From "Workshop: Parametric estimate" pp. 152-154 in the case study book, what are the pros and cons of such a cost estimation approach? Have you experienced the use of such an approach at work? Give an example.

Workshop: Parametric Estimate Dragan Z. Milosevic, Peerasit Patanakul, and Sabin Srivannaboon Ball. Inc. is a management consulting rm advising leading companies on issues of strategy. technology. projects. and operations. Focusing on local services. the company has more than 100 employees at three different locations around the country. Konrad Cerni is a senior consultant with expertise in project manage- ment. He is a very knowledgeable and resourceful person since he has worked in this eld at a wide range of companies in different industries from traditional manufacturing to very complex aerospace. At the time, Konrad was conducting a workshop exclusively designed for project management tools for about 30+ project and program managers. These managers work for the leading electronics manufacturing firm in the local area. Given that more than 50 project management tools are available in the practice and literature of project management, Konrad knew he could not cover them all. and had to carefully pick the tools that would be most useful to these managers. One of the tools he included was called a \"Parametric Estimate.\" WHAT IS A PARAMETRIC ESTIMATE? WHAT IS A PARAMETRIC ESTIMATE? A parametric estimate uses mathematical models to relate cost to one or more physical or performance characteristics (parameters) of a project that is being esti mated. Typically. the model provides cost estimating relationship(s) that measures cost of the project being estimated to its physical or performance parameters. such as production capacity. size, volume. weight. power requirements. and so forth. Determining the estimate for a new power plant may be as simple as multiplying two parametersthe number of kilowatts of a new power plant by the anticipated dollars of kilowatt. Or it may be very complex. for instance. involving 32 para- meters (also called factors or cost drivers) formulated into an equation to estimate the cost of a new software development project. Values of the parameters can be entered into the cost estimating relationship(s). and the results can be plotted on a graph or tabular format. 152 Project Cost Management 153 A PICTURE IS WORTH A THOUSAND WORDS Konrad said, \"To develop a proper parametric estimate. you may need to collect quality information inputs that include the following: 0 Basic project scope 0 Selected project parameters 0 Historical information Basic project scope description provides understanding of what is being esti- mated. Its parameters are identified on the basis of the nature of the cost estimating relationship model that will be used to collect and organize historical information, which will be related to the project being estimated. Here is an example of a typical cost estimating relationship in a parametric estimate model where cost and area are expressed in a linear function.\" (See Figure 7.1.) Konrad continued, \"Many parametric software effort models are based on key software parameters such as cost drivers. They are usually based on the statistical analysis of the results of previous software development projects. These analyses include key parameters such as system size (e.g., line of code). complexity (e.g.. degree of difficulty), type of application (e.g.. real time). and Figure 7.1 Typical Cost Estimating Relationship in a Parametric Estimate Model y = 90 (x) 210 200 Cost (in thousands of dollars) 190 180 - 170 - O 160 0 1.8 1.9 2.0 2.1 2.2 2.3 Area (in thousands of sq.ft.)154 CASE STUDIES development productivity (e.g.. productivity). Some experts suggest more than 59 parameters that can impact outcomes of these cost models. But a simple model can take the form of: 2:ch where Z = estimated project effort (per months) Y = Estimated project size (thousands of lines of code) C = Regressions coefcient L = Regression exponent You can apply this model to estimate the effort for a new software development project by assuming the following values: C = 3.8. L = 1.4, Y = 2. z = CYL = 3.8(2)'-4 = 10.03 person-months. \"Now let's think about how you can apply the parametric estimate to your project,\" concluded Konrad. Discussion items I. What are the pros and cons of the parametric estimate? 2. When should the parametric estimate be used