Definition:
A high-level cost estimation technique used in the early stages of project planning, based on historical data, analogous projects, and limited design information.
Key Components:
- Historical Project Comparisons: Using data from similar past projects.
- Cost-per-Unit Factors: Applying general cost metrics (e.g., $/MW, $/mile, $/sq ft).
- Engineering Judgment & Assumptions: Relying on expert insights for preliminary cost assessment.
- Feasibility Analysis: Determining whether a project is financially viable.
- Accuracy Range: Typically within ±30% to ±50%, improving as more data becomes available.
Use Cases/Industries:
- Oil & Gas: Initial budget forecasting for new drilling sites.
- Renewables: Evaluating the economic feasibility of solar and wind projects.
- Infrastructure: Estimating early-stage costs for highway expansions.
Advantages:
- Quick Decision Support: Helps determine project viability before detailed design.
- Low Resource Commitment: Requires minimal upfront effort compared to detailed estimating.
- Useful for Early Budgeting: Provides a rough cost framework for financial planning.
Challenges:
- High Uncertainty Levels: Lacks accuracy due to minimal design details.
- Assumption-Driven Risks: Errors in early estimates can lead to costly adjustments.
- Difficult to Validate: Limited data makes cross-checking estimates challenging.
Related Terms:
Class 5 Estimate, Feasibility Study, Order-of-Magnitude Estimate, Front-End Loading (FEL)
Example:
A refinery expansion project used conceptual estimating to evaluate feasibility, later refining the budget with parametric and deterministic methods as design progressed.
Visited 1 times, 1 visit(s) today
Synonyms:
Preliminary Estimating, Order-of-Magnitude Estimating, Rough Cost Projection
