Basis of Estimate
AACE International’s Total Cost Management (TCM) Framework identifies a basis of estimate (BOE) document as a required component of a cost estimate.
In the TCM Framework, the BOE is characterized as the one deliverable that defines the scope of the engagement and ultimately becomes the basis for change management. Note: In the software services industries, the term ‘engagement’ is commonly used and synonymous with ‘project’. When prepared correctly, any person with (capital) project experience can use the BOE to understand and assess the estimate, independent of any other supporting documentation. A well-written BOE achieves those goals by clearly and concisely stating the purpose of the estimate being prepared (i.e. cost/effort/duration study, project options, funding, etc.), the project scope, cost basis, allowances, assumptions, exclusions, cost risks and opportunities, contingencies, and any deviations from standard practices. For software services the effort expended is the main driver for cost and duration. In addition the BOE is a documented record of pertinent communications that have occurred and agreements that have been made between the estimator and other stakeholders.
Content of the BOE
A well prepared BOE will:
- Document the overall engagement scope.
- Communicate the estimator’s knowledge of the engagement by demonstrating an understanding of scope, quality and duration as it relates to cost.
- Provide a record of all the hypothesis and assumptions taken into account for deriving the BOE.
- Alert the stakeholders to potential cost risks and opportunities.
- Provide a record of key communications made during estimate preparation.
- Provide a record of all documents used to prepare the estimate.
- Act as a source of support during dispute resolutions.
- Establish the initial baseline for scope, quantities, effort, duration and cost for use in engagement control.
- Provide the historical relationships between baselined estimates throughout the project lifecycle.
- Facilitate the review and validation of the estimates.
This Recommended Practice is intended to be a guideline, not a standard. It is understood that not all organizations that prepare estimates employ the same processes and practices, and therefore, may opt to use this information either in part or in its entirety. However, in all cases this RP supports creating consistent estimate documentation that provides a high degree of traceability and repeatability for the estimate.
The Recommended Practice for a basis of estimate (BOE) document for software estimation can be found here.