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Within seconds of answering the phone, those ominous words were muttered by the project manager, "do you remember that estimate you did for me a few months ago? Well the project is way over budget." Your immediate reaction is one of impending doom, but your anguish quickly disappears as you realize that you have nothing to worry about—your estimates are always expertly prepared. Each and every one of your estimates contains appropriate detail, is sufficiently supported by history, and most importantly, is accompanied by a well documented Basis of Estimate (BOE).

You soon discover that instead of being months old, the estimate in question was actually prepared well over a year prior to the phone call; and with a little effort you easily locate all of the documentation that was safely tucked away in a project estimate file. Much to your relief, everything is there, including all of the technical documents, applicable project plans and schedules, and, of course, the basis of estimate.

A meeting is quickly convened to review the basis of estimate and to reconcile the estimate with the project's actual execution and costs. Discrepancies and warning flags appear almost immediately. Scope has changed and different drawings were used for construction, alternate subcontractors were employed, and the quote for a major piece of equipment significantly differed from that used in the estimate. All of this had been well documented in the basis of estimate, but had been ignored during project execution. Someone had not done their job, but fortunately it wasn't the estimator.

In this paper, I will describe in detail the content and layout of a properly prepared basis of estimate. Keeping in mind that projects vary in value, complexity, intent, and nature, I will discuss how the BOE should be prepared on a fit-for-use basis and the amount of effort that should be expended during its preparation. A general outline of a BOE will also be provided that can be used as a template for almost any industrial or commercial application.



Download the full paper as a PDF-document.