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TOPIC: Estimate Cost - Rough Order of Magnitude, etc.

Estimate Cost - Rough Order of Magnitude, etc. 5 years 6 months ago #2082

  • Jean Reksodiputro
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Hello Cornelius and All,
I found conflicting statements regarding the Rough Order of Magnitude (ROM) Estimate and others. Which one should we follow that is correct according to PMI?

PMBOK & Rita Mulcahy:
*) ROM (initiation phase) = -50% +50%
*) Later in the project (is it referred to as Definitive Estimate?) = -10% +10%
*) Only Rita => Budget Estimate (planning phase) = -10% +25%

Andy Crowe:
*) Order of Magnitude Estimate = -50% +100%
*) Conceptual Estimate = -30% +50%
*) Preliminary Estimate = -20% +30%
*) Definitive Estimate = -15% +20%
*) Control Estimate = -10% +15%.

Please advise.

Thank you very much!
Jean R.

Re:Estimate Cost - Rough Order of Magnitude, etc. 5 years 5 months ago #2099

  • Jean Reksodiputro
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Hello Forum,
Anybody that can give some feedback please?

Thank you!
Jean R.

Re:Estimate Cost - Rough Order of Magnitude, etc. 5 years 5 months ago #2102

  • Jean Reksodiputro
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Hello Cornelius & Forum,
Here's what I'm going to use.

PMBOK:
*) ROM (initiation phase) = -50% +50%
*) Later in the project (Definitive Estimate?) = -10% +10%

Industry Standard Range (Cornelius & Rita):
*) ROM = -25% +75%
*) Budget Estimate (planning phase) = -10% +25%
*) Definitive Estimate = -5% +10%

Any feedback?

Thank you!
Jean R.

Re:Estimate Cost - Rough Order of Magnitude, etc. 5 years 5 months ago #2105

  • Jean Reksodiputro
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No feedback yet... I saw many other replies on other topics... can anybody please advise how should I approach this when there's a question related to the issue.

Thank you very much!
Jean R.

Re:Estimate Cost - Rough Order of Magnitude, etc. 5 years 5 months ago #2110

  • Cornelius Fichtner
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Jean,

Sorry. Your email arrived during my trip to Switzerland (I'm here for 3 months - so I'm still a bit jetlagged and getting settled in).

Here is an excerpt from one of our newsletters where we discuss estimation, that explains this:
There are various ways in which you can perform an estimate. Here are the most common types:

Estimation by expert judgment
Analogous Estimating
Parametric Estimating
Top-down Estimating
Bottom-up Estimating

The PMBOK Guide and the PM PrepCast both explain the concepts and approaches behind these types. For the exam you not only need to know these types but you also have to know the estimation ranges. And they are as follows: Order of Magnitude: -25% to +75%, a Budget Estimate is -10% to +25%, a Definite Estimate is -5% to +10% and a Final Estimate has a 0% range.

If you compare these numbers to the PMBOK Guide you will notice that there is a difference. The PMBOK Guide only mentions the ROM at -50% to +50% but not the other numbers. Don't be surprised. The PMBOK Guide only contains about 75% of the knowledge required for the PMP exam. The other 25% come from various other sources and the PMI does not specify exactly from where. The percentages that we have listed above are the generally accepted ranges and you can find them references both in many PMP prep books as well as on many free PMP websites. But don't be shocked if they are not in the PMBOK Guide.

And just to emphasize: When giving a quote to a customer, you will never give a single number (i.e. $10) you will always give a range ($8 - $12).

Overall I can say that these ranges are best described as "a headache". There is no authoritative source that has defined these ranges once and for all. All that PMP Exam students can do is to know the ranges from the PMBOK Guide and then learn the generally accepted ranges from other sources. Unfortunately (and there is nothing we can do about that) even the top PMP exam prep companies don't agree on the ranges. It's a headache and there is nothing that anyone can do and not even "Advil PM" will help... ;-)
Until Next Time,
Cornelius Fichtner, PMP, CSM
President, OSP International LLC

Re:Estimate Cost - Rough Order of Magnitude, etc. 5 years 5 months ago #2112

  • Jean Reksodiputro
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Hello Master Cornelius,
Thank you very much, I'm glad you're back and hope you have an excellent break there (and bring some chocolates? ;o)

Anyway,
I agree with you to refer this range as "a headache". I do understand there will be variety of opinions out there, but based on your inputs and PMBOK here's basically what I'll use. Please let me know if you agree with me that it's safe to have this assumption.

*) ROM (initiation phase) = -50% +50% (PMBOK)
or -25% +75%

*) Budget Estimate (planning phase) = -10% +25%

*) Later in the project (Definitive Estimate) = -10% +10% (PMBOK)
or -5% +10%

Thank you!
Jean R.
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