Basis of Estimate

Basis of Estimate

Basis of Estimate Jonathan Poland

A basis of estimate (BOE) is a document that outlines the methodology and assumptions used to create an estimate for a project. It is typically used to provide a detailed explanation of how the estimate was developed, and to provide transparency and accountability for the estimate.

The BOE should include a description of the work that is being estimated, as well as the assumptions and constraints that were considered in developing the estimate. This may include information about the resources that will be required, the schedule for the work, and any other factors that could impact the cost or duration of the project.

In addition to providing a detailed explanation of the estimate, the BOE may also include supporting documentation, such as cost estimates for materials or labor, or references to industry standards or best practices that were used to develop the estimate.

The BOE is an important tool for managing projects, as it helps to ensure that the estimate is accurate and transparent. It is also useful for stakeholders, as it provides them with a clear understanding of the assumptions and constraints that were considered in developing the estimate, and helps to build confidence in the accuracy of the estimate. The following are examples of basis of estimate content.

Assumptions & Constraints

Any assumptions and constraints that were required to generate a set of estimates. This isn’t a repeat of project assumptions but applies to the estimates themselves. For example, assumptions that were made to generate a list of comparable projects for estimate benchmarks.


Identify the version of requirements, risk registers and other project artifacts that are the basis of the estimate. Attach any source documents such as price quotes from suppliers.

Estimate Summary

A high level summary designed to communicate the estimate to all stakeholders such that it can be easily understood.


A description of the estimation procedure. For example, describing a bottom-up estimation process of identifying tasks and having subject matter experts estimate each. Include details of calculations or algorithms.


Principles that are used to guide estimates. For example, a principle of using three point estimates to estimate complex tasks.

Bottom-up Estimates

If bottom-up estimates are used the details are included at the level at which estimates were produced, typically the task level.

Parametric Estimates

The details of any calculations or algorithms that were used to generate estimates. Algorithms are sufficiently explained in plain language such that they aren’t a mystery.

Analogous Estimates

Any comparisons that were used to generate or validate estimates based on your historical projects. The details of the historical projects used are listed.

Reference Class Forecasting

Any benchmarks that were used to generate or validate estimates using a database of similar programs, projects and initiatives. The details of relevant database entries are listed.

Third Party Estimates

Details of price quotations and other estimates provided by third parties.


Details of contingency added to an estimate to account for risk. Potentially includes confidence intervals for estimates.


Details of any analysis related to the estimates.


Details of sanity checks and validations that were performed. For example, a bottom-up estimate technique that is validated with reference class forecasting.


An audit trail of approvals for the estimate.

Learn More…

Customer Expectations Jonathan Poland

Customer Expectations

Customer expectations refer to the base assumptions that customers make about a…

Advertising Strategies Jonathan Poland

Advertising Strategies

Advertising involves paying to disseminate a message or promote a product or…

Fourth Industrial Revolution Jonathan Poland

Fourth Industrial Revolution

The fourth industrial revolution, also known as Industry 4.0, refers to the…

Change Resistance Jonathan Poland

Change Resistance

Change resistance is the act of derailing, slowing down, or preventing a…

Aftermarket Jonathan Poland


The aftermarket refers to the market for products and services that are…

Delegation 101 Jonathan Poland

Delegation 101

Delegation is the act of assigning specific tasks and responsibilities to others,…

Continuous Improvement Jonathan Poland

Continuous Improvement

Continuous improvement is a systematic approach to improving products, services, and processes…

Inherent Risk Jonathan Poland

Inherent Risk

Inherent risk is a term used in the field of auditing to…

Business Equipment Jonathan Poland

Business Equipment

Business equipment refers to the tools, machines, and other physical assets that…

Jonathan Poland © 2023

Search the Database

Over 1,000 posts on topics ranging from strategy to operations, innovation to finance, technology to risk and much more…

Concept Selling Jonathan Poland

Concept Selling

Concept selling is a approach to marketing and sales that involves framing…

Innovation Risk Jonathan Poland

Innovation Risk

Innovation is a proactive approach to business and design that aims to…

Intangible Assets Jonathan Poland

Intangible Assets

Intangible assets are non-physical assets that have monetary value and are expected…

Physical Capital Jonathan Poland

Physical Capital

Physical capital refers to the tangible assets that are used to produce…

Algorithms Jonathan Poland


An algorithm is a set of instructions or rules that are followed…

Opportunity Cost Jonathan Poland

Opportunity Cost

Opportunity cost is the value of the next best alternative that is…

Performance Goals Jonathan Poland

Performance Goals

Performance goals are targets or objectives that are set for an employee’s…

Business Experience Jonathan Poland

Business Experience

Business experience refers to any work experience, including paid employment, freelance work,…

Value Creation Jonathan Poland

Value Creation

Value creation refers to the process of creating outputs that have a…