Estimate Classification 1

[TangoCleveland]

I was in the Cost Engineering field many years ago, and there was a standard breakdown of estimate classification by available data vs. accuracy. For example, an order-of-magnitude, +- 50%, was for a factored estimate. The tightest class was a "definitive" estimate, usually +- 5%, when most project details were known. Our current customer is trying to hold us to +-3% accuracy on design/construction bids for all size projects, from $2,500 (yes, two thousand, five hundred dollars), on up to several million dollars.

Could someone please update me on the accuracy classifications of cost estimates? Does anyone work where +-3% accuracy on estimates is common?

Our current customer is an organization within the US Government.

Larry

 

[jalvarez]

Larry:
I will give you a summary of what I was using according the directives of a company I used to work for:
- Global, pre-planning purpose, order of magnitude: +/-45%
- Company Planning, next year budget, etc.: +/-20%
- Final approval for each single project: +/-10%
- Detailed, current: +/-5%
This applies to projects under 1MMU$S (one million).
Each one of these levels have a specific scope. I mean, what is supposed to be included for each level, in terms of:
* Soil - civil work.
* Preliminary / Engineering sketches (Process descriptions).
* Piping (preliminary, sketchs, final engineering, specs)
* Instrumentation (from preliminary to detailed)
* Electricity (same)
* Main equipment (preliminary list, preliminary design, final design)
* Engineering hours...

I don't know if I'm replying what you expected, if you like more details I can do it, no charges!
Finally, 3% accuracy is not so common, but you know, you can receive any kind of commands nowadays... If you are asked and paid for a cost estimation of that level, you must be very sure that:
-- the project scope has been agreed and frozen,
-- the Detail Engineering has been finished and approved,
-- major equipment has been committed,
-- and Construction contractor has been, at least, deeply consulted.
If not, any Cost Estimation would be risky.
One question I should ask before all this wording: Your's is a grass root, an expansion, a medium size Project?
Good luck, have a safe day.
J.Alvarez

 

[TangoCleveland]

J.,

Thanks for the information. It's pretty much as I recalled, and the details are helpful. Our projects are at a research facility that dates from the 1940's, and most of the construction deals with control system upgrades and piping/valve modifications. Scope creep is very hard to control, but we're getting better at it.

We're starting on a new Support Services Contract, so now is the time to get a good cost control program set up.

Thanks again!

Larry