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CWorkshop Parametric Estimate

The document discusses a workshop on parametric estimates led by Konrad Cerni. Konrad explained that a parametric estimate uses mathematical models to relate a project's cost to physical or performance parameters. He provided an example of a linear model relating cost to area. Konrad also discussed parametric software effort models based on parameters like lines of code and complexity. He concluded by having the managers think about applying parametric estimates to their own projects.

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MARIO CELIS ACUNA
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111 views3 pages

CWorkshop Parametric Estimate

The document discusses a workshop on parametric estimates led by Konrad Cerni. Konrad explained that a parametric estimate uses mathematical models to relate a project's cost to physical or performance parameters. He provided an example of a linear model relating cost to area. Konrad also discussed parametric software effort models based on parameters like lines of code and complexity. He concluded by having the managers think about applying parametric estimates to their own projects.

Uploaded by

MARIO CELIS ACUNA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Workshop: Parametric Estimate

Dragan Z. Milosevic, Peerasit Patanakul,


and Sabin Srivannaboon

Ball, Inc. is a management consulting firm advising leading companies on issues


of strategy, technology, projects, and operations. Focusing on local services, the
company has more than 100 employees at three different locations around
the country. Konrad Cerni is a senior consultant with expertise in project manage-
ment. He is a very knowledgeable and resourceful person since he has worked
in this field at a wide range of companies in different industries from traditional
manufacturing to very complex aerospace.
At the time, Konrad was conducting a workshop exclusively designed for
project management tools for about 30+ project and program managers. These
managers work for the leading electronics manufacturing firm in the local area.
Given that more than 50 project management tools are available in the practice
and literature of project management, Konrad knew he could not cover them all,
and had to carefully pick the tools that would be most useful to these managers.
One of the tools he included was called a “Parametric Estimate.”

WHAT IS A PARAMETRIC ESTIMATE?


A parametric estimate uses mathematical models to relate cost to one or more
physical or performance characteristics (parameters) of a project that is being esti-
mated. Typically, the model provides cost estimating relationship(s) that measures
cost of the project being estimated to its physical or performance parameters, such
as production capacity, size, volume, weight, power requirements, and so forth.
Determining the estimate for a new power plant may be as simple as multiplying
two parameters—the number of kilowatts of a new power plant by the anticipated
dollars of kilowatt. Or it may be very complex, for instance, involving 32 para-
meters (also called factors or cost drivers) formulated into an equation to estimate
the cost of a new software development project. Values of the parameters can be
entered into the cost estimating relationship(s), and the results can be plotted on
a graph or tabular format.

152
Project Cost Management 153

A PICTURE IS WORTH A THOUSAND WORDS


Konrad said, “To develop a proper parametric estimate, you may need to collect
quality information inputs that include the following:

● Basic project scope


● Selected project parameters
● Historical information

Basic project scope description provides understanding of what is being esti-


mated. Its parameters are identified on the basis of the nature of the cost estimating
relationship model that will be used to collect and organize historical information,
which will be related to the project being estimated.
Here is an example of a typical cost estimating relationship in a parametric
estimate model where cost and area are expressed in a linear function.” (See
Figure 7.1.)
Konrad continued, “Many parametric software effort models are based on
key software parameters such as cost drivers. They are usually based on the
statistical analysis of the results of previous software development projects.
These analyses include key parameters such as system size (e.g., line of code),
complexity (e.g., degree of difficulty), type of application (e.g., real time), and

Figure 7.1 Typical Cost Estimating Relationship in a Parametric Estimate


Model

y = 90 (x)
Cost (in thousands of dollars)

210

200

190

180

170

160
1.8 1.9 2.0 2.1 2.2 2.3
Area (in thousands of sq.ft.)
154 CASE STUDIES

development productivity (e.g., productivity). Some experts suggest more than


59 parameters that can impact outcomes of these cost models. But a simple model
can take the form of:

Z = CYL

where
Z = estimated project effort (per months)
Y = Estimated project size (thousands of lines of code)
C = Regressions coefficient
L = Regression exponent

You can apply this model to estimate the effort for a new software development
project by assuming the following values: C = 3.8, L = 1.4, Y = 2.

Z = CYL = 3.8(2)1.4 = 10.03 person-months.

“Now let’s think about how you can apply the parametric estimate to your project,”
concluded Konrad.

Discussion items
1. What are the pros and cons of the parametric estimate?
2. When should the parametric estimate be used?

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