Estimate Classification
Estimate Classification
(OP)
I was in the Cost Engineering field many years ago, and there was a standard breakdown of estimate classification by available data vs. accuracy. For example, an order-of-magnitude, +- 50%, was for a factored estimate. The tightest class was a "definitive" estimate, usually +- 5%, when most project details were known. Our current customer is trying to hold us to +-3% accuracy on design/construction bids for all size projects, from $2,500 (yes, two thousand, five hundred dollars), on up to several million dollars.
Could someone please update me on the accuracy classifications of cost estimates? Does anyone work where +-3% accuracy on estimates is common?
Our current customer is an organization within the US Government.
Could someone please update me on the accuracy classifications of cost estimates? Does anyone work where +-3% accuracy on estimates is common?
Our current customer is an organization within the US Government.
Larry





RE: Estimate Classification
I will give you a summary of what I was using according the directives of a company I used to work for:
- Global, pre-planning purpose, order of magnitude: +/-45%
- Company Planning, next year budget, etc.: +/-20%
- Final approval for each single project: +/-10%
- Detailed, current: +/-5%
This applies to projects under 1MMU$S (one million).
Each one of these levels have a specific scope. I mean, what is supposed to be included for each level, in terms of:
* Soil - civil work.
* Preliminary / Engineering sketches (Process descriptions).
* Piping (preliminary, sketchs, final engineering, specs)
* Instrumentation (from preliminary to detailed)
* Electricity (same)
* Main equipment (preliminary list, preliminary design, final design)
* Engineering hours...
I don't know if I'm replying what you expected, if you like more details I can do it, no charges!
Finally, 3% accuracy is not so common, but you know, you can receive any kind of commands nowadays... If you are asked and paid for a cost estimation of that level, you must be very sure that:
-- the project scope has been agreed and frozen,
-- the Detail Engineering has been finished and approved,
-- major equipment has been committed,
-- and Construction contractor has been, at least, deeply consulted.
If not, any Cost Estimation would be risky.
One question I should ask before all this wording: Your's is a grass root, an expansion, a medium size Project?
Good luck, have a safe day.
J.Alvarez
RE: Estimate Classification
Thanks for the information. It's pretty much as I recalled, and the details are helpful. Our projects are at a research facility that dates from the 1940's, and most of the construction deals with control system upgrades and piping/valve modifications. Scope creep is very hard to control, but we're getting better at it.
We're starting on a new Support Services Contract, so now is the time to get a good cost control program set up.
Thanks again!
Larry