What makes a good construction estimate?

Clear identification of task

Estimator must be provided with the project description, ground rules, assumptions, technical and performance characteristics. The estimate’s constraints and conditions must be clearly identified to ensure the preparation of a well-documented estimate.

Broad participation in preparing estimates

All players / constituencies should be involved in deciding needs and requirements and in defining parameters and other characteristics.

Availability of valid data

Multiple sources of suitable, relevant, and available data should be used.  Data should be independently verified for accuracy, completeness, and reliability. Relevant, historical data should be used from similar systems to project costs of new systems. The historical data should be directly related to the requirements.

Standardized structure for the estimate

A standard work breakdown structure, as detailed as possible, should be used, refining it as the cost estimate matures and the system becomes more defined.  The standardized structure helps ensure that no portions of the estimate are omitted and makes it easier to make comparisons to similar project.

Provision for program uncertainties

Uncertainties should be identified and allowance developed to cover the cost effect.  Known costs should be included and unknown costs should be allowed for.

Recognition of inflation

The estimator should ensure that economic changes, such as inflation, are properly and realistically reflected in the life-cycle cost estimate.

Recognition of excluded costs

All costs associated with a system should be included; if any cost has been excluded, it should be disclosed and given a rationale.

Independent review of estimates

Conducting an independent review of an estimate is crucial to establishing confidence in the estimate. The independent reviewer should verify, modify, and correct an estimate to ensure realism, completeness, and consistency.

Revision of estimates for significant program

Estimates should be updated to reflect changes in a system’s design requirements. Large changes that affect costs can significantly influence program decisions.

Adapted from GAO Cost Assessment Guide, 2007

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