Analogous Estimation: Definition, Uses and Examples

Any project manager in any industry needs to have a strong foundation in estimation. Project managers can combine a variety of estimation tools to more accurately determine the final estimated value for resources, effort, budget, timelines, and even risks. No project plan can happen without estimating. The decision of when to use which combination of the analogous estimating (or “top-down estimating”), parametric estimating, and three-point estimating tools is influenced by each of their unique characteristics. The Project Management Institute (PMI) may include questions on project estimating tools and how to use them for a specific project in their Project Management Professional (PMP)® certification exam. In this article, we will contrast and compare the pros and cons of parametric vs. analogous PMP estimation.

Analogous Estimation | Tools and Techniques

When is analogous estimating used?

To help you understand when and how to use this method, the following are a few applications of analogous estimation:

In the initial stages of the project

One of the best ways to determine an initial value for a project and its components is through analogous estimation. At this point in the project, analogous estimation can be used to assess the project’s viability and decide whether to submit a bid for it. As the project progresses, you can refine your estimates.

When you have limited estimation resources

If you need to create an estimate to decide whether to move forward with a project but have little to no past data available to make an exact comparison, you might use analogous estimating.

When little project detail is available

Analyze the cost and duration of the project using analogous estimation if you have limited information or no access to the information for the current project.

When you need only a rough estimate

A company only needs a basic estimation of the project’s cost and duration when it is submitting a bid on it. An analogous estimation might be the most resourceful option.

When you need expert judgment

If a project manager has the expertise and knowledge to make an analogous estimate based on their involvement in related prior projects, they may use comparison.

What is analogous estimating?

By studying the variables of a previous project and extrapolating from them, the project manager can use the information to estimate the size and cost of the current project. The more data the project manager has access to, the more accurate their assessment will be since the project manager bases their estimation on the comparison. This kind of estimation method is simple to comprehend and use. When they are short on information about their current project, project managers frequently use it.

You can classify analogous estimation into four general categories:

Disadvantages of analogous estimating

The few downsides of analogous estimating include:

Advantages of analogous estimating

Advantages of analogous estimation as a project management tool include:

What is the difference between analogous and parametric estimating?

Project managers can modify the parametric variables to conform to the current project, similar to analogous estimations.

When comparing the two popular methodologies, analogous estimation:

On the other hand, parametric estimation:

Examples of analogous estimating

To help you understand how you might apply analogous estimating to your project planning, here are a few examples:

Example 1

Tina recently received a promotion to project head at an advertising agency, where she is responsible for outlining the cost and timeline of upcoming projects to clients. She hasn’t worked on this kind of account before, but the company has run campaigns of a similar nature in the past. She evaluates the project’s requirements using analogous estimation based on historical data. She modifies a few variables to account for variations between projects and incorporates the data obtained into her presentation.

Example 2

Tinas advertising agency is bidding on two different commercial campaigns. The first is a digital ad for a brand-new hotel in the area, and the second is for a dating service. The company previously ran a digital advertising campaign for a new township, so they gather data from that effort. Compared to the dating website campaign, for which they lack relevant historical data, the agency is better positioned to make an initial estimate for this project based on analogous estimating.

FAQ

What is an analogous estimate?

The analogous estimating technique creates a cost estimate using data from previous projects that are similar to the one being estimated. To ensure that the data can be reused, analogous estimating must incorporate expert judgment. When there is little information available about the project, analogous estimating is employed.

What is the difference between analogous and parametric estimation?

This phrase describes an estimation outcome with a single absolute value. The analogous estimate would be $100,000, an absolute value, for example, if the cost of a previous project was $100,000 and it is anticipated that a new, similar project will require a similar budget.

Why is analogous estimating most reliable?

When there is little information available, analogous estimating, which basically compares projects that are comparable in size and complexity at the high level, is used. Parametric estimating is based on unit rates per activity. When data are available, it is much more accurate than analogous estimating.

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