Cost Estimates over the Project Life Cycle
Planning estimates are normally created for a proposed job or project before the conceptual design is completed. Planning estimates are used to set cost estimates for early project work involving scope determination and feasibility study efforts and for a preliminary budget estimate of the total project costs.
Planning estimates are based on drawing analogies from past cost experience with similar projects, where available. Rough Order of Magnitude estimates are planning estimates used in the absence of previous cost experience.
Planning estimates are only approximations. It is imperative that the estimator fully describe and document the basis of the estimate, including how the estimate was prepared and any items specifically excluded from the estimate.
Budgetary or Conceptual Design Estimates
The fundamental purposes of a budgetary or conceptual design estimate are:
- Ensuring that the project offers sufficient benefit for the estimated cost;
- Developing a reliable project cost estimate consistent with the proposed schedule;
- At a minimum, establishing baseline project costs at the phase summary level; and
- Serving as the basis for project funding.
The conceptual estimate will be based on any available conceptual design information, such as sketches and specifications.
Preliminary Design or System Design Estimates
The preliminary design and system design estimates are intermediate estimates created for these purposes:
- Verifying that the newly available design details still support the conclusion that the revised cost budget remains less than the total project funding; and
- Breaking down the cost budget to the work package level for the upcoming phase, to facilitate more complete and accurate cost monitoring and control.
Preliminary design estimates are based on the specifications that have just been developed.
Upon approval of system design and during subsequent execution phases, system design estimates become definitive estimates. They are updated during project monitoring and control to predict revised project completion dates and costs.