Example of Analogous Estimating
Analogous Estimation is dependent upon the similarity of the two projects being considered. Let’s consider the following example.
Suppose in an earlier project, you constructed half a mile of tarmac road for a million dollars. In the new project, you need to estimate the cost for two miles. In this example, you could quite confidently say that the new project will cost approximately four million dollars. Since constructing a road is linear, analogous estimation can be quite accurate. Or, is it?
There are some assumptions that drive the cost estimate accuracy. For example, if in the earlier project the road was constructed on a non-mountainous terrain and the new road is to be constructed in the foothills of the Rocky Mountains, then four million dollars would not be an inaccurate estimate. This is because construction costs zoom up as the terrain gets tougher. In addition, consider that when you implement a project that is four times as big as the baseline project, the complexity increases exponentially. The rule of thumb is:
If the scale of a project grows, the complexity of the project will grow many times more…watch out!!!
As you can see from this example, Analogous Estimation is heavily dependent on the similarities between the two projects being considered; even if they are similar, the estimates may not be accurate. Therefore, do not rely entirely on Analogous Estimation even if two projects seem similar during the initiation of the project. Supplement the estimates with other estimation techniques.