Presenting the Estimate

The determination of using a conceptual approach versus a detailed approach will depend on many factors: the end use
of the estimate, the amount of time and money available to prepare the estimate, the estimating tools available, and the
previous historical information available.

 

A conceptual estimating approach (capacity factored, equipment factored, parametric) requires a significant effort in data-gathering and methods development before estimate preparation ever begins. In contrast, a detailed estimating approach requires a large effort during the actual preparation of the estimate.


With either approach, the challenge for the estimator is to evaluate the unique combination of required material and
labor resources in order to prepare a cost estimate for a project to be completed in the future.

 

The use of structured estimating techniques and tools, high-quality engineering deliverables, and good historical data and pricing information, combined with estimating skill and experience, will assure that the best possible estimate is prepared. The desired end result is to prepare estimates that are well-documented, consistent, reliable, appropriate, accurate, and that support the decision-making process for the project.
 

Estimating is obviously a vital component to project success. Estimates are used not only to establish project budgets, but
also to provide accurate information to support scheduling, cost monitoring, and progress measurement of a project during execution.

The method in which you present an estimate to your customer (internal company management or external client) is extremely important. An estimate should never be presented as just a list of numbers, or estimating calculations. A number (or even a range of numbers) is meaningless without the supporting information that describes what the number represents, and, sometimes even more importantly, what it doesn’t represent. In general, a complete estimate report will include the following:


        • basis of estimate (BOE),
        • estimate summaries,
        • estimate detail,
        • estimate benchmarking report,
        • estimate reconciliation report, and
        • estimate backup.

Lastly, all estimate backup should be compiled and available. This information may not need to be presented to the estimate owner (Client), but should be available if questions arise. This will include all notes, documentation, drawings, engineering deliverables, and vendor quotes, etc., that were used in preparation of the estimate.

The basis of estimate is a critically important document in describing the scope that is represented by the estimated cost and in conveying all the assumptions that have been embedded into the estimate. A well-written BoE document can go a long ways towards providing confidence in the estimate itself.

The various parties will all have different ways in which they want to see the estimate summarized, depending on the classification and end-use of the estimate being prepared. It is very important that every value appearing on an estimate summary be easily tracked back to the estimate detail.

The Estimate Detail shows all of the individual cost used in preparing the estimate. For a conceptual estimate, a page of calculations; however, for a large detailed estimate it may include hundreds of pages of individual line items. This
report is also prepared according to the project WBS.

An estimate benchmarking report will often be included. It should show benchmark information and metrics with other similar projects. For example, for a building estimate, this report may show the cost per square meter of building area ($/m2) compared to recent similar projects.

The Estimate Detail shows all of the individual cost used in preparing the estimate. For a conceptual estimate, a page of calculations; however, for a large detailed estimate it may include hundreds of pages of individual line items. This
report is also prepared according to the project WBS.

An estimate reconciliation report should also be prepared that reconciles the current estimate with any previous estimates prepared for the same project. This report should identify the cost differences dues to changes in scope, changes in direct & indirect costs and changes in contingencies risk, etc.