In EPC (Engineering, Procurement, and Construction) projects, estimation levels progress from broad conceptual estimates (e.g., Order of Magnitude, Class 5) to highly detailed definitive estimates (e.g., Bid/Control, Class 1) as project scope and definition increase, generally corresponding to the project’s lifecycle gates (FEP 1 to FEP 3). Key methods include Analogous (historical data), Parametric (formulas/unit rates), Three-Point (optimistic, pessimistic, most likely), and Bottom-Up (detailed component summation), becoming more complex and accurate as the project advances.
Here are the common levels of estimation, often classified by accuracy and project phase:
Early Stage Estimates (Conceptual/Screening)
- Order of Magnitude/Conceptual (Class 5): A very early, rough estimate for feasibility studies or initial screening, often using factor estimation based on limited scope definition.
- Accuracy: Wide range, e.g., -50% to +100%.
- Method: Analogous or factor-based.
Mid-Stage Estimates (Feasibility/Budgetary)
- Feasibility/Study (Class 4): Used for preliminary budget approval and developing the project scope.
- Accuracy: Better than Class 5, e.g., -30% to +50%.
- Method: Parametric, based on developed key parameters.
Detailed Stage Estimates (Authorization/Control)
- Budget Authorization (Class 3): Prepared during basic engineering for funding approval and Final Investment Decision (FID).
- Accuracy: More precise, e.g., -20% to +30%.
- Method: More detailed, potentially using some bottom-up elements.
- Control/Bid (Class 2): Developed from detailed engineering (like Material Take-Offs) and used for cost control, vendor bidding, and construction planning.
- Accuracy: Within -15% to +20%.
- Method: Incorporates vendor quotes and detailed design data.
Final Stage Estimate
- Definitive (Class 1): The most accurate estimate, developed with full contractor consultation, detailed engineering, and procured vendor data for procurement and tight execution control.
- Accuracy: High precision, e.g., -10% to +15%.
- Method: Exhaustive bottom-up estimation, often used for cost baseline and control.
Common Estimation Techniques Used Across Levels
- Analogous Estimating: Uses data from past, similar projects.
- Parametric Estimating: Uses statistical relationships and unit rates (e.g., cost per meter of pipe).
- Bottom-Up Estimating: Sums the costs of individual, detailed work packages.
- Three-Point Estimating: Calculates a weighted average of optimistic, pessimistic, and most likely scenarios for better accuracy.
- Expert Judgment: Relies on the experience of subject matter experts.