Basis of Estimate (34R-05)

AACEInternationalRecommendedPracticeNo.
34R05
BASISOFESTIMATE
TCMFramework:7.3CostEstimatingandBudgeting
Rev.May2,2014
Note:AsAACEInternationalRecommendedPracticesevolveovertime,pleaserefertowww.aacei.orgforthelatestrevisions.
Contributors:
Disclaimer: The opinions expressed by the authors and contributors to this recommended practice are their own
anddonotnecessarilyreflectthoseoftheiremployers,unlessotherwisestated.
StephenM.JacobsonCCC
ToddPickett,CCCCEP(Author)
CarltonW.Karlik,PECEP
PeterR.Bredehoeft,Jr.CEP
ChristopherL.Kinney
TedA.Downen
DonaldF.McDonald,Jr.PECCEPSP
LarryR.Dysert,CCCCEP
BernardA.PietlockCCCCEP
BruceG.Elliott,CCC
JohnK.Hollmann,PECCECEP
RichardA.Selg,CCE
CopyrightAACEInternational
AACEInternationalRecommendedPractices
AACEInternationalRecommendedPracticeNo.34R05
BASISOFESTIMATE
TCMFramework: 7.3CostEstimatingandBudgeting
May2,2014
PURPOSE
AACEInternationalsTotalCostManagement(TCM)Frameworkidentifiesabasisofestimate(BOE)documentasa
required component of a cost estimate. As a recommended practice (RP) of AACE International, the template
outlinedinthefollowingsectionsprovidesguidelinesforthestructureandcontentofacostbasisofestimate.
IntheTCMFramework,theBOEischaracterizedastheonedeliverablethatdefinesthescopeoftheproject,and
ultimatelybecomesthebasisforchangemanagement.Whenpreparedcorrectly,anypersonwithcapitalproject
experience can use the BOE to understand and assess the estimate, independent of any other supporting
documentation. A wellwritten 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,costrisksandopportunities,andanydeviationsfromstandardpractices.In
additiontheBOEisadocumentedrecordofpertinentcommunicationsthathaveoccurredandagreementsthat
havebeenmadebetweentheestimatorandotherprojectstakeholders.
Awellpreparedbasisofestimatewill:
Documenttheoverallprojectscope.
Communicate the estimators knowledge of the project by demonstrating an understanding of scope and
scheduleasitrelatestocost.
Alerttheprojectteamtopotentialcostrisksandopportunities.
Providearecordofkeycommunicationsmadeduringestimatepreparation.
Providearecordofalldocumentsusedtopreparetheestimate.
Actasasourceofsupportduringdisputeresolutions.
Establishtheinitialbaselineforscope,quantitiesandcostforuseincosttrendingthroughouttheproject.
Providethehistoricalrelationshipsbetweenestimatesthroughouttheprojectlifecycle.
Facilitatethereviewandvalidationofthecostestimate.
This RP is intended to be a guideline, not a standard. It is understood that not all organizations that prepare
estimatesemploythesameprocessesandpractices,andtherefore,mayopttousethisinformationeitherinpart
orinitsentirety.
RECOMMENDEDPRACTICE
TheprimaryintentofthisRPistoprovideaguidelineforthetopicsandcontentstobeincludedintypicalBOE.
However,beforedescribingthetemplatecontentsthereareafewpointsofsignificanceworthnoting.Abasisof
estimateshould:
Befactuallycomplete,butconcise.
Beabletosupportfactsandfindings.
Identifyestimatingteammembersandtheirroles.
Describethetools,techniques,estimatingmethodology,anddatausedtodevelopthecostestimate.
Identifyotherprojectsthatwerereferencedorbenchmarkedduringestimatepreparation.
Bepreparedinparallelwiththecostestimate.
Establishthecontextoftheestimate,andsupportestimatereviewandvalidation.
34R05:BasisofEstimate
2 of7
May2,2014
Qualify any rates or factors that are referenced either in the estimate or BOE; e.g. productivity can be
expressedaseitherunits/time(linearfeet/hour)ortime/units(hours/linearfoot).
ThefollowingdescribesthesuggestedtopicsandcontentsincludedinatypicalBOE.
Purpose
In this initial sectionof a basis of estimate, the estimator should provide abrief and concise description for the
totalproject.Thetypeofprojectshouldbeidentified(i.e.,newfacilities,additiontoexisting,revampofexisting,
etc.),aswellasthetypeandcapacityoftheprocessunits,thelocationofthefacility,andtheoveralltimingofthe
project.
ProjectScopeDescription
Thissectionoftheestimatebasisshouldbeorganizedtocorrespondwiththeprojectsworkbreakdownstructure
(i.e., plant, building, floor, etc.). A semidetailed description of the scope of work should be provided for each
major segment of the project. Identify any major pieces of process equipment or components. Its also good
practicetoindicatetheprimarytradesthatwillbeinvolvedwiththeproject.Beasthoroughasnecessary,without
beingoverlydescriptive,soastoadequatelyexplainthescopeofworkbeingestimated.
Methodology
The BOE should indicate the primary estimating methodology used to prepare the cost estimate. This should
includedocumentationoftheuseofcostresources,historicaldataandprojectbenchmarking.Documentingthe
levelofeffortormanhoursusedinpreparationoftheestimateisalsorecommended.
EstimateClassification
TheAACEInternationalestimateclassificationshouldbeidentified,alongwithreasonsorjustificationusedinthe
selectionoftheestimateclassification.
DesignBasis
Companystandardswilltypicallyspecifythetechnicalandprojectinformationrequiredfortheclassificationofthe
estimatethatisbeingprepared.Inthissection,theestimatorwillidentifythetypesandstatusofengineeringand
design deliverables that were provided to prepare the estimate including any design basis assumptions. Two
attachmentstotheestimatebasisshouldbereferenced:1)anestimatedeliverableschecklistthatisalignedwith
thecompanysstandardprojectprocess;and2)alistingofallengineeringdrawings(includingrevisionnumberand
date), a well as other design information, such as specifications, equipment lists, units of measure (imperial vs.
metric),etc.
Inadditionitmaybeusefultodocumentspecificquantitymetricsforparticularprojects,suchasoverallexcavation
and backfill quantities, overall concrete volumes, overall piping quantities, etc. These may be organized by
facilities,processtrainormanufacturingunit.
Ifmaterialtakeoffs(MTOs)areprovidedtotheestimator,identifyspecificallywhodevelopedtheMTOsandthe
methodologyused.

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