Level:
Basic
TCM Section(s):
7.3. Cost Estimating and Budgeting
7.6. Risk Management
Venue: 2022 AACE International Conference & Expo
Abstract: This paper is intended to provide an introduction to understanding estimate quality and its relationship to accuracy. It is recommended that the reader continue the learning process through study of the many supporting AACE documents available (see the References section and AACE website).
Understanding true estimate accuracy is critical in determining if the estimate meets client expectations and is suitable for the intended purpose. This paper examines and discusses the foundations of estimate accuracy, and common misrepresentations and misconceptions of it. A strong understanding of the foundations of estimate accuracy enables the estimate reviewer or recipient to better understand an estimates true accuracy.
Some incorrect practices to be examined are: creation of deliverables to estimating based on conjecture instead of sound engineering design; incorrect use and presentation of historical data; assumptions used in place of a sound execution plan; incorrect use of factors and allowances; improper understanding of uncertainty and contingency; and a lack of supporting benchmarking.
This paper will also examine key contributors to desired estimate accuracy. A proper understanding of the key drivers of estimate accuracy guides the estimate developer to successful practices that will result in the best possible (accurate) outcomes. For the estimate recipient, the proper understanding of the foundations of good estimate accuracy allows early (and comparatively inexpensive) identification and correction of deviations from best practices that contribute to poor accuracy.
The reader will understand that while a few minor inaccuracies in an estimate may not have a significant impact on the overall accuracy, a wholesale disregard of the need to reduce uncertainty in the estimate by the many parties providing input will lead to grossly inaccurate project cost estimates.
The author is drawing from previous work experiences.
TCM Section(s):
7.3. Cost Estimating and Budgeting
7.6. Risk Management
Venue: 2022 AACE International Conference & Expo
Abstract: This paper is intended to provide an introduction to understanding estimate quality and its relationship to accuracy. It is recommended that the reader continue the learning process through study of the many supporting AACE documents available (see the References section and AACE website).
Understanding true estimate accuracy is critical in determining if the estimate meets client expectations and is suitable for the intended purpose. This paper examines and discusses the foundations of estimate accuracy, and common misrepresentations and misconceptions of it. A strong understanding of the foundations of estimate accuracy enables the estimate reviewer or recipient to better understand an estimates true accuracy.
Some incorrect practices to be examined are: creation of deliverables to estimating based on conjecture instead of sound engineering design; incorrect use and presentation of historical data; assumptions used in place of a sound execution plan; incorrect use of factors and allowances; improper understanding of uncertainty and contingency; and a lack of supporting benchmarking.
This paper will also examine key contributors to desired estimate accuracy. A proper understanding of the key drivers of estimate accuracy guides the estimate developer to successful practices that will result in the best possible (accurate) outcomes. For the estimate recipient, the proper understanding of the foundations of good estimate accuracy allows early (and comparatively inexpensive) identification and correction of deviations from best practices that contribute to poor accuracy.
The reader will understand that while a few minor inaccuracies in an estimate may not have a significant impact on the overall accuracy, a wholesale disregard of the need to reduce uncertainty in the estimate by the many parties providing input will lead to grossly inaccurate project cost estimates.
The author is drawing from previous work experiences.