Improving Early Estimates (Archived)

RT-131 Topic Summary
RT 131


A well-prepared early estimate enables businesses to make sound economic decisions. An early estimate helps to formulate execution strategies, provides a basis to plan engineering and construction, and serves as a baseline for changes.

The research team has developed a "Best Practice Guide" for the development of early estimates. The guide features processes, procedures, techniques, and checklists that have been successfully used to prepare early estimates and includes the following:

  • Team alignment and early communication is necessary to ensure a clear understanding of customer expectations. Alignment is established with the estimate kick-off meeting held between all participants and maintained through regular estimate meetings and communication.
  • Level of scope definition can determine the range of accuracy at the time the estimate is prepared. When scope definition is low, businesses can still produce accurate estimates by using good estimating practices and an experienced estimating team.
  • Appropriate tools and techniques such as Estimate Work Plans, Early Estimate Checklists, and Estimate Reviews are methods to develop and support early estimates for communication with the customer.
  • Risk assessment is a collaborative approach which requires involvement of all project stakeholders to properly assess risk and assign contingency to the base estimate. The lead estimator is typically responsible for selecting the technique of risk analysis and determining the appropriate contingency amount for a desired confidence level.
  • Continuous feedback loop is necessary to capture lessons learned during project execution for improving the accuracy of early estimates.

RT-131 developed an estimate scoring process that provides a method of assessing the driving factors and provides a basis of predicting the level of accuracy by comparing historical data in the database. Project teams can use drivers that fail to achieve the desired level of accuracy to identify opportunities for improving the estimate. Note this database is no longer supported and does not run on current platforms; however the Best Practices Guide remains a very good primer for improving early estimates.

Key Findings and Implementation Tools

1 : Quality of Estimate

The research identified 45 elements to measure the quality of an estimate, including 14 PDRI scope definition elements and 31 elements not directly related to scope definition. The complete list of 45 elements was then subdivided into eleven factor groups; through factor analysis in developing Estimate Score Program (ESP) each of the 45 elements was allocated an element weight and determines the factor weights of the eleven factor groups.  Factor group weights have relative influence the four drivers of the estimate score. (RS131-1, p. 4)
Reference: (RS131-1)

2 : Eleven Factor Groups

The factor analysis and regression analysis performed in development of the ESP identified eleven factor groups with the most impact on estimate accuracy. 

The figure below describes the eleven factors in order of significance. The most significant factor, basic process design, accounts for 25% of the estimate score therefore concludes that a comprehensive and definitive process design is critical to the accuracy of early estimates. Basic process design includes process flow sheets, heat and material balance, project schedule, capacities, equipment list, and P&IDs as the highest factors elements. (RS131-1, p. 9)

Reference: (RS131-1)

3 : Team Experience

This is the second factor of significance in the accuracy of early estimates. Extensive analysis of historical project data revealed that there is a positive correlation between estimated and actual total installed cost based on issues related to the team’s skills and experience, the estimating procedures, and scope definition. It was concluded in situations where scope definition is limited, project teams with good established estimating practices and experienced personnel were able to prepare accurate early estimates. 

The figure below illustrates the hypothesis RT-131 developed regarding the positive impacts of team experience and good procedures with various levels of scope definition. (RS131-1, p. 25)

Graphic showing effect of the team experience and procedures on estimate quality.
Reference: (RS131-1)

4 : Continuous Improvement

The Research Team identified continuous improvement and estimate feedback as an integral part of improving the accuracy of early estimates. Final project cost reports is a valuable document to capture lessons learned and develop and enhance estimating tools and techniques within an organization. The feedback loop is illustrated in the figures below. (IR131-2, p. 37)

Reference: (IR131-2)

5 : Estimate Plan

The estimate work plan is a document to guide the team in preparing accurate estimates and improving the estimating process. It identifies the work that needs to be accomplished to prepare the estimate: who is going to do it, when it is being done, and the budget for preparing the estimate. The work plan serves as a document to coordinate the estimating work and as a basis to control and maintain the estimating process. It is one of the tools and techniques used to by early estimation teams and identified in the best practice guide. The illustration below is the typical information addressed in an Estimate Work Plan. (IR131-2, Figure 4, p. 15)

Estimate Work Plan graphic (IR131-2, Figure 4, p. 16)
Reference: (IR131-2)

6 : Estimate Score Program (ESP)

This tool had the function to allow users to query the database of completed projects to identify projects against which to compare an early estimate. A Scatter Plot and Cumulative Graph are graphical views of project data returned by the query and display the Estimate Score values or Probability values and corresponding amount of contingency as a percent of the base estimate. Values are displayed based on the queried projects and chosen confidence level. Users can view the results of recommended contingency amounts given their current project estimate score. (RS131-1, p. 19)
Reference: (RS131-1)

7 : Implementation Tool #1

IR131-2, Improving Early Estimates Best Practices Guide

This guide describes the most effective ways to achieve more accurate early estimates emphasizing team alignment, project scope definition, estimate reviews, the estimate team’s experience level, assessing risk and assigning contingency.

  • This guide included the Estimate Scoring Program (ESP), which is no longer supported and does not run on current platforms.
Reference: (IR131-2)

Key Performance Indicators

Improved estimating/forecasting, Improved quality, Improved customer satisfaction

Research Publications

Qualititative Prediction of Estimate Accuracy - RS131-1

Publication Date: 03/1999 Type: Research Summary Pages: 27 Status: Archived Supporting Product

Improving Early Estimates Best Practices Guide - IR131-2

Publication Date: 09/1998 Type: Implementation Resource Pages: 45 Status: Archived Tool

Presentations from CII Events

Session - Improving Early Estimates

Publication Date: 07/1998 Presenter: Number of Slides: 35 Event Code: AC98