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Analogous Estimating: Definition, Uses, and Examples 

 September 1, 2021

As a PMP professional, you have to navigate through different projects and deliver them within the schedule in compliance with the allocated budget. So when you have something that you can compare your project to avoid estimated risks, it simplifies your task by many folds.

And as the name suggests, Analogous Estimating compares your project’s current status to previous similar projects. It is a commonly used estimation tool to estimate the cost and duration of the project and further utilize the data to make necessary alterations.

Whether or not you’re a project manager, you’re here to learn more about this topic through this article. Read on as we navigate you through Analogous Estimating and its utilization. 

What is Analogous Estimating?

Analogous Estimating is a project management tool for estimating the project parameters and measures by comparing them with past projects. Simply put, this tool utilizes the data collected from previous projects and compares them to your current project status to estimate the cost, resources, and duration. 

When you manage a project, you will notice how it deviates from its initial planning frequently throughout its run-time. These changes can happen due to both external and internal factors.

And this is why a project needs to be estimated repeatedly to understand its status quo. It is a top-down estimation technique that doesn’t require statistical adjustments or manipulation. 

Since this tool assesses based on comparable data, the accuracy of the estimation process heavily depends on the degree of data availability. Unlike other estimation processes, analogous estimation is easy to execute and interpret. It is best applied when there is less comparable data available. And that is why it is a commonly used tool for project managers all around. 

Types of Analogous Estimating 

Project EStimation is the process of assessing the project cost, duration, and resources. Analogous estimating is a gross value assessment process, classified into four different categories. 

Absolute-Value or One-Point Estimate 

The term Absolute value or One point estimate denotes that the estimation value consists of a single absolute value.

That is, if a past project depicting similar traits shows a budget consisting of a single value, then you can apply that budget to your current project.

For instance, if the budget used for a historical project were $400,000, then the allocated amount for the project would also be the same. 

Ratio Estimate 

A ratio estimate is the relative use of comparable historical data that assumes a linear relationship between various project attributes. Even though the ratio estimate is similar to the parametric estimate process, it depends more on expert judgment than statistical evidence.

There are two ways to apply this estimation process. One is the usage of historical data, and the other is the breakdown of the project to estimate current values.

For instance, while estimating, project managers may conclude that the budget of the current project is 50% of the total budget of the previous project.

For another instance, the total cost gets divided into smaller fragments, and the estimation may conclude that the current budget is 90% of the total cost of a similar managerial project. 

Range Estimate 

Unlike absolute value or one-point estimate, range estimate depends on a variety of estimated values. In this estimating technique, the evaluation of the cost and duration of the project shows a variety of valuations.

However, it gets accompanied by a most likely estimate, a value showcasing the probable values. The value depicting the most likely attributes is the one that ends up getting executed by the project managers.

Since this estimating technique shows more than one value, it often gets compared with the three-point estimating process. 

Three-point Estimate 

Even though a three-point estimating process often gets depicted as a  range estimate form, it is an estimate of its own. In this estimating technique, the project manager concludes three distinctive values.

These estimates include optimistic estimate, pessimistic estimate, and most likely estimate. However, the project manager concludes the final figure by executing the triangular or PERT distribution. The concluding value then gets enacted by the project manager as the value or cost of the project. 

The Difference Between Analogous Estimating And Parametric Estimating

Parametric Estimating is the quantitative approach towards project management. Unlike Analogous Estimating, Parametric maintains a statistical relationship with the existing variables and historical information. However, much like analogous, parametric estimates analyze the expected cost and duration of the project. 

The utilization of Parametric estimating differs by the project type. Even though the process is less complex, it depicts an accurate result for the estimates. Moreover, with parametric estimations, manual adjustments and alterations are less complicated to make. 

That said, parametric estimating can easily be costly and time-consuming since it requires resources and energy to model complex projects. Moreover, point estimation does not apply to this technique. Since the process is already costly, any errors made can cause crucial discrepancies from the initial budget. 

Analogous Estimating, on the other hand, is budget-friendly while executing similar results. However, unlike Parametric Estimating, the Analogous Estimate is dependent on the amount of data available. While Analogous Estimating gets applied when the data is less complicated and limited at the initial stages of the project, Parametric Estimating gets performed when the project is rather complex.   

When Should You Use Analogous Estimating?

Analogous Estimating is executed at the initial stages of the planning process when the data availability is limited. At the initial stages of the planning process, the project’s estimated cost and duration help get an overview of the project’s viability. So, as the project progresses, you can alternate the estimated values according to the probable risks. 

At the initial stages, the project’s limited resources work in favor of utilizing Analogous Estimating since you can use the tool to determine whether or not to bid on the project. The historical data may not be available in every case, which works against the utilization of other estimating tools, unlike Analogous Estimating. So, even if the resources are restricted, you can analyze the cost and time required with this estimating tool. 

Therefore, applying analogous estimating at the beginning helps form the overall planning of the project. Moreover, it can get used for project bidding and expert judgment. You may re-apply and re-evaluate your decisions throughout the project run-time if cost or duration estimations are needed. 

How to Use Analogous Estimating 

We have further divided the application process of Analogous Estimating for your convenience.  

Creating a List 

First, start by establishing the parts that seem to be applicable for Analogous Estimating. You can further divide your project and use the tool on individual segments such as cost, time, resources. Then proceed to create a list for all the similar projects that you can utilize as historical data. 

While creating the list, you need to evaluate the sources and verify the viability of each source. Moreover, you need to verify the characteristics of the past project and its risks. While the risk analysis process of your project, if it shows probable threats, you need to compare those risks with that of the historical projects. 

Once you finish making this list, you can shortlist it and exclude the past projects that are trivial or least similar to your project traits. Thus, you will end up with several past projects that you can use as resources for your estimating process. 

Determining the Parameters

Once you select the parts and collect the resources needed, you can determine which estimation processes are applicable. Each project requires a different type of estimation process. Since Analogous Estimation is of four categories, you need to analyze the parts and select the technique that works the best. In such a case, expert judgment comes in handy. Once you identify the parameters, that will lead to further calculations. 

Estimating the Cost and Duration 

Once you identify the estimation, you can use the historical data to calculate the estimated cost and duration of the project. Then the project manager will consult the stakeholders and higher authorities regarding the estimated results. The application of expert judgment will help plan and schedule the project surrounding the estimated cost and duration.

Examples of Analogous Estimating 

In order to understand the process of Analogous Estimating better, we have listed down some examples. However, note that these calculations are not entirely accurate and only demonstrated to give a brief idea.

Example 1 

A large organization, Y, assigned Company X with a project. So, to start the planning process, Company X has to estimate the cost and duration of the project. However, Company X has previously handled similar projects. So after collecting all the similar historical data, the project shows the most similarities with one of their past projects based on scope and complexities. 

Data of the historical project shows the cost was $35,000, and the duration was 15 days. The estimated value, according to the absolute value procedure, then stands as, 

Estimated cost = $35,000.

Estimated duration = 15 days. 

Example 2 

Similar to the first example, Y assigns Company X with another project. While determining the estimation process, Y identifies that they need to conduct a three-point estimate. The historical data that showed the most relevance in terms of characteristics and risks are, 

Project A, 

Cost = $35,000 and Duration =10 days 

Project B, 

Cost = $40,000 and Duration =30 days 

Project C, 

Cost = $46,000 and Duration =15 days 

After analyzing the historical data in terms of project factors, Project B was the most relevant. Since B was the most likely estimate, the concluded estimated value for the assigned project is, 

Estimated cost = $46,000.

Estimated duration = 15 days. 

Pros and Cons of Analogous Estimating 

The most prominent advantages of using Analogous Estimating are that it is applicable even when the resources are limited, and there is restricted historical data. Throughout the project run-time, a project undergoes several unexpected changes. In such instances, it is convenient for project managers to calculate the project status quo with Analogous Estimating.

Apart from being highly cost-effective and easy to use, Analogous Estimating showcases accurate results for calculating the cost and duration of large projects. 

Moreover, this estimating tool comes in handy for bidding on the project. Since it is less complicated to interpret the results of this estimating tool, project managers commonly use this tool for stakeholder evaluation. 

That said, Analogous Estimating also has some disadvantages. The calculations of this process are highly dependable on the accuracy of the historical data.

So, if there are any errors in the resources used to calculate this process, then the estimated values will also be inaccurate. That said, any inaccuracy of the estimated value puts restrictions on its applications.

Moreover, the top-down estimating technique can often get swayed by political considerations instead of being project-specific. 

Analogous Estimating in Project Management 

PMP professionals use various tools depending on the project type and probable risks. Analogous Estimating is one of those tools that project managers commonly use to verify the estimated cost and duration. Since they can use this tool at any granular level, this is a technique that almost every project manager ought to learn. 

Nevertheless, you are required to master all the estimating techniques to become a PMP professional. To learn how you can pass your PMP certification exam in the next six weeks, sign up for a free class to get a study plan + valuable tips & tricks!

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