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