An Introduction to Parametric Estimating 
2008 AACE INTERNATIONAL TRANSACTIONS
EST.03
An Introduction to Parametric Estimating
Mr. Larry R. Dysert, CCC
A
ACE International describes cost estimating as the “predictive process used to quantify, cost, and price the resources required by the scope of an asset investment option, activity, or project [1].” The methods and techniques used to prepare a cost estimate will typically vary based on the level of project definition available at the time the estimate is prepared [2, 3]. Early in a project’s lifecycle, there is a need to prepare conceptual cost estimates to support timely decision-making such as to make a “go or no-go” decision to continue development of a project proposal or to select between alternative designs.
This paper is aimed at those wanting to explore the concepts of parametric estimating. Parametric cost estimating models are useful tools for preparing early conceptual estimates when there is little technical detail to provide the basis to support using more detailed estimating methods. This paper will introduce the concept of parametric estimating and discuss the steps involved in the creation of a parametric estimating model.
PARAMETRIC ESTIMATING
A parametric estimating model is a mathematical representation of cost relationships that provide a logical and predictable correlation between the physical or functional characteristics of a project (plant, process system, etc.) and its resultant cost [4]. A parametric estimate is comprised of cost estimating relationships and other parametric estimating functions that provide logical and repeatable relationships between independent variables (such as design parameters or physical characteristics) and the dependent variable (cost). The independent variables are known as cost drivers, and typically may be physical, performance, or operational characteristics associated with the project to be estimated.
Capacity factor and equipment factors estimates are simple examples of parametric estimates;
EST.03
An Introduction to Parametric Estimating
Mr. Larry R. Dysert, CCC
A
ACE International describes cost estimating as the “predictive process used to quantify, cost, and price the resources required by the scope of an asset investment option, activity, or project [1].” The methods and techniques used to prepare a cost estimate will typically vary based on the level of project definition available at the time the estimate is prepared [2, 3]. Early in a project’s lifecycle, there is a need to prepare conceptual cost estimates to support timely decision-making such as to make a “go or no-go” decision to continue development of a project proposal or to select between alternative designs.
This paper is aimed at those wanting to explore the concepts of parametric estimating. Parametric cost estimating models are useful tools for preparing early conceptual estimates when there is little technical detail to provide the basis to support using more detailed estimating methods. This paper will introduce the concept of parametric estimating and discuss the steps involved in the creation of a parametric estimating model.
PARAMETRIC ESTIMATING
A parametric estimating model is a mathematical representation of cost relationships that provide a logical and predictable correlation between the physical or functional characteristics of a project (plant, process system, etc.) and its resultant cost [4]. A parametric estimate is comprised of cost estimating relationships and other parametric estimating functions that provide logical and repeatable relationships between independent variables (such as design parameters or physical characteristics) and the dependent variable (cost). The independent variables are known as cost drivers, and typically may be physical, performance, or operational characteristics associated with the project to be estimated.
Capacity factor and equipment factors estimates are simple examples of parametric estimates;
References: International, 1984 [6] Dysert, L Transactions, AACE International, 1999 [7] Rose, A., “An Organized Approach to Parametric Estimating”, Transactions of the Seventh International Cost Engineering Congress, 1982 Mr