1. How does a parametric estimate work?
A tutorial on the fundamentals of parametric cost estimating using the PRICE models.
Presented by EastWise Technology, Beijing, China
5/19/2019
Copyright 2004 RWF Consulting

2. What is the basis of a parametric estimate?
Deterministic parametric models like the PRICE models are based upon the form where cost is a function of “K” (complexity, specification level, quality level or application), times the product of “M” (mass, size, quantity, number of parts, or lines of code), times “T” (time span, or schedule constraints), divided by “R” (resource effectiveness, relative simplicity or experience, or design inventory).
(from Parametric Cost Estimating, Federal Publications, Inc., 1985 – used with permission)
5/19/2019
Copyright 2004 RWF Consulting

3. Copyright 2004 RWF Consulting
Using the PRICE H (Hardware) model as a example – What are examples of PRICE H inputs?
Physical = electronic & mechanical weights
Qualitative = electronic & manufacturing complexities
Programmatic = quantities and schedules
5/19/2019
Copyright 2004 RWF Consulting

4. What about electronic and mechanical weights?
Generally mechanical weights are required inputs.
Electronic weights are generally calculated by PRICE H look-up tables.
5/19/2019
Copyright 2004 RWF Consulting

5. What about manufacturing complexities of structure or electronics?
Manufacturing complexities of structure (MCPLXS) are generally obtained from either a look-up table, a conceptual MCPLXS generator, or a detail MCPLXS generator.
Manufacturing complexities of electronics (MCPLXE) are generally obtained from a look-up table or a generator.
5/19/2019
Copyright 2004 RWF Consulting

6. How does the estimator know the information the PRICE model needs?
Use a Cost Analysis Requirements Description (CARD) that contains a detailed technical, programmatic, and schedule description
Purpose of CARD
Provides collected, integrated and coordinated technical, programmatic, and schedule information necessary to estimate the costs of a program using the PRICE models.
Ensures that cost projections developed by the analyst are based on a common definition of the system and the acquisition program
CARD is a USA DoD requirement for major programs but a CARD-like document should be developed for any estimate for government or private industry
5/19/2019
Copyright 2004 RWF Consulting

7. So, how does a parametric estimate using the PRICE model work?
The parametric estimator creates a work breakdown structure (WBS) in the PRICE model based upon the information contained in the CARD or from interviews with experts.
Each part of the system to estimated separately must be an element of the WBS.
Next the parametric estimator enters into the PRICE model the technical attributes of the systems (including weights and MCPLXS & MCPLXE). Generally if the estimator does not know the other required inputs the PRICE model will estimate that input when a zero is entered for that input.
5/19/2019
Copyright 2004 RWF Consulting

8. What else is needed to obtain an estimate?
If the PRICE model accepts (validates) the parametric estimator’s inputs then the estimate is ready to run.
The only thing left to do is run the estimate and look at the outputs both on-screen by WBS element and in on-screen (printable) report form.
If the estimate is acceptable then it can be exported to Excel for further analysis and formatting.
5/19/2019
Copyright 2004 RWF Consulting

9. Copyright 2004 RWF Consulting
Is it that easy?
Yes, but obtaining the input information needed to start takes effort and persistence.
The PRICE models are forgiving because they generally assume validated similar industry factors if the parametric estimator is unable to obtain the information needed.
The more of the technical information and CARD information that the parametric estimator can obtain, the better the estimate.
Experience shows that it is easier to obtain better inputs from experts once the first PRICE estimate is available to review by the expert.
5/19/2019
Copyright 2004 RWF Consulting

10. Copyright 2004 RWF Consulting
Any questions?
5/19/2019
Copyright 2004 RWF Consulting