ASTM E2516-06
(Classification)Standard Classification for Cost Estimate Classification System
Standard Classification for Cost Estimate Classification System
SIGNIFICANCE AND USE
Use of this classification will improve communication among all the stakeholders involved with preparing, evaluating, and using cost estimates.
The various parties that use cost estimates often misinterpret the quality and value of the information available to prepare cost estimates, the various methods employed during the estimating process, the accuracy level expected from estimates, and the level of risk associated with estimates.
This classification applies the level of project definition as the primary characteristic for determining an estimate’s classification.
Using this classification will help those involved with project estimates to avoid misinterpretation of the various classes of cost estimates and to avoid their misapplication and misrepresentation. Improving communications about estimate classifications reduces business costs and project cycle times by avoiding inappropriate business and financial decisions, actions, delays, or disputes caused by misunderstandings of cost estimates and what they are expected to represent.
This classification is intended to be generic and so provide a system for the classification of cost estimates in any industry.
Estimate classifications provide valuable additional reporting information when used as an adjunct to Practice E 1804.
SCOPE
1.1 This classification provides a generic classification system for cost estimates and provides guidelines for applying the classification to cost estimates.
1.2 This classification maps the phases and stages of cost estimating to a generic maturity and quality matrix, keyed to a level of project definition, that can be applied across a wide variety of industries.
1.3 The Cost Estimate Classification System has been developed in a way that:
1.3.1 provides a common understanding of the concepts involved with classifying cost estimates;
1.3.2 defines and correlates the major characteristics used in classifying cost estimates, and;
1.3.3 uses the degree of project definition as the primary characteristic used to categorize estimate classes.
General Information
Relations
Standards Content (Sample)
NOTICE: This standard has either been superseded and replaced by a new version or withdrawn.
Contact ASTM International (www.astm.org) for the latest information
Designation: E2516 – 06
Standard Classification for
,
1 2
Cost Estimate Classification System
This standard is issued under the fixed designation E2516; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope Estimate Classification System
AACE International 18R-97 Recommended Practice: Cost
1.1 This classification provides a generic classification sys-
Estimate Classification System: As Applied in Engineer-
tem for cost estimates and provides guidelines for applying the
ing, Procurement, and Construction for the Process Indus-
classification to cost estimates.
tries
1.2 This classification maps the phases and stages of cost
estimating to a generic maturity and quality matrix, keyed to a
3. Terminology
level of project definition, that can be applied across a wide
3.1 Defintions—For definitions of terms used in this prac-
variety of industries.
tice, refer to Terminology E833 and Terminology E631.
1.3 The Cost Estimate Classification System has been
developed in a way that:
4. Significance and Use
1.3.1 provides a common understanding of the concepts
4.1 Use of this classification will improve communication
involved with classifying cost estimates;
among all the stakeholders involved with preparing, evaluat-
1.3.2 defines and correlates the major characteristics used in
ing, and using cost estimates.
classifying cost estimates, and;
4.2 The various parties that use cost estimates often misin-
1.3.3 uses the degree of project definition as the primary
terpret the quality and value of the information available to
characteristic used to categorize estimate classes.
prepare cost estimates, the various methods employed during
the estimating process, the accuracy level expected from
2. Referenced Documents
estimates, and the level of risk associated with estimates.
2.1 ASTM Standards:
4.3 This classification applies the level of project definition
E631 Terminology of Building Constructions
as the primary characteristic for determining an estimate’s
E833 Terminology of Building Economics
classification.
E1804 PracticeforPerformingandReportingCostAnalysis
4.4 Using this classification will help those involved with
During the Design Phase of a Project
project estimates to avoid misinterpretation of the various
2.2 Other Standards:
classes of cost estimates and to avoid their misapplication and
ANSI Z94.2-1989 Industrial Engineering Terminology:
4 misrepresentation. Improving communications about estimate
Cost Engineering
classifications reduces business costs and project cycle times
AACE International 17R-97 Recommended Practice: Cost
by avoiding inappropriate business and financial decisions,
actions, delays, or disputes caused by misunderstandings of
cost estimates and what they are expected to represent.
This specification is under the jurisdiction of ASTM Committee E06 on
4.5 This classification is intended to be generic and so
Performance of Buildings and is the direct responsibility of Subcommittee E06.81
on Building Economics.
provide a system for the classification of cost estimates in any
Current edition approved Oct. 1, 2006. Published October 2006. DOI: 10.1520/
industry.
E2516-06.
2 4.6 Estimate classifications provide valuable additional re-
This classification is based on the Cost Estimate Classification System,
portinginformationwhenusedasanadjuncttoPracticeE1804.
Recommended Practice Document AACE International 17R–97.
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM
Standards volume information, refer to the standard’s Document Summary page on
the ASTM website. Available from the Association of the Advancement of Cost Engineering
Available fromAmerican National Standards Institute (ANSI), 25 W. 43rd St., International (AACE), 209 Prairie Avenue, Suite 100, Morgantown, WV 26501,
4th Floor, New York, NY 10036, http://www.ansi.org. USA.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
E2516 – 06
5. Basis of Classification determinestheestimateclass.Theotherfourcharacteristicsare
secondary characteristics that are generally correlated with the
5.1 There are numerous characteristics that can be used to
level of project definition.
categorizecostestimatetypes.Themostsignificantoftheseare
5.6 This generic matrix and guideline provides a high-level
degree of project definition, end usage of the estimate, estimat-
estimate classification system that is non-industry specific.The
ing methodology, and the effort and time needed to prepare the
accuracy ranges identified in Fig. 1 are indicated as index
estimate. The primary characteristic used in this guideline to
valuessothattheymaybeappliedgenericallytojustaboutany
define the classification category is the degree of project
particular industry.Amore detailed explanation of these index
definition. The other characteristics are secondary.
values, including two examples of their possible ranges, can be
5.2 The discrete levels of project definition used for classi-
found in Appendix X1.
fying estimates correspond to the typical phases and gates of
evaluation, authorization, and execution often used by project
6. Estimate Characteristics
stakeholders during a project life cycle.
5.3 Five cost estimate classes have been established. While 6.1 The following are brief discussions of the various
estimate characteristics used in the estimate classification
the level of project definition is a continuous spectrum, it has
been determined from benchmarking industry practices that matrix, Fig. 1. For the secondary characteristics, the overall
three to five discrete categories are commonly used. Five trend of how each characteristic varies with the degree of
categories are established in this standard classification as it is project definition (the primary characteristic) is provided.
easier to simplify by combining categories than it is to 6.2 Level of Project Definition (Primary Characteristic)
arbitrarily split a standard. 6.2.1 This characteristic is based upon the level of comple-
5.4 In Fig. 1 these estimate class designations are labeled tion of project definition (roughly corresponding to the per-
Class 1, 2, 3, 4, and 5. A Class 5 estimate is based upon the centage completion of architectural/engineering detail and
lowest level of project definition, and a Class 1 estimate is design). The level of project definition defines maturity, or the
closest to full project definition and maturity. This countdown extent and types, of input information available to the estimat-
approach considers that estimating is an iterative process ing process. Such inputs include project scope definition,
whereby successive estimates are prepared until a final esti- requirements documents, specifications, project plans, draw-
mate closes the process. ings, calculations, knowledge and experience gained from past
5.5 The five estimate classes are presented in Fig. 1 in projects, reconnaissance data, and other information that must
relationship to the identified characteristics. It is important to be used, and developed, to define the project. Each industry
understand that it is only the level of project definition that will have a typical set of deliverables that are used to support
NOTE 1—[a] If the expected accuracy range index value of “1” represents +10/-5 %, then an index value of “10” represents +100/-50 %.
NOTE 2—[b] If the preparation effort index value of “1” represents 0.005 % of project costs, then an index value of “100” represents 0.5 %.
FIG. 1 Generic Cost Estimate Classification Matrix
E2516 – 06
the type of estimates used in that industry. The set of is not included in these effort metrics; they only cover the cost
deliverables becomes more definitive and complete as the level to prepare the cost estimate itself.
of project definition (such as architecture and engineering)
7. Relationships and Variations of Estimate
progresses.
Characteristics: Discussion
6.3 End Usage (Secondary Characteristic)
7.1 Thereareamyriadofcomplexrelationshipsthatmaybe
6.3.1 The various classes (or phases) of cost estimates
exhibited among the estimate characteristics within the esti-
prepared for a project typically have different end uses or
mate classifications. The overall trend of how the secondary
purposes. As the level of project definition increases, the end
characteristics vary with the level of project definition was
usage of an estimate typically progresses from strategic evalu-
provided above. This section explores those trends in more
ation and feasibility studies to funding authorization and
detail. Typically, there are commonalties in the secondary
budgeting, to project control.
characteristics between one estimate and the next, but in any
6.4 Estimating Methodology (Secondary Characteristic)
given situation there may be wide variations in usage, meth-
6.4.1 Estimating methodologies fall into two broad catego-
odology, accuracy, and effort.
ries: stochastic and deterministic. In stochastic methods, the
7.1.1 The level of project definition is the driver of the other
independent variable(s) used in the cost estimating algorithms
characteristics. Typically, all of the secondary characteristics
aregenerallysomethingotherthanadirectmeasureoftheunits
have the level of project definition as a primary determinant.
of the item being estimated. The cost estimating relationships
While the other characteristics are important to categorization,
used in stochastic methods often are somewhat subject to
they lack complete consensus. For example, one estimator’s
conjecture. With deterministic methods, the independent vari-
bid might be another’s budget. Characteristics such as meth-
able(s) are a more definitive measure of the item being
odology and accuracy can vary markedly from one industry to
estimated. A deterministic methodology is not subject to
another and even from estimator to estimator within a given
significant conjecture. As the level of project definition in-
industry.
creases, the estimating methodology progresses from stochas-
7.2 Level of Project Definition
tic to deterministic methods.
7.2.1 Each project (or industry grouping) will have a typical
6.5 Expected Accuracy Range (Secondary Characteristic)
set of deliverables that are used to support a given class of
6.5.1 Estimate accuracy range is an indication of the degree
estimate. The availability of these deliverables is directly
to which the final cost outcome for a given project could vary
related to the level of project definition achieved. The varia-
from the estimated cost.Accuracy is traditionally expressed as
tions in the deliverables required for an estimate are too broad
a 6 percentage range around the point estimate, after applica-
to cover in detail here; however, it is important to understand
tion of contingency, with a stated level of confidence that the
what drives the variations. Each industry group tends to focus
actual cost outcome would fall within this range (6 measures
on a defining project element that drives the estimate maturity
are a useful simplification, given that actual cost outcomes
level. For instance, chemical industry projects are process
have different frequency distributions for different types of
equipment-centric; such as, the level of project definition and
projects). As the level of project definition increases, the
subsequent estimate maturity level is significantly determined
expected accuracy of the estimate tends to improve, as indi-
by how well the equipment is defined. Architectural projects
cated by a narrower 6 range.Additionally, industry experience
tend to be structure-centric, software projects tend to be
shows that a percentage range should also vary with the cost
function-centric,andsoforth.Understandingthesedriversputs
magnitude of the project. Typically a range will narrow as the
the differences that may appear in the more detailed industry
cost magnitude increases, for example a 10 % range on
addenda into perspective.
100 000 job may be unrealistically narrow, whereas a 10 %
7.3 End Usage
range for a $100 000 000 job may be considered absurdly
7.3.1 While there are common end usages of an estimate
wide.
among different stakeholders, usage is often relative to the
stakeholdersidentity.Forinstance,anownercompanymayuse
NOTE 1—In Fig. 1, the values in the accuracy range column do not
represent plus or minus percentages, but instead represent an index value a given class of estimate to support project funding, while a
relative to a best range index value of 1. If, for a particular industry, a
contractor may use the same class of estimate to support a
Class 1 estimate has an accuracy range of +10/-5 percent, then a Class 5
contract bid or tender. It is not at all uncommon to find
estimate in that same industry may have an accuracy range of +100/-50
stakeholders categorizing their estimates by usage-related
percent.
headings such as budget, study, or bid. Depending on the
NOTE 2—Appendix A provides an illustrative example of estimate
stakeholders perspective and needs, it is important to under-
accuracy ranges for two particular industries.
stand that these may actually be all the same class of estimate
6.6 Effort to Prepare Estimate (Secondary Characteristic)
(based on the primary characteristic of level of project defini-
6.6.1 The level of effort needed to prepare a given estimate tion achieved).
is an indication of the cost, time, and resources required. The 7.4 Estimating Methodology
cost measure of that effort is typically expressed as a percent- 7.4.1 As stated previously, estimating methodologies fall
age of the total project costs for a given project size. As the into two broad categories: stochastic and deterministic. These
level of project definition increases, the amount of effort to broad categories encompass scores of individual methodolo-
prepare an estimate increases, as does its cost relative to the gies. Stochastic methods often involve simple or complex
total project cost. The effort to develop the project deliverables modeling based on inferred or statistical relationships between
E2516 – 06
costs and programmatic or technical parameters, or both. estimate will be better when verified empirical data and
Deterministic methods tend to be straightforward counts or statistics are employed as a basis for the estimating process,
measures of units of items multiplied by known unit costs or rat
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