerns the services offered by a moving company. The company calculates the cost of moving office items using variable cost and base cost. This is based on the distance as well as the employees involved in shifting the office items. Shorter distances will be charged lesser while longer distances will be charged more. Similarly, charges are high when more manpower is needed. 

In addition, there are unique complexities that the company includes in the moving process such as relocating the air conditioning system. That is included as a separate cost. Then, the base cost is multiplied by surcharges that relate to moving the items to multi-floor premises or working on a weekend. Here is the calculation for the moving estimate.

Price Quotation for an Office Move

Parametric Estimating Advantages

  • The point estimation technique is very accurate, especially when estimating time and cost.
  • It is easier to win stakeholders’ support and budget approval determined by the use of point estimation.
  • Once the ideal model has been put in place, it can be used again for other and alike comparable projects. It is good that the quality of information that is received improves with any single additional project.
  • It is easy to use manual adjustment on the already evaluated results to explain the differences between the current project and the historic data. This practice can assist greatly to address weaknesses of underlying data or a model. For example, in a case where environmental and qualitative factors aren’t completely put in the model.

Parametric Estimating Disadvantages

  • Point estimation is sometimes costly and time-consuming. This is because building a model and obtaining historic information requires a lot of resources and effort.
  • The availability of required historic information and the projected scalability can become constrained due to using this technique
  • It is difficult to use Point estimation to determine the cost and duration of a whole project. It is only usable for a few parts of the project whereas the other parts are evaluated with different methods.  
  • It is inappropriate to rely on data if some of the current factors are different from the previous projects. For example, the reliability of evaluated estimates may become affected if aspects like environmental factors, progress regarding the learning curve, personnel’s experience, and other criteria are not reflected in the model.
  • The quality of the history of the information used may also raise some concerns.
  • Point estimating tends of offering a false accuracy especially if an inaccurate model is used. Errors may also arise if the information gathered from other projects shows that is not applying to the existing project.

Parametric Estimating Software

There are several parametric estimating applications that project managers can use to compute different estimates. The type of software one can use depends on the project and the expected results. Sometimes, the Excel application may help you accomplish estimate computations. Whether you are dealing with a complex project or a simple one, this application is designed to process huge sums of data. It offers columns and rows that allow you to enter your data in an orderly manner. These also come in handy when it comes to organizing your work. In other words, it helps to organize your items in an orderly way. In addition, this application allows you to insert formulas. These will help you to quickly calculate without even struggling to add or multiply numbers. Below are two examples of premium parametric estimating software.


COCOMO or Constructive Cost Model is a procedural cost estimation application that is used by software project managers to estimate costs and effort for software projects. It features a hierarchy of three accurate and detailed forms. The first form is used to make early and quick estimates of software costs. The second and third forms uses costs from the first form and helps to make further analysis so as to make estimations as accurate as possible.


This is another cost estimating software designed to model costs in the manufacturing industry. The application comes with industry validated time standards and cost models. These features help the software to support estimation of costs for lots of manufacturing processes. It features all forms of welding, stamping, fabrication, machining, electronics, and more.


Parametric estimating is considered as one of the best approaches for the duration, resource requirements, and cost if sufficient historical information is available. A high level of accuracy is achieved if there is a proven correlation existing between the estimated values and the parameters.

Parametric estimating can be deployed both in a simple and a complex statistical model. However, the complexity of the evaluation depends mostly on the different factors including quality, availability, and accuracy of historic information not forgetting the available resources for estimating.