Estimate

Reviews

Because an estimate is of critical importance to a project’s success, it makes sense that the estimate should undergo a rigorous review process. The estimate should be evaluated not only
for its quality or accuracy, but also to ensure that it contains all the required information and is presented in a way that is understandable to all project team members and client personnel.

 

The level of detail and diligence used during the estimate review cycle will vary both with the strategic importance, total value, and purpose of the particular estimate. These steps can be easily adapted on a fit-for-use basis.

When reviewing estimates by others, we always want to keep in mind the basic fundamentals
of cost estimating. Complicating the matter, however, is the problem that many times the amount of time allowed for a complete estimate review is very short. Thus the review of
an estimate prepared by others is usually accomplished by a critical assessment of the estimate and its documentation, and a series of questions to assist in evaluating the level of
diligence used in preparing the estimate.

BASIS OF ESTIMATE "BoE"

PERSONNEL USED

The first thing to assess is the BoE.

Is it well-organized and complete?

 - Does it provide the required information regarding the design basis, planning basis, cost basis, and risk basis of the estimate?

 - Does the design basis clearly document the scope of the project, and have all engineering deliverables used in developing the estimate been identified?

 - Have all scope assumptions been acknowledged?

 - Is the planning basis (schedule, resource plan, construction plan, etc.) reasonable?

 - Is the basis of cost (material prices, labor rates, labor  productivities) reasonable, in line with expectations, and consistently applied throughout the estimate?

 - Has the risk basis been clearly defined, and is it reasonable for the level of information available to prepare the estimate?

Next, you will want to know who prepared the estimate, and what their level of estimating experience is. Do they have established estimating procedures and guidelines? Was the estimate checked and reviewed before publication?

Coins

methodology & Procedures

      - What estimating methods, techniques and procedures were used in preparing the estimate?

      - Are they appropriate for the level of information available and project type?

      - Were different estimating methods used for different parts of the estimate?

      - Is the level of detail in the estimate sufficient for the purpose of the estimate?

      - Were parts of the project difficult to estimate, and why?

      - Was sufficient time available to prepare the estimate?

      - What adjustments were made to the estimate for location, complexity, etc., and are they reasonable?

      - Was the estimate prepared utilizing a code of account structure?

documentation

estimate validation

 - Is the estimate documented clearly?

 - Are the estimate summary and detail pages well-organized and presented at and appropriate level of detail?

 - Is every cost appearing on the estimate summary traceable to the estimate detail and other estimate backup?

The estimate for review should include a metrics report showing key estimating metrics and benchmark ratios for the estimate and similar past projects.

 - Review this report and question any significant differences;

 - Have set of metrics and statistics from other project history to compare against.
 - Develop quick-check estimate (using conceptual estimating techniques) for comparison purposes;

THE REVIEW

If the preceding inquiry has gone well, and we are confident that the estimate appears to have been prepared in a professional manner, we are ready to delve into some of the estimate details to verify estimate quality.

 

The goal is to check that selected areas of the estimate can withstand further scrutiny. The key here is to not get too
deep into the details and lose sight of the forest for the trees. An important point to remember here is the “80/20
rule.”This principle generalizes that 80 percent of the cost will come from 20 percent of the estimate line items. For any
particular estimate, the significant cost drivers may vary.


Sometimes, the main cost driver may be a particular process unit of the project; other times it may be the type of process
equipment or machinery throughout the project; and still other times it may be the overall bulk material quantities or labor hours. We will examine the estimate summary and detail pages closely to ascertain which aspects of the estimate
we may want to examine in closer detail. Basically, we will examine in detail those items of the estimate that will
have the most significant cost impact if estimated incorrectly.

One review technique that is often employed is to thoroughly examine and review the estimating steps that were used
for a particular part of the estimate. We will select an area of the estimate, and ask the estimators to show us the drawings from which the quantities were generated. We will then perform a quick takeoff to see if the quantities can be verified.

 

We will then ask what the basis was for the unit material price and labor workhours. Have these been consistent throughout the estimate? What adjustments were made and why? If the answers to our questions are evasive, it may call into question the
credibility of the entire estimate, and a more thorough review of the complete estimate may be necessary. If our questions
are answered confidently, and the answers can be verified against the engineering deliverables and scope information,

then you may decide to check the rest of the estimate details in a more cursory fashion.
 

The goal of an estimate is to predict the probable cost of a project. The goal of an estimate review is to determine that a
high quality and sufficiently accurate estimate has been prepared. The review should ensure that the proper estimating
methods, procedures, techniques, data, and guidelines have been employed in the preparation of the estimate. The use of
a structured estimate review cycle and estimating review techniques will help to ensure that quality estimates are consistently
prepared which effectively support the decision making process by project main stakeholders and client.

01

DOCUMENTATION

02

COST REVIEW

03

ESTIMATE VALIDATION

04

BENCHMARK