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111R-20: Estimating for Long-Range Planning - As Applied for the Public Sector

111R-20: Estimating for Long-Range Planning - As Applied for the Public Sector
AACE International, March 19, 2021

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

This recommended practice (RP) of AACE International identifies special considerations that apply when estimating project costs for long-range strategic asset planning, including documenting and communicating the estimate basis. The strategic asset planning that is specifically addressed by this RP supports long-range planning for public sector organizations or similar entities that is required in order for them to better accomplish their objectives. This includes estimating as well as communicating needs and concepts that may pre-date the creation, existence, or emergence of an asset by many years, such as planning for future capacity/infrastructure. These estimates are prepared as planning-level predictions for facilities that may be constructed 10-50+ years in the future. These extreme front-end predictions are necessary for public sector organizations to determine their financial and capital strategies often decades in advance.

These highly conceptual estimates may be revisited periodically during the extended planning-level process. There is often an anchoring effect, i.e., decision-makers are biased towards initial cost estimates prepared at the beginning of a long-range planning estimating process. Subsequent cost analyses are often based on and compared to the initially prepared long-range planning estimate, sometimes ignoring significant changes in scope or strategies, and without adequate consideration of technology change and escalation over time.

These long-range planning estimates are differentiated from traditional AACE International Class 5 estimates for a near-term project where the accuracy range of -20/-50 percent to +30/+100 percent may be sufficient. Long-range planning estimates are prepared for potential facilities within a 10-50+ year strategic asset planning timeframe. It must be acknowledged that the long-range planning estimate is unlikely to be accurate, and the original scope may not be representative of the final solution and associated costs. Unpredictable scope and risk challenges over the extended long-range planning timeframe include economics, technology, availability of resources, critical infrastructure, population dynamics, regulations, organizational and asset resiliency, climate, energy, and natural influences. Clearly, costs are affected by many factors in addition to escalation.

This RP will identify special considerations and define the required project documentation and management communication necessary to provide stakeholders and end-users with clear understanding of costs and associated risks at any point of estimating process for long-range planning in order to convey the story of scope progression and corresponding costs and risks. It will examine estimating for long-range asset planning not at a point in time but as a developing portfolio of cost, best identified as an AACE International Unclassified / Class 10 estimate.

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