Scribd
Upload
75 views4 pages

Estimating Categories

1. The document discusses improving budget formulation for building projects by introducing standardized estimate categories. 2. Estimate categories would communicate the status and reliability of cost estimates based on the information available and project stage. 3. Using appropriately categorized estimates would set realistic expectations, avoid cost overruns, and reduce the need for extra funding approvals.

Uploaded by

CPittman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
75 views4 pages

Estimating Categories

1. The document discusses improving budget formulation for building projects by introducing standardized estimate categories. 2. Estimate categories would communicate the status and reliability of cost estimates based on the information available and project stage. 3. Using appropriately categorized estimates would set realistic expectations, avoid cost overruns, and reduce the need for extra funding approvals.

Uploaded by

CPittman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Estimate categories

An initiative to improve budget


formulation for building projects
Background

Estimates of cost can be produced at any time during the life of a project from initiation right
through to the settlement of the final account. However, the accuracy of the estimate will vary
greatly depending of the degree of information available, knowledge of building costs and the
skills of the estimator. Generally, as a project progresses it can be expected that the accuracy of
estimates is likely to increase.

Forward planning and program formulation usually requires estimates of cost at an early stage.
However, a budget set very early in the life of a project tends to set expectations. The first
estimate of cost is usually the most remembered, but is also the least accurate.

Risks when using estimates

To use an estimate of cost with a degree of confidence requires knowledge of what the estimate
includes and what it excludes. Without this knowledge, the user of the estimate can make
potentially risky assumptions.

If an estimate of cost is provided with no qualifications, parameters, inclusions and exclusions,


then the user may unintentionally misquote or misuse the estimate. This is particularly the case
when there is no record of when the estimate was produced and what was included in it.

The scope of works may have changed since the estimate was produced, although the user may
not be aware of this and may continue to assume the budget is adequate.

Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manage
Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advi
Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manag
Impact on stakeholders

Using an unqualified or out of date estimate can have the following impacts:

Setting false expectations


Stakeholders can be misled into believing that the funds allocated will deliver a certain scope
of works, which by necessity may change during the life of the project.

Service delivery compromises


Building to an unrealistic budget ultimately leads to compromises in design and scope which
can leave a facility unable to fully support service delivery objectives.

Delivery pressures
Expectations raised by early project estimates can lead to Project Managers being locked
into delivering a project within a budget that no longer reflects the scope of works or market
conditions.

Desired improvements

The following improvements to budgeting for building projects have been identified:

Facilitate the responsible use of building cost estimates


Using cost estimates in an informed and responsible manner reduces the likelihood of cost
overruns.

Increase the understanding of how estimates are produced and how they should be
used
Better communication and understanding throughout government will ensure that the
estimates align with the scope of works.

Encourage the reviewing and updating of estimates as projects progress


Updating estimates is good practice and reduces the risk that arises when there is a mismatch
of the scope and the estimate.

Reduce the need for extra funding approvals


Reallocating funds can disrupt the capital works program and interfere with other priorities.
Preparation of submissions and seeking approvals consumes time and resources and often
causes delays.

Introducing estimate categories

The adoption of standard categories for estimates for both the budget formulation process
and the procurement process will assist in addressing the issues previously identified in this
Note and offer stakeholders improved confidence in the accuracy of the estimates. This will
involve identifying all building cost estimates or budgets with a category (either 1, 2, 3, 4 or
5). The intention is that the category will always accompany the estimate or budget amount to
communicate the status.


Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manage
Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advi
Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manag
The category reveals basic information about how the estimate was compiled and how it should
be used.

The table at Figure 1 sets out the estimate categories that should be used for government building
projects.

Figure 1 – Estimate categories table


Category 1 Category 2 Category 3 Category 4 Category 5
Estimate Estimate Estimate Estimate Estimate
Corresponding Project Project Project Project Project
initiation Evaluation delivery delivery delivery
CWMF
(including
Stage Business Case
development)
Time of Initiation Scoping Brief Schematic Post design
estimate
Basis No formal Early concept Concept Developed Designed and
scoping concept documented
When to Use Basic Budgeting Refine budget Set final Detailed cost
budgeting project budget management
Information Similar Basic scoping Project brief Sketch design Full
used projects information drawing and
documents
Effort to Very low Low Medium High Very High
produce
estimate
Confidence Very low Low Low-Medium Medium High
level

Using estimate categories

Wherever project budgets or estimates are quoted they should be accompanied by an estimate
type.

The estimate/budget type should be quoted wherever likely project costs are disclosed including:

• budget and funding documentation


• project proposals and business cases
• Capital Works Programs
• all program and project reporting systems
• the Prequalification (PQC) System; and
• the Queensland Government Building Projects guide (Industry Guide)

Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manage
Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advi
Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manag
The use of cost ranges, e.g. $20M–$30M should also be considered for estimates/budgets of
Categories 1 and 2 to reflect the level of uncertainty inherent at the front end of the building
procurement process.

Updating estimates

Out of date budgets and estimates will be clearly visible.

Identifying an estimate with a ‘type’ acts as a time stamp on the estimate and implies a ‘use by
date’.

Project proponents have an obligation to seek updates to the estimate as a project proceeds
through the various stages of planning and procurement.

Users of estimates will also be more likely to request an update of estimated costs if they can see
that an estimate is not aligned with the status of a project.

Achieving successful implementation

Successful implementation will require the adoption of the estimate categories for the reporting of
all government building projects. Officers responsible for developing estimates should ensure that
each estimate is accompanied by a reference to the appropriate category.

For further information on this Capital Works Management Framework Policy Advice Note,
contact:
Principal Policy Manager Department of Public Works
Building Policy Unit GPO Box 2457
Brisbane Qld 4001
Telephone 07 322 45631
Fax 07 322 45498 March 2006
Email [email protected] www.build.qld.gov.au

Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manage
Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advi
Capital Works Management Framework Policy Advice Note  Capital Works Management Framework Policy Advice Note  Capital Works Manag

You might also like