Excel Templates

Parametric Estimating – Excel Tutorial

Posted on by Anthony James
30
Sep

In this tutorial, I’ll show you how to setup Parametric Estimates formulas in Excel to support your Cost Management Plan.

  1. Previous: Three-Point Estimating
  2. Download: Cost Management MS Word and Excel Templates

Purpose:

Parametric estimating uses historical data and known parameters to estimate the cost of a project. It is particularly useful when there are well-defined, measurable aspects of the project that can be scaled up or down to predict overall costs. This method is highly accurate when historical data and project parameters are reliable.

1.1 Step-by-Step Guide for Excel:

  1. Define Key Parameters:

Identify measurable project parameters that influence costs (e.g., lines of code, labor hours, number of units produced).

  1. Use Historical Data:

Collect historical data to determine the cost per unit, hour, or other relevant metric based on previous projects.

  1. Apply the Parametric Formula:

Multiply the key parameter (e.g., number of units, lines of code) by the cost per unit to get the estimated cost.

1.2 Sample Data to Import into Excel:

Task

Key Parameter (Lines of Code, Hours, etc.)

Cost per Unit ($)

Parametric Estimate Formula

Total Estimate ($)

Develop Module 1

10,000 Lines of Code

5

=B2*C2

50,000

Develop Module 2

15,000 Lines of Code

5

=B3*C3

75,000

Testing

500 Hours

40

=B4*C4

20,000

Deployment

100 Hours

50

=B5*C5

5,000

Total Estimate

    

=SUM(D2)

150,000

Explanation of Sample Data:

  • Task: Each row represents a task or work package in the project (e.g., development, testing).
  • Key Parameter (Lines of Code, Hours, etc.): This column represents the measurable parameter for each task, such as lines of code for software development or hours for labor.
  • Cost per Unit ($): The cost associated with each unit of the key parameter, based on historical data (e.g., $5 per line of code or $40 per hour).
  • Parametric Estimate Formula: The formula used to calculate the estimated cost by multiplying the key parameter by the cost per unit.
  • Total Estimate ($): The final estimated cost for each task based on the parametric estimate.

1.3 Formula Breakdown in Excel:

  1. For Each Task:
    • In cell D2: Enter =B2*C2 to calculate the parametric estimate for Develop Module 1.
    • In cell D3: Enter =B3*C3 for Develop Module 2.
    • In cell D4: Enter =B4*C4 for Testing.
    • In cell D5: Enter =B5*C5 for Deployment.
  2. For the Total Estimate:
    • In cell D6: Enter =SUM(D2:D5) to calculate the Total Estimate for the project.

1.4 How to Use the Table in Excel:

  1. Key Parameter Definition: Define the key parameters for each task, such as the number of lines of code, labor hours, or units produced.
  2. Historical Data Application: Input the cost per unit (e.g., cost per line of code or per labor hour) based on historical data from similar projects.
  3. Parametric Cost Calculation: Use the formula in the Parametric Estimate Formula column to calculate the estimated cost for each task.
  4. Summing Total Estimate: Use the SUM function at the bottom to calculate the total project estimate.

1.5 Sample Interpretation:

  • Develop Module 1: Estimated to involve 10,000 lines of code, with a historical cost of $5 per line, for a total estimate of $50,000.
  • Develop Module 2: Estimated to require 15,000 lines of code, with the same cost per line, resulting in a total estimate of $75,000.
  • Testing: Involves 500 labor hours at $40 per hour, leading to a total estimate of $20,000.
  • Total Estimate: The total project estimate, after summing all task costs, is $150,000.

1.6 Downloadable Excel Setup:

In your Excel sheet:

  1. Label the first row with Task, Key Parameter (Lines of Code, Hours, etc.), Cost per Unit ($), Parametric Estimate Formula, and Total Estimate ($).
  2. Input the data for each task and calculate the parametric estimate for each using the formulas.
  3. Use the SUM formula at the bottom to get the total project estimate.

1.7 Customization Tips:

  • You can change the key parameter depending on your project. For software development, it might be Lines of Code, but for manufacturing projects, it might be Number of Units or Labor Hours.
  • Adjust the Cost per Unit value based on historical data for different tasks, ensuring accuracy for each specific task.
  • If you have additional tasks, simply add more rows and update the formulas to reflect the new data.

1.8 Additional Considerations:

  • Parametric estimating works best when the project scope and key parameters are well defined.
  • Ensure that the historical data you use to derive the Cost per Unit is accurate and relevant to the current project, as this will directly affect the reliability of the estimate.

This Parametric Estimating Excel template provides a structured and accurate way to estimate project costs based on key project parameters, making it highly useful for projects with predictable, repeatable tasks.

Download Excel Templates

Use these Cost Management Plan templates to establish a framework for estimating, budgeting, and controlling the costs of your IT project. Includes Explainer Guide to configure the Excel formulas.

MS Word

  • Cost Management Plan: 41 pages
  • Explainer Guide: 15 pages

MS Excel spreadsheets

  • Analogous Estimating
  • Bottom-Up Estimating
  • Parametric Estimating
  • Three-Point Estimating

Download: Cost Management Plan templates (MS Word + Excel)

Anthony James