What type of estimation uses the relationship between current projects and historical data to estimate costs?

Parametric estimating is a technique that relies on statistical relationships between historical data and current project variables to generate estimates for future projects. This method involves analyzing the cost data from previous projects and establishing a mathematical relationship that can project costs based on specific metrics or parameters of the new project, such as size, complexity, or duration.

For example, if a previous project of a similar nature cost $500,000 for every 1,000 square feet, a new project can use this parameter to estimate costs based on its own square footage. This approach allows for a more data-driven and scalable method of estimation, often leading to quicker and potentially more accurate results compared to subjective estimates or methods that do not incorporate historical performance data.

By leveraging established metrics from comparable projects, parametric estimating stands out because it provides a systematic and objective way to forecast costs, making it a valuable tool in project management practices.