Budget Estimates.

1. Project Management
Key Concepts

2. Cost Estimates

3. What is it?
In project management you may need to estimate the cost of a
work package, activity, or project as a whole. Knowing the types of
cost estimates you can make (from easy and inaccurate to more
difficult and accurate) will help you budget your project.
Cost Estimates

4. Five Types of Cost Estimates:
1. Order of Magnitude Estimate
2. Preliminary Estimate
3. Budget Estimate
4. Definitive Estimate
5. Final Estimate
Cost Estimates

5. Rough Order of Magnitude Estimate or “ROM”
-25% to +75%
• A “ballpark” estimate used to provide a
starting estimate to move forward
• A top-down estimation approach
• Use of previous expert knowledge and
experience
• Not a great deal of time is spent to develop
the ROM estimate
Cost Estimates

6. Preliminary Estimate
-15% to +50%
• Top down estimation approach
• Use of analogous estimation techniques
will help
Cost Estimates

7. Budget Estimate
-10% to + 25%
• Also a top down estimation approach
• Use of analogous estimation techniques
helps provide a slightly more accurate
estimate than the ROM estimate (e.g.,
referencing previous similar types of
projects for effort)
Estimates

8. Definitive Estimate
-5% to +10%
• A bottom-up estimation technique that
requires a decomposition of work
• Generally performed during the planning
phase and maintained through the
remainder of the project
• This is the most time consuming estimation
effort of the three listed
Estimates

9. Final Estimate
0%
• Used when work or a contract is about to
proceed, or when a project is complete (as
there is no more variation between
planned and actual cost)
Estimates