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3 Examples of a Parametric Estimate

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A parametric estimate is an estimate of cost, time or risk that is based on a calculation or algorithm. As the name suggests, parametric estimates are based on parameters that define the complexity, risk and costs of a program, project, service, process or activity. The following are illustrative examples.

Software Development

The cost of software development is defined by factors such as business requirements, non-functional requirements and the complexity of environments, politics and technology. It is common to use proprietary methods, calculations and algorithms to estimate software development costs based on rankings of requirement complexity such as story points, number of screens and integrations. Unusually complex requirements may be estimated by subject matter experts and added in. The following is a simplified example.


Services may calculate internal costs and customer price quotations using parameters that correlate with effort and expenses. In the following example, a moving company estimates the price of an office move using a base cost and variable cost based on the number of employees and distance. Unique complexities such as moving an air conditioning system is added as a separate cost. This base cost is multiplied by surcharges for moving to a multi-floor premise and working on a weekend.


A construction company generates parametric estimates for building a house based primarily on the size of the house in square meters. They multiple this by a "luxury factor" based on the quality of materials. They also multiple by a "complexity factor" that captures any unusually costly elements of the architecture. Unique items such as landscaping, systems, furnishings and interior design elements are added in separately.
Parametric estimates are often validated using estimates of experts and by comparing to industry data using reference class forecasting.
Overview: Parametric Estimate
An estimate of cost, time or risk that is based on a calculation or algorithm.
Related Concepts


This is the complete list of articles we have written about estimates.
Base Case
Basis Of Estimate
Budget Estimates
Cost Estimates
Parametric Estimate
Risk Estimates
Work Complexity
More ...
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The common types of estimates.

Reference Class Forecasting

An overview of reference class forecasting as an estimation technique.


Projections of costs, task completion times and resource needs for a project.

Story Points

An overview of estimating with story points including planning poker.

Basis Of Estimate

A definition of basis of estimate with examples.

Cost Analysis

The common types of cost analysis.

Budget Estimates

A definition of budget estimate with examples.

Level Of Effort

The definition of level of effort with examples.

Technical Requirements

An overview of technical requirements with common examples.

Business Costs

A list of common types of business cost.

Matching Principle

A principle of financial accounting.

Business Costs

A list of common types of business cost.

Cost Escalation

A definition of cost escalation with an example.

Cost Reduction Examples

Common examples of cost reduction.

Cost Estimates

The common types of cost estimate.

Relevant Cost

A definition of relevant cost with examples.

Cost Structure

Detailed examples of how to map out the cost structure of a business.

Cost Competition

The definition of cost competition with examples.

Cost Goals

An overview of cost goals with examples.
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