Analogous Estimation Technique PMP

In this video, you will learn what is analogous estimating. And if you haven't done so already, make sure you hit the subscribe button as well as the bell notification. So analogous estimation is used when you have accurate data from previous projects that could help you estimate the current project's schedule as well as cost. So for example, let's suppose that you built a fence 1 year ago for $100 per feet. So because of inflation, You could estimate that this year this fence should cost about $110 to $120 per feet. Now, using an analogous estimation, you're relying on previous projects as your only source of information, so it is usually considered a pretty low accuracy. When you're doing an analogous estimation, there are many variables that you can take into consideration, including scope, cost, budget, or duration. Now, the reason that people use analogous estimation is because it is very cheap and easy to perform. However, the trade-off is that it's less accurate as well. So analogous estimation is typically used to get 4 types of estimates. You could get a single absolute value for a cost or a duration. You could also get a ratio estimate. You could get a range, and it could also help you come up with the 3-point estimate. So the 3-point estimate is when you compute 3 numbers, a pessimistic, optimistic, and most likely for an activity duration or cost, and then you take the average of those 3 numbers to come up with a more accurate number. So Naive Bayes estimation could help you come up with one or all 3 of those points that will be inputs to this 3-point estimation. Now, Naive Bayes estimation is not the same as parametric estimation. So in parametric estimation, you will use historical information to come up with a unit of measure. For example, the accountant's daily rate is $100 per hour, and if we use 8 hours of the accountant's time, that means the cost will be $800. So an analogous estimation is just using historical information, but there's no unit cost here. It doesn't require any calculation. You're just looking at characteristics of a historical project, and based on the scope, based on other characteristics of that project, you will try to come up with an estimation for the current project based on the assumptions that you will make of how that previous project is similar to the current project. And if that is confusing, let's take a look at the steps involved here. First, you will create a list of similar projects. You can start with a long list and refine it later. Then you will get the historical characteristics of these past projects, including their cost, duration, the resources used, and any additional information such as the scope, activities, complexity, etc. Then you will remove all of the irrelevant data from these past projects. You will refine the list and get rid of anything that's deemed not relevant anymore. The result here is you will have a short list of relevant projects that's similar to the one that you're managing right now. The last step is to calculate the estimate from the historical data. So you want to use analogous estimation only if there are similar types of projects ran in the past. And in order to decide if analogous estimation is the best technique to use, you need to look at your stakeholders' requirement, the availability of the data, the confidence that you have in the estimators, as well as the accuracy of the historical data. Now let's quickly take a look at the pros and cons of using this technique. The pro is that it doesn't take a lot of time or resources in order to compute a Naive Least Estimation for your project activity cost or duration, and you can perform this with limited data. The con is that it's not very accurate. So you're making the assumption that the historical data from past projects will still be applicable to the current projects, and if this assumption turns out to be incorrect, then all of your estimation will be useless. Another point to note here is that analogous estimation, it's usually only used at the activity level, and once you have computed all of your activity cost or duration, then you want to roll this up into the project level to get your overall project budget or project duration. Okay, so that is your tip of the day for your upcoming PMP exam for analogous estimation. If you want to learn more great tips and tricks just like this, make sure you sign up for our free training at www.examspm.com/free where I will teach you how you can become PMP certified in the next 6 weeks or less. So make sure you sign up, get our free study guide as well as other great tips and tricks as well, and I'll see you there.