3 tips to increase the accuracy of your estimates

Estimating accuracy is the degree to which a calculation of an item varies to its actual value. As estimators, we want to minimize the gap between the estimated and the actual cost. Of course there are a lot of factors involved here. We have to take into account things like the scope of the project, the available information, its phase in the project lifecycle and turbulent market conditions. This article however provides you with three general tips to increase the accuracy of your estimates:

1. Create a cost database

When it comes to the accuracy of your estimates, the information you use as input is very important. But where do you find the right information? At Cost Engineering we have built an extensive cost database (Cost Engineering Standard Knowledgebase), based on industry standards, historical data from completed projects and requested quotations. But the market place is constantly in motion, therefore it is important to keep your data up-to-date. One way to do this, is by regularly indexing your equipment or material cost.

2. Integrate risk analysis into your estimates by adding contingencies

Individual projects should have their accuracy ranges determined by a cost risk analysis study. From the resulting output of the risk analysis, the project budget should be derived, based on the level of confidence (or risk) acceptable to management. From there we can define the contingencies. Estimate contingency is the amount added to the estimate in order to provide the desired level of confidence (e.g. p50 or p90).

3. Use a dedicated cost estimating software tool

As mentioned before, using a well-developed cost database will increase the accuracy of your estimates. But how do you manage such a great amount of data? The use of a dedicated cost estimating software tool in this case is indispensable. Our software, Cleopatra Enterprise, achieves this by using a single central database in which all facets involved in costing are managed.

Standardization also reduces the time spend merging and analyzing the individual outputs from different sources. Furthermore, multiple disciplines can make use of the same estimating tool. This allows the central estimate group to quickly and accurately check estimate data from multiple disciplines.

Last but not least, the unique cost management feature in Cleopatra Enterprise, provides the estimator with a tool to directly benchmark their estimate against actual cost. By closing the loop between estimating and project controls the estimating accuracy will eventually increase.