Which cost estimating technique is used when very little information is available about the project or the new project is very similar to a previous project? Marginal estimating Profit estimating Analogous estimating Matrix estimation
The correct answer and explanation is:
The correct answer is Analogous estimating.
Analogous estimating is a cost estimating technique used when there is very limited information about the current project. It relies on the costs and parameters of a previous, similar project to estimate the cost of the new project. This method assumes that the new project shares enough characteristics with the previous one so that the previous cost data can provide a reasonable basis for the estimate.
This technique is particularly useful early in the project lifecycle when detailed information is scarce. It provides a quick and rough estimate that can be refined later as more data becomes available. Because it uses historical data, the accuracy of analogous estimating depends on how similar the previous project is to the current one. If the projects differ significantly in scope, technology, or environment, the estimate may be less reliable.
Analogous estimating is less time-consuming and less costly than detailed bottom-up estimating methods, making it suitable for initial planning, budgeting, and feasibility studies. However, because it is based on analogy rather than detailed analysis, it generally provides a less precise estimate and often requires adjustments or expert judgment to account for differences between projects.
In summary, when a project has little detailed information available and resembles a prior project, analogous estimating is the appropriate technique. It leverages historical data to produce an early cost estimate that can guide initial decision-making and resource allocation. As the project progresses and more specifics emerge, more detailed and accurate estimating techniques can be applied.