Module 2- Discussion of Different Estimating Methods Flashcards
It is an estimate prepared using engineering concepts, avoiding the counting of individual pieces. As the name implies, conceptual estimates are generally made in the early phases of a project, during predesign, before construction drawings are completed.
Conceptual estimate
It is created during the design phase of the project lifecycle. It first starts with the order of magnitude to determine a project’s feasibility and is based on the schematic design. After the preliminary estimate, a more detailed estimate is followed by the design team.
Design estimate
It is a rough estimate of construction costs, prepared without detailed information on the quality or type of materials. This enables clients to make early, broad-sweeping decisions about target outcomes.
Budget bid
It is created once the contract is fully signed between the owner/client and the contractor. This type of estimate plans for upcoming costs.
Control estimates
It depends on a variety of factors. For example, some organizations may require cost estimates to follow company policies, while others may work with rough estimates and refine them as the project progresses.
Cost Estimating Methods
It is when the project manager calculates costs based on the known costs of a similar project done in the past. This method relies on expert judgment and historical data. The limitation of analogous estimation is that no two projects are the same. Therefore, it is usually used in the early stages of project planning during preconstruction when there is very little information about the project.
Analogous estimating
This method uses algorithms or statistical relationships based on historical data to calculate the resources needed. The advantage of this method is that it is more accurate than analogous estimating and requires more data to assess costs.
Parametric estimating method
Here, the project manager identifies three cost estimates: an optimistic estimate, where funds are spent efficiently; a pessimistic estimate, where funds are spent least efficiently; and a balanced estimate, which represents the most likely scenario.
Three-point estimate
This technique, also known as alternative analysis, identifies available options and outlines them to execute the work. This method provides the best solutions for performing project activities within defined project constraints.
Data analysis method
Cost estimates are also known as rough order of magnitude (ROM) estimates. This is a high-level estimate that assists with capital planning. “Ballpark” is the name of the game with it estimates, where accuracy can range from 50% below actual costs to more than 100% above the actual spend.
Class 5
These estimates come into play when project owners assess a project’s feasibility. At this stage, between 1-15% of the project must be defined. While this is still limited, the cost estimate accuracy improves significantly on both the low and high ends of the actual capital expenditures.
Class 4
When project planning gets underway, project managers create a it estimate based on initial project plans. These are also called “control” estimates and are used for budget authorization. At this phase, basic designs should be close to 40% complete, with a broad scope and an expected timeline in place. Accuracy continues to improve at this stage, ranging from -10% to -20% on the low end to +10% to +30% on the high end of actual costs.
Class 3
Also known as a bid or tender estimate, it is created when 30-70% of the project details are complete. Project data and engineering deliverables should be nearly finalized, and the resulting bid is used to establish the contract value of the project. It also includes a project’s indirect costs, such as overhead, margins, and administrative costs. Accuracy at this stage ranges from -5% to -15% on the low side and +5% to +20% on the high side.
Class 2
This is the most accurate category of cost estimates and is calculated using detailed estimation methods. It is prepared when needed for a specific part of the project, typically for subcontracting purposes, controlling change orders, or evaluating contractor claims. Accuracy improves to -3% to -10% on the low side and +3% to +15% on the high side.
Class 1
