Section E Estimating and Contingency

An estimate should comprise of the following:

  • A description of the project scope
  • A list of information on which the estimate is based
  • The proposed contract strategy
  • The assumed installation techniques
  • The project schedule milestones
  • The currency exchange rates used and estimated inflation
  • The assessment of project risks and contingency
  • The base date of the estimate and its estimated accuracy.

The principles of estimating are the same for all disciplines, and it involves a number of distinctly different components:

  • A database
  • An algorithm
  • The effect of people's attitudes
  • Definition of scope
  • Definition of method of execution
  • Identification of the risks.

The estimating approach depends on:

  • The status of the estimate basis (see 2c below)
  • The end use of the estimate:
    • funding of the project
    • preparation of tender documents
    • tendering for project
    • finalizing project funds
  • The need for details
  • Previous historical data
  • The tools available
  • The time and budget available for preparing the estimate.

This last item is perhaps the overriding determinant. If a senior executive asks for an ‘off the cuff’ number, it could be anything from +/–50 per cent to +/–100 per cent, depending on our experience and ability to interpret the crude project description. The problem is that the first number quoted is always remembered. Consequently, one should quote a range. However, if we are allowed to spend £500,000, and have three months, we could probably ...

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