Cost Estimate Accuracy

[jagermeister5]

Does anyone have a reference to an accepted classification system for various types of cost estimates? For instance, a Class ?? cost estimate would be used for conceptual planning and has an accuracy of +-30%. A Class ?? cost estimate is for a final design and has an accuracy of +-5%. Etc....

Thanks.

 

[Ron]

jagermeister5....You should consider differentiating between what you are calling a "cost estimate" and an engineering "opinion of cost". Which do you want?

An engineering opinion of cost carries a lower liability than a "cost estimate". A cost estimate is considered to be just that and is expected to be relatively accurate, but fortunately I don't know that there has been a quantification on that range in the courts. It is generally accepted that a cost estimate will be within about 10% of the cost.

An opinion of cost is usually qualified heavily and may vary 25%.

If you are a design or consulting engineer, I would suggest that you provide an engineering opinion of cost and leave the cost estimate to the contractors willing to actually contract for that amount.

 

[mwkjax]

I work in the Federal Governemnt and we use RS Means extensively. Means breaks estimates down like this;

Order of Magnitude Estimate +/- 20%
Square Foot or Cubic Foot Estimate +/-15%
System Estimate +/- 10%
Unit price estimate +/5%

I know there must be other conventions out there, but I haven't had any experience with them.

 

[Maury]

Ron's suggestion to refer to your estimate as Engineer's Opinion of Probable Cost is right on, but I would never committ to a certain accuracy %. That's to much liability. I let the form of the document imply the accuracy. A preliminary estimate would have fewer items, describing very general work areas, rounded off, and would include a large contingency. As the the project is better defined, later estimates would be more detailed, with smaller contingency amounts. It's essential to be constantly aware of how what you say or write might be used against you if a project goes bad.

 

[Ron]

Maury...good advice.....Every Word Counts!

 

[jheidt2543]

Regarding cost estimate accuracy, take a look at the bid tabs for a few of your projects bid recently. Check the % difference between the first and second bidder and then the % difference between the low and high bidders. For a well documented set of plans and specifications the % difference between the low and second bidder is "usually" only a couple of percent apart. We have also all seen the difference between the low and high bidder be as much as 25% or more.

The contractors that submitted those bids live and die by their ability to estimate the cost of a project, yet look at the difference between their bids! They all want the job at the highest possible number, but they can't get it unless they are the low bidder and most of them are good, responsible contractors (or they wouldn't be bidding your jobs right?).

I have two points:

First, it is foolish to think that an architect's or engineer's budget is going to be "accurate" when the guys who bid for a living can't get close to each other. How many tie bids do you see? The A/E budget may be a necessary part of the process, but don't count on it being accurate. I actually had an architect refuse to disclose his budgets because he felt contractors would use it to base their bids on - honest!

Secondly, a good measure of how well drawn and documented your project is, is how close the bids are low to high bidder. IMHO, if you want to score yourself, keep track of the % standard deviation of the bids on your projects, the smaller it is, the better you are doing.

 

[Burr]

Obviously, cost estimates are subjective. To provide some objectiveness, I add to my cost estimate a paragraph descibing my assumptions. For example, Lump Sum-SWAG or RSMeans unit est #, etc. I then provide what I believe to be a percentage accuracy estimate (i.e- guess) based on these assumptions. The true accuracy of your estimate is based on the experience you have with the subject. Find an expert to review your assumptions in the area that will grossly affect your bottom line. Good Luck!

 

[cvg]

As a consulting engineer, I always try not to be the "low bidder". It can be difficult to explain to your client why all the bids he received for the project are more than your estimate (opinion), and even more difficult to explain to the city council / board when you have to go back to the well for more funding...

 

[KRSServices]

This is not standardized....just locally accepted and practiced/understood.

Class A - Pre-tender estimate - 5%
Class B - Mid Design - 10% to 15%
Class C - Preliminary/Predesign - 20%
Class D - Conceptual - 25% or designers level of comfort.

KRS Services

http://www.krs-services.com

 

[cvg]

For most public works projects in this region, engineers estimate (opinion) at bid MUST be within 10% of the low bidder, otherwise the owner MAY reject all the bids and start over.