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87R-14: Cost Estimate Classification System - As Applied for the Petroleum Exploration and Production Industry

87R-14: Cost Estimate Classification System - As Applied for the Petroleum Exploration and Production Industry
AACE International, March 10, 2015

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

As a recommended practice (RP) of AACE International, the Cost Estimate Classification System provides guidelines for applying the general principles of estimate classification to project cost estimates (i.e., cost estimates that are used to evaluate, approve, and/or fund projects). The Cost Estimate Classification System maps the phases and stages of project cost estimating together with a generic project scope definition maturity and quality matrix, which can be applied across a wide variety of process industries.

This addendum to the generic recommended practice (17R‐97) [2] provides guidelines for applying the principles of estimate classification specifically to project estimates in the petroleum exploration and production industry. This addendum supplements the generic recommended practice by providing:
• A section that further defines classification concepts as they apply to the petroleum exploration and production industry.
• A section on the geopolitical nature and investment regulation of petroleum exploration and production projects that impact the estimating process and its basis definition deliverables.
• A chart that maps the extent and maturity of estimate input information (project definition deliverables) against the class of estimate.

As with the generic RP, the intent of this addendum is to improve communications among all of the stakeholders involved with preparing, evaluating, and using project cost estimates, specifically for the petroleum exploration and production industry.
The overall purpose of this recommended practice is to provide the petroleum exploration and production industry a project definition deliverable maturity matrix, which is not provided in 17R‐97. It also provides an approximate representation of the relationship of specific design input data and design deliverable maturity to the estimate accuracy and methodology used to produce the cost estimate. The estimate accuracy range is driven by many other variables and risks, so the maturity and quality of the scope definition available at the time of the estimate is not the sole determinant of accuracy; risk analysis is required for that purpose.

This document is intended to provide a guideline, not a standard. It is understood that each enterprise may have its own project and estimating processes and terminology, and may classify estimates in particular ways. This guideline provides a generic and generally acceptable classification system for the petroleum exploration and production industry that can be used as a basis to compare against. This addendum should allow each user to better assess, define, and communicate their own processes and standards in the light of generally accepted cost engineering practice.

As a final note regarding purpose, users must be aware of the industry’s well documented history of challenges with overruns of budget authorization, appropriation, or funding estimates. An intent of this RP is to help improve upon past performance.

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