5 things to consider when building an estimate
Although technology may change, estimating methods stay, relatively, consistent. After working in various fields, as I have, you become familiar with the standard estimating methods. Each field, whether facilities, construction, advanced weapons systems development, or environmental cleanup, has unique challenges and requirements. Even within a single field, each estimate is unique.
Sometimes the challenge is selecting the right method to use. Sure, they may share the same fundamental estimating techniques; However, given the number of variables you must consider before developing your estimate, it can be difficult know which method to use. Below are just five of the most import items I consider before starting an estimate.
1What phase is the project in?
Perhaps the most important, or at least first, determining factor for selecting the estimating method, or approach, is the project phase. Where is the project in it’s life-cycle? If it is in the conceptual design phase you might consider using the Universal Factors method. This method, in it’s simplest form, works as a type of “analogy” estimating approach. If you have similar past projects in your “bottom right-hand drawer” then you may be set. Otherwise, you may need to use a Universal Factors model.
Another option, that requires only a handful of project defining parameters, is the parametric estimating method. This method uses models based on statistical analysis of multiple like projects to generate a preliminary estimate. Once you are in the construction phase, you would likely start using the Quantity Take Off method.
2What project data is available?
As they say “data is king”. That statement certainly holds true for estimating. Not only the volume, but the type of data available to you, can make all the difference in the method and accuracy of your estimate. Review the data available to you (technical or unit cost). The amount of data on hand can help you decide which method you will use, the cost drivers, and many more aspects of your estimate.
As a standard practice, I try and gather as much information and data as I can. This often means that I am pouring through boxes of paperwork trying to pull together some meaningful historical cost data to help fine-tune some estimate. Or in the case of Environmental remediation, the only piece of data you may have is the acreage of the field that might be contaminated. In this case, you would very likely use a parametric estimating method.
3What is the purpose of the estimate?
You should always keep in mind the purpose of the estimate you are developing. Is your estimate attached to a detailed bid or proposal for a potential client or is it going to be used to “cost out” one of multiple approaches to a solution for management review? If the latter, perhaps all you need is a Rough Order of Magnitude (ROM) estimate? The estimates purpose (read: audience) determines the approach you take and what attributes of your estimate you include or highlight.
4 What is your time-frame?
When you have the time (and data points), it is often best practice to develop as detailed an estimate as possible. This is especially true when estimating construction or preparing a T&M bid or proposal.
Sometimes, you may need to submit a bid on an opportunity but the lead time is too short to pull together a detailed estimate. If you often find yourself in this situation, you should consider either developing a parametric model or using an existing model. In fact, you can save an estimated 40 to 80 percent during proposal preparation by using parametric estimating in place of a “normal” bottoms-up approach¹. This is, in part, because parametric estimating is one of the most effective estimating techniques during early, conceptual design, phases. Also, parametric estimates can be prepared in a matter of minutes and adjust well to scope, technical and performance changes.
5 What estimating tools are available?
After all is said and done, it may come down to the tools you have in your toolbox. Most estimators, and I know I am in this category, are Excel aficionados. You can often find me buried in a spreadsheet somewhere. If I am pulling together a “back-of-the-envelope” estimate I will often use Excel. However, Excel has it’s limits. There are multiple tools on the market for QTO estimating that provide management capabilities over and above what Excel can offer.