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34R-05: Basis of Estimate

34R-05: Basis of Estimate
AACE International, May 2, 2014

Price: $0 (Member) / $100 (Non-Member)

AACE International’s Total Cost Management (TCM) Framework identifies a basis of estimate (BOE) document as a required component of a cost estimate. As a recommended practice (RP) of AACE International, the template outlined in the following sections provides guidelines for the structure and content of a cost basis of estimate.

In the TCM Framework, the BOE is characterized as the one deliverable that defines the scope of the project, and ultimately becomes the basis for change management. When prepared correctly, any person with capital project experience can use the BOE to understand and assess the estimate, independent of any other supporting documentation. A well-written BOE achieves those goals by clearly and concisely stating the purpose of the estimate being prepared (i.e. cost study, project options, funding, etc.), the project scope, pricing basis, allowances, assumptions, exclusions, cost risks and opportunities, and any deviations from standard practices. In addition the BOE is a documented record of pertinent communications that have occurred and agreements that have been made between the estimator and other project stakeholders.

A well prepared basis of estimate will:
• Document the overall project scope.
• Communicate the estimator’s knowledge of the project by demonstrating an understanding of scope and schedule as it relates to cost.
• Alert the project team to potential cost risks and opportunities.
• Provide a record of key communications made during estimate preparation.
• Provide a record of all documents used to prepare the estimate.
• Act as a source of support during dispute resolutions.
• Establish the initial baseline for scope, quantities and cost for use in cost trending throughout the project.
• Provide the historical relationships between estimates throughout the project lifecycle.
• Facilitate the review and validation of the cost estimate.

This RP is intended to be a guideline, not a standard. It is understood that not all organizations that prepare estimates employ the same processes and practices, and therefore, may opt to use this information either in part or in its entirety.

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