zmVault/estimating-methodologies.md

id, aliases, tags, title, dg-publish

id	aliases	tags	title	dg-publish
		destiny/uncertain status/draft topic/estimating type/philosophy authorship/original	Estimating Methodologies	true

Estimating Methodologies

The 4 Traditional Methodologies

[!quote] Defense Acquisition University There are four principal cost estimating methodologies:

1. Comparison/analogy,
2. Parametric,
3. Detailed engineering/bottom up, and
4. Extrapolation from actual costs.

Comparison / Analogy

Pros:

• simple to implement
• quick in practice

Cons:

• unsatisfying input
• unsatisfying output

Parametric

Pros:

• quick in practice
• nuanced input
• accounts for incomplete input
• effectively accurate through the entire estimate process
• well-suited for automation

Cons:

• complex to implement

Detailed Engineering / "Bottom-Up"

Pros:

• simple to implement
• satisfying output

Cons:

• slow in practice
• unsatisfying input
• accuracy and risk depend solely on estimator
• output dependent on complete input
• ill-suited to automation

Extrapolation from Actual Costs

Depending on the application this is one is either

• better described as the previous 3
• or not estimating at all.

In Other Industries

There exist articles from software development project management resources stating essentially what I believe to be true, that parametric estimating is more accurate than bottom-up, in contrast to common assumption.

I suspect that industry tolerance for cost-modeling is related to the cost of estimation. Software is largely impractical to estimate bottom-up, whereas anyone can take off construction scope.

Alternate theory: tolerance is related to the industry's ability to understand the model.

Regardless, a continuum emerges:

^
| Software
| Defense
| Construction
v

Industries that would benefit the most from cost-modeling are least likely to consider it a valid method.

These methods are actually the same, just different levels of abstraction. This can be observed in the very subtle distinction between parametric and analogous estimating.

# of Parameters
^
| Bottom-Up     (100+)
| Parametric     (10)
| Analogous       (1)
| Extrapolation   (0)

These different methods are just a response to different levels of requirement specificity. Parametric is obviously more accurate and precise than analogous, however the question not being asked is if there are diminishing returns to estimate specificity.

Suppose there are: at some point then, there must then be a point at which risk of human error outweighs the value of more perfect information.