Parametric Estimates

Parametric estimates are similar to analogous estimates. They are also "top-down," and their inherent accuracy neither better nor worse than analogous estimates. The basis of parametric estimation is some parameter of the project being estimated that changes proportionately with project cost, and a model may be calculated based on one or more such parameters. For most types of estimates, the rated per-unit cost of resources to be con­sumed in creating the project must be known. With these figures known, adjustments in the parameter will enable revising the estimate without loss of accuracy. Accuracy of the estimate may be improved if there is a close relationship between parameters and costs, and if the parameters are easy to quantify. If there are historical projects that are both more costly and less costly than the project being estimated, and if the parametric relationship holds true for both of those historical projects, the accuracy of

Table 6.1 Cost estimate procedure


The function of the estimate is to forecast a cost for a specified scope of work, enabling an accurate budget to be assembled for the business. Cost estimation by definition is uncertain, but different classes of estimation may yield improved levels of accuracy as a project’s scope becomes better defined in its details.

A work breakdown structure (WBS) should be built from which estimates, schedules, from which cost controls may be derived.

Formal documents are produced for all levels of estimate.

Appraise: Order of Magnitude (OOM) accuracy range of +/-50%.

Select: Class 3 accuracy range of +/- 30%.

Define: Class 2 accuracy range of +/-15-20%.

Class 1 is +/-10% (rarely used).


This is done to indicate to the business the predicted cost of the project, so that the project is financially viable and can become established.


The project leader and the asset development engineer develop a Work Breakdown Schedule. This is then discussed with the project team to allow the relevant discipline engineers input in the estimate. OOM estimate will normally be factored estimates based on the known high-level scope and equipment definition. Class 3 estimates will be factored based on a developed scope and equipment definition including indirect costs. Class 2 estimates will be built up from the developed scope of the project and will be fit for purpose to give the accuracy range.


All projects must have a Class 2 at the end of Define for business sanction. An estimate will be produced at the end of each development stage. The accuracy of the estimate will reflect that particular stage.


The project leader is responsible and is supported by the estimator, discipline engineers, SPA, construction engineers, and commissioning engineer.

the estimate and the reliability of the parameter for this project will be better. Multiple-parameter estimates can be produced as well. In a multiple-parameter estimate, various weights are given to each parameter to allow for the calculation of cost by several parameters simultaneously.

"For example, houses cost $150 per square foot, software deve­lopment cost is $2 per line of code produced, an office building costs $260 per square foot plus $54 per cubic foot plus $2,000 per acre of land, and so on."

Responsibility for monitoring construction and installation costs, which comprise the largest part of the total project costs, is usually shared between the overall project manager and onsite project construction manager. The accuracy of calculating the esti­mated cost of construction is different from one stage to another. The more accurate the data is, the more accurate the calculation of the cost.

Yet another complexity attending the monitoring, control and updating of construction cost estimates arises from the point-of – view informing the particular calculation method used. From the owners perspective, the general tendency is to estimate costs on the basis of the project’s design and construction drawings. On the other hand, a project contractor’s approach to estimating costs will be applied with an eye to entering a tender that will qualify him to win the bidding on the project.

The initial cost estimate is made after preliminary studies of the project have identified industrial facility requirements such as the number of pumps, air pumps, and compressors and the size of pipes and lines in diameter, and so on.

The cost is determined at this stage on the basis of previous experience of similar projects. For example, calculating the cost is as follows:

The calculation of the concrete price is calculated after deter­mining the type of concrete. The cost of reinforced concrete can be calculated by obtaining the following information:

• Quantity of steel per concrete cubic meter and the price of steel per ton

• Quantity of cement in concrete mix and the price of cement ton

• Quantity of coarse and fine aggregate and the price per cubic meter

• For ready mix, the price of each cubic meter by knowing the concrete grade, which is standardized at 30-25 N/mm2 for petrochemical projects

• Cost of shattering, bending bars, pouring, and curing per cubic meter of concrete

For ready mix concrete, obtain the following information:

• Quantity of steel in the meter cube of concrete and the price of a ton of steel

• The price of concrete from the nearest ready mix loca­tion to the site and the concrete pump

• The cost of wooden form, which is usually a special strong form to the pump concrete

• The cost of steel fabrication

• The cost of the pouring process and curing

Note that in calculating the reinforced concrete cost estimate the main item is the quantity of steel in concrete, and it is different

Table 6.3 Percentage of reinforced concrete building cost

Activity Item

Percentage from the Total Cost, %

Design and site supervision


Concrete works


Masonry work


Sanitary and plumbing


Internal and external finishing


The percentage cost of the domestic and administration building will be a guide as shown in Table (6.3).