Analogous cost estimation Flashcards
What do we need to to do analogous cost estimation?
To calculate the cost of the new project you need data from one previous similar project. We need to know the cost of the previous project and it’s primary cost driver.
cost of new project = (cost driver new project/cost driver old project) * cost of old project
What makes the analogous cost estimation work better?
The more similar the previous project is the new project, and the higher the correlation between the cost and the costdriver.
What are the differences between parametric and analogous estimation?
Analogous is just OLS regression, but with only one observation. However we can’t do it with only one observation, but we know that if we do nothing with the project the cost will be 0. You’ll then get a point through origo.
