What Do a Space Shuttle and an Anti-Cancer Drug Have in Common? Their Development Costs Can Be Estimated Using Parametric Cost Analysis: A Literature Review

29 Pages Posted: 13 Sep 2007

See all articles by Giampiero Favato

Giampiero Favato

Institute of Leadership and Management in Health - Kingston University

Roger Mills

Henley Management College - Henley Centre for Value Improvement (HCVI)

Bill Weinstein

Henley Management College

Abstract

The existing literature on Parametric cost analysis (PCA) has been reviewed focusing on methodology, application, shortcomings, suggested remedies and alternatives. Parametric cost analysis (PCA) is a method of estimating the cost of a product using mathematical relationships to other parameters of the product, such as parts and labor cost. These models or cost estimating relationships (CERs) are often obtained by regressing the total cost of a product on a set of variables that represent the product's performance. Throughout this review, emphasis has been placed on why these techniques are used, their practical applications, and explanation of statistical methodology in layman's terms. PCA is found to be useful in large scale projects and in situations where little is known about the new product.

Keywords: parametric, cost, analysis, literature, review

JEL Classification: O32

Suggested Citation

Favato, Giampiero and Mills, Roger and Weinstein, Bill, What Do a Space Shuttle and an Anti-Cancer Drug Have in Common? Their Development Costs Can Be Estimated Using Parametric Cost Analysis: A Literature Review. Available at SSRN: https://ssrn.com/abstract=1012647 or http://dx.doi.org/10.2139/ssrn.1012647

Giampiero Favato (Contact Author)

Institute of Leadership and Management in Health - Kingston University ( email )

Kingston Hill
Kingston upon Thames
Surrey KT2 7LB
United Kingdom

Roger Mills

Henley Management College - Henley Centre for Value Improvement (HCVI) ( email )

Greenlands
Henley-on-Thames
Oxfordshire RG9 3AU, England
United Kingdom

HOME PAGE: www.henleymc.ac.uk/hcvi

Bill Weinstein

Henley Management College ( email )

Greenlands
Henley-on-Thames
Oxfordshire RG9 3AU, England
United Kingdom

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