Start with the decision the estimate must support
An estimate for screening alternatives does not need the same detail as a bid, funding request or control baseline. State the decision, the project phase, the expected accuracy range and the date basis before calculating.
Define scope and boundaries
Describe the deliverable, included work, location, schedule, interfaces, quantities, performance requirements and exclusions. A missing scope boundary often becomes a missing cost element.
Typical cost groups
- Labour hours and rates
- Materials, equipment and software
- Subcontracts and specialist services
- Mobilization, logistics, permits and testing
- Project management and other indirect support
- Escalation, contingency and management reserve where applicable
- Operations, maintenance, replacement and disposal for lifecycle decisions
Choose methods that match the information
| Method | Useful when | Main caution |
|---|---|---|
| Analogous | A comparable completed project exists | Normalize size, time, location and scope |
| Parametric | A cost relationship can be expressed per unit | Validate the range where the relationship applies |
| Bottom-up | Work packages and quantities are defined | Can omit integration and indirect work |
| Three-point | Uncertainty needs to be represented | Inputs still require evidence and judgment |
Document the basis
Record source dates, currency, price level, labour assumptions, productivity, escalation, taxes, exclusions, risk treatment and who prepared and reviewed the estimate. This basis of estimate is part of the estimate, not optional paperwork.
Test and communicate uncertainty
Identify the assumptions that move the total most. Present a range or confidence discussion that matches estimate maturity. Show the base estimate separately from contingency so reviewers can understand both expected work and uncertainty.