Conceptual estimating methods are typically used for Class 5 and Class 4 (and sometimes Class 3) estimates. They are often referred to as “order-of-magnitude” (OOM) estimates in reference to their typically wide range of estimate accuracy. They provide a relatively quick method of determining the approximate probable cost of a project without the benefit of detailed scope definition. These estimates may be used for the following:
• establishing an early screening estimate for a proposed project or program,
• evaluating the general feasibility of a project,
• screening project alternatives (such as different locations, technologies, capacities, etc.),
• evaluating the cost impacts of design alternatives, and
• establishing a preliminary budget for control purposes during the design phase of a project.
Conceptual estimates are generally based on little project definition (i.e., engineering deliverable), thus subjecting them to a wide range of estimate accuracy.
Their accuracy can depend on several factors, including the level of project definition, the quality of the past historical cost data used in development of the factors and algorithms, as well as the judgment and experience
of the estimator.
These limitations should, of course, be recognized in using conceptual estimating methods. Nonetheless, there are many cases where conceptual estimates can be very reliable, especially in estimating repeat projects.
Generally, the emphasis with conceptual estimating is not on detailed accuracy, but on obtaining a reasonable cost
estimate of sufficient accuracy to insure that the results are meaningful for management to make the decision at hand.
There are a wide variety of conceptual or OOM estimating methodologies. Several of the more commonly used methods
are end-product units, physical dimensions, capacity factor, various ratio or factor methods, and parametric modeling. Most conceptual estimating methods rely on relationships of one form or another.