AACE International Recommended Practice No.

18R-97

COST ESTIMATE CLASSIFICATION SYSTEM –

AS APPLIED IN ENGINEERING, PROCUREMENT, AND CONSTRUCTION
FOR THE PROCESS INDUSTRIES
TCM Framework: 7.3 – Cost Estimating and Budgeting

Rev. November 29, 2011

Note: As AACE International Recommended Practices evolve over time, please refer to www.aacei.org for the latest revisions.

Contributors:
Peter Christensen, CCE (Author) Kenneth K. Humphreys, PE CCE
Larry R. Dysert, CCC CEP (Author) Donald F. McDonald, Jr. PE CCE PSP
Jennifer Bates, CCE C. Arthur Miller
Jeffery J. Borowicz, CCE CEP PSP Todd W. Pickett, CCC CEP
Peter R. Bredehoeft, Jr. CEP Bernard A. Pietlock, CCC CEP
Robert B. Brown, PE Wesley R. Querns, CCE
Dorothy J. Burton Don L. Short, II CEP
Robert C. Creese, PE CCE H. Lance Stephenson, CCC
John K. Hollmann, PE CCE CEP James D. Whiteside, II PE

Copyright © AACE® International AACE® International Recommended Practices

AACE® International Recommended Practice No. 18R-97
COST ESTIMATE CLASSIFICATION SYSTEM – AS
APPLIED IN ENGINEERING, PROCUREMENT, AND
CONSTRUCTION FOR THE PROCESS INDUSTRIES
TCM Framework: 7.3 – Cost Estimating and Budgeting

November 29, 2011

PURPOSE

As a recommended practice of AACE International, the Cost Estimate Classification System provides guidelines for
applying the general principles of estimate classification to project cost estimates (i.e., cost estimates that are used
to evaluate, approve, and/or fund projects). The Cost Estimate Classification System maps the phases and stages of
project cost estimating together with a generic project scope definition maturity and quality matrix, which can be
applied across a wide variety of process industries.

This addendum to the generic recommended practice (17R-97) provides guidelines for applying the principles of
estimate classification specifically to project estimates for engineering, procurement, and construction (EPC) work
for the process industries. This addendum supplements the generic recommended practice by providing:

• a section that further defines classification concepts as they apply to the process industries; and
• a chart that maps the extent and maturity of estimate input information (project definition deliverables)
against the class of estimate.

As with the generic recommended practice, an intent of this addendum is to improve communications among all of
the stakeholders involved with preparing, evaluating, and using project cost estimates specifically for the process
industries.

The overall purpose of this recommended practice is to provide the process industry definition deliverable
maturity matrix which is not provided in 17R-97. It also provides an approximate representation of the relationship
of specific design input data and design deliverable maturity to the estimate accuracy and methodology used to
produce the cost estimate. The estimate accuracy range is driven by many other variables and risks, so the
maturity and quality of the scope definition available at the time of the estimate is not the sole determinate of
accuracy; risk analysis is required for that purpose.

This document is intended to provide a guideline, not a standard. It is understood that each enterprise may have
its own project and estimating processes and terminology, and may classify estimates in particular ways. This
guideline provides a generic and generally acceptable classification system for process industries that can be used
as a basis to compare against. This addendum should allow each user to better assess, define, and communicate
their own processes and standards in the light of generally-accepted cost engineering practice.

INTRODUCTION

For the purposes of this addendum, the term process industries is assumed to include firms involved with the
manufacturing and production of chemicals, petrochemicals, and hydrocarbon processing. The common thread
among these industries (for the purpose of estimate classification) is their reliance on process flow diagrams (PFDs)
and piping and instrument diagrams (P&IDs) as primary scope defining documents. These documents are key
deliverables in determining the degree of project definition, and thus the extent and maturity of estimate input
information.

Estimates for process facilities center on mechanical and chemical process equipment, and they have significant
amounts of piping, instrumentation, and process controls involved. As such, this addendum may apply to portions

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 2 of 10
Construction for the Process Industries

November 29, 2011

of other industries, such as pharmaceutical, utility, metallurgical, converting, and similar industries. Specific
addendums addressing these industries may be developed over time.

This addendum specifically does not address cost estimate classification in non-process industries such as
commercial building construction, environmental remediation, transportation infrastructure, hydropower, “dry”
processes such as assembly and manufacturing, “soft asset” production such as software development, and similar
industries. It also does not specifically address estimates for the exploration, production, or transportation of
mining or hydrocarbon materials, although it may apply to some of the intermediate processing steps in these
systems.

The cost estimates covered by this addendum are for engineering, procurement, and construction (EPC) work only.
It does not cover estimates for the products manufactured by the process facilities, or for research and
development work in support of the process industries. This guideline does not cover the significant building
construction that may be a part of process plants.

This guideline reflects generally-accepted cost engineering practices. This addendum was based upon the practices
of a wide range of companies in the process industries from around the world, as well as published references and
standards. Company and public standards were solicited and reviewed, and the practices were found to have
significant commonalities. These classifications are also supported by empirical process industry research of
[8]
systemic risks and their correlation with cost growth and schedule slip .

COST ESTIMATE CLASSIFICATION MATRIX FOR THE PROCESS INDUSTRIES

Primary Characteristic Secondary Characteristic

MATURITY LEVEL OF
EXPECTED ACCURACY
ESTIMATE PROJECT DEFINITION END USAGE METHODOLOGY
Typical purpose of
RANGE
CLASS DELIVERABLES Typical estimating method Typical variation in low and high
Expressed as % of complete estimate [a]
ranges
definition
Capacity factored,
Concept L: -20% to -50%
Class 5 0% to 2% parametric models,
screening H: +30% to +100%
judgment, or analogy
Study or Equipment factored or L: -15% to -30%
Class 4 1% to 15%
feasibility parametric models H: +20% to +50%
Budget Semi-detailed unit costs
L: -10% to -20%
Class 3 10% to 40% authorization or with assembly level line
H: +10% to +30%
control items
Control or Detailed unit cost with L: -5% to -15%
Class 2 30% to 75%
bid/tender forced detailed take-off H: +5% to +20%
Check estimate Detailed unit cost with L: -3% to -10%
Class 1 65% to 100%
or bid/tender detailed take-off H: +3% to +15%
Notes: [a] The state of process technology, availability of applicable reference cost data, and many other risks affect the range markedly. The
+/- value represents typical percentage variation of actual costs from the cost estimate after application of contingency (typically at
a 50% level of confidence) for given scope.
Table 1 – Cost Estimate Classification Matrix for Process Industries

Table 1 provides a summary of the characteristics of the five estimate classes. The maturity level of definition is the
sole determining (i.e., primary) characteristic of Class. In Table 1, the maturity is roughly indicated by a % of

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 3 of 10
Construction for the Process Industries

November 29, 2011

complete definition; however, it is the maturity of the defining deliverables that is the determinant, not the
percent. The specific deliverables, and their maturity, or status, are provided in Table 3. The other characteristics
are secondary and are generally correlated with the maturity level of project definition deliverables, as discussed
in the generic RP[1]. The characteristics are typical for the process industries but may vary from application to
application.

This matrix and guideline outline an estimate classification system that is specific to the process industries. Refer
to the generic estimate classification RP[1] for a general matrix that is non-industry specific, or to other addendums
for guidelines that will provide more detailed information for application in other specific industries. These will
provide additional information, particularly the project definition deliverable maturity matrix which determines
the class in those particular industries.

Table 1 illustrates typical ranges of accuracy ranges that are associated with the process industries. Depending on
the technical and project deliverables (and other variables) and risks associated with each estimate, the accuracy
range for any particular estimate is expected to fall into the ranges identified (although extreme risks can lead to
wider ranges).

In addition to the degree of project definition, estimate accuracy is also driven by other systemic risks such as:

• Level of non-familiar technology in the project.

• Complexity of the project.
• Quality of reference cost estimating data.
• Quality of assumptions used in preparing the estimate.
• Experience and skill level of the estimator.
• Estimating techniques employed.
• Time and level of effort budgeted to prepare the estimate.

Systemic risks such as these are often the primary driver of accuracy; however, project-specific risks (e.g. risk
[3]
events) also drive the accuracy range .

Another way to look at the variability associated with estimate accuracy ranges is shown in Figure 1. Depending
upon the technical complexity of the project, the availability of appropriate cost reference information, the degree
of project definition, and the inclusion of appropriate contingency determination, a typical Class 5 estimate for a
process industry project may have an accuracy range as broad as -50% to +100%, or as narrow as -20% to +30%.

Figure 1 also illustrates that the estimating accuracy ranges overlap the estimate classes. There are cases where a
Class 5 estimate for a particular project may be as accurate as a Class 3 estimate for a different project. For
example, similar accuracy ranges may occur for the Class 5 estimate of one project that is based on a repeat
project with good cost history and data and the Class 3 estimate for another project involving new technology. It is
for this reason that Table 1 provides ranges of accuracy range values. The accuracy range is determined through
risk analysis of the specific project.

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 4 of 10
Construction for the Process Industries

November 29, 2011

100

90

80
Growth from Estimated Costs Including Contingency (%)

70

60

50

40

30

20

10

-10

-20

-30

-40
Maturity Level of Project Definition Deliverables (%)
-50
0 10 20 30 40 50 60 70 80 90 100
Class 5
Class 4 Class 2
Class 3 Class 1

Figure 1 – Example of the Variability in Accuracy Ranges for a Process Industry Estimate

DETERMINATION OF THE COST ESTIMATE CLASS

The cost estimator makes the determination of the estimate class based upon the maturity level of project
definition based on the status of specific key planning and design deliverables. The percent design completion may
be correlated with the status, but the percentage should not be used as the Class determinate. While the
determination of the status (and hence class) is somewhat subjective, having standards for the design input data,
completeness and quality of the design deliverables will serve to make the determination more objective.

CHARACTERISTICS OF THE ESTIMATE CLASSES

The following tables (2a through 2e) provide detailed descriptions of the five estimate classifications as applied in
the process industries. They are presented in the order of least-defined estimates to the most-defined estimates.
These descriptions include brief discussions of each of the estimate characteristics that define an estimate class.

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Construction for the Process Industries

November 29, 2011

For each table, the following information is provided:

• Description: a short description of the class of estimate, including a brief listing of the expected estimate
inputs based on the maturity level of project definition deliverables. The “minimum” inputs reflect the
range of industry experience, but would not generally be recommended.
• Maturity Level of Project Definition Deliverables (Primary Characteristic): Describes a particularly key
deliverable and a typical target status in stage-gate decision processes, plus an indication of approximate
percent of full definition of project and technical deliverables. For the process industries, this correlates
with the percent of engineering and design complete.
• End Usage (Secondary Characteristic): a short discussion of the possible end usage of this class of
estimate.
• Estimating Methodology (Secondary Characteristic): a listing of the possible estimating methods that
may be employed to develop an estimate of this class.
• Expected Accuracy Range (Secondary Characteristic): typical variation in low and high ranges after the
application of contingency (determined at a 50% level of confidence). Typically, this represents about 80%
confidence that the actual cost will fall within the bounds of the low and high ranges. The estimate
confidence interval or accuracy range is driven by the reliability of the scope information available at the
time of the estimate in addition to the other variables and risk identified above.
• Alternate Estimate Names, Terms, Expressions, Synonyms: this section provides other commonly used
names that an estimate of this class might be known by. These alternate names are not endorsed by this
Recommended Practice. The user is cautioned that an alternative name may not always be correlated
with the class of estimate as identified in Tables 2a-2e.

CLASS 5 ESTIMATE

Description: Estimating Methodology:

Class 5 estimates are generally prepared based on very limited Class 5 estimates generally use stochastic estimating methods
information, and subsequently have wide accuracy ranges. As such as cost/capacity curves and factors, scale of operations
such, some companies and organizations have elected to factors, Lang factors, Hand factors, Chilton factors, Peters-
determine that due to the inherent inaccuracies, such Timmerhaus factors, Guthrie factors, and other parametric
estimates cannot be classified in a conventional and and modeling techniques.
systematic manner. Class 5 estimates, due to the requirements
of end use, may be prepared within a very limited amount of Expected Accuracy Range:
time and with little effort expended—sometimes requiring less Typical accuracy ranges for Class 5 estimates are
than an hour to prepare. Often, little more than proposed -20% to -50% on the low side, and +30% to +100% on the high
plant type, location, and capacity are known at the time of side, depending on the technological complexity of the
estimate preparation. project, appropriate reference information and other risks (
after inclusion of an appropriate contingency determination).
Maturity Level of Project Definition Deliverables: Ranges could exceed those shown if there are unusual risks.
Key deliverable and target status: Block flow diagram agreed
by key stakeholders. 0% to 2% of full project definition. Alternate Estimate Names, Terms, Expressions, Synonyms:
Ratio, ballpark, blue sky, seat-of-pants, ROM, idea study,
End Usage: prospect estimate, concession license estimate, guesstimate,
Class 5 estimates are prepared for any number of strategic rule-of-thumb.
business planning purposes, such as but not limited to market
studies, assessment of initial viability, evaluation of alternate
schemes, project screening, project location studies,
evaluation of resource needs and budgeting, long-range
capital planning, etc.
Table 2a – Class 5 Estimate

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 6 of 10
Construction for the Process Industries

November 29, 2011

CLASS 4 ESTIMATE

Description: Estimating Methodology:

Class 4 estimates are generally prepared based on limited Class 4 estimates generally use stochastic estimating methods
information and subsequently have fairly wide accuracy such as equipment factors, Lang factors, Hand factors, Chilton
ranges. They are typically used for project screening, factors, Peters-Timmerhaus factors, Guthrie factors, the Miller
determination of feasibility, concept evaluation, and method, gross unit costs/ratios, and other parametric and
preliminary budget approval. Typically, engineering is from 1% modeling techniques.
to 15% complete, and would comprise at a minimum the
following: plant capacity, block schematics, indicated layout, Expected Accuracy Range:
process flow diagrams (PFDs) for main process systems, and Typical accuracy ranges for Class 4 estimates are
preliminary engineered process and utility equipment lists. -15% to -30% on the low side, and +20% to +50% on the high
side, depending on the technological complexity of the
Maturity Level of Project Definition Deliverables: project, appropriate reference information, and other risks
Key deliverable and target status: Process flow diagrams (after inclusion of an appropriate contingency determination).
(PFDs) issued for design. 1% to 15% of full project definition. Ranges could exceed those shown if there are unusual risks.

End Usage: Alternate Estimate Names, Terms, Expressions, Synonyms:

Class 4 estimates are prepared for a number of purposes, such Screening, top-down, feasibility (pre-feasibility for metals
as but not limited to, detailed strategic planning, business processes), authorization, factored, pre-design, pre-study.
development, project screening at more developed stages,
alternative scheme analysis, confirmation of economic and/or
technical feasibility, and preliminary budget approval or
approval to proceed to next stage.
Table 2b – Class 4 Estimate

CLASS 3 ESTIMATE

Description: Estimating Methodology:

Class 3 estimates are generally prepared to form the basis for Class 3 estimates generally involve more deterministic
budget authorization, appropriation, and/or funding. As such, estimating methods than stochastic methods. They usually
they typically form the initial control estimate against which all involve predominant use of unit cost line items, although
actual costs and resources will be monitored. Typically, these may be at an assembly level of detail rather than
engineering is from 10% to 40% complete, and would individual components. Factoring and other stochastic
comprise at a minimum the following: process flow diagrams, methods may be used to estimate less-significant areas of the
utility flow diagrams, preliminary piping and instrument project.
diagrams, plot plan, developed layout drawings, and
essentially complete engineered process and utility equipment Expected Accuracy Range:
lists. Typical accuracy ranges for Class 3 estimates are
-10% to -20% on the low side, and +10% to +30% on the high
Maturity Level of Project Definition Deliverables: side, depending on the technological complexity of the
Key deliverable and target status: Piping and instrumentation project, appropriate reference information, and other risks
diagrams (P&IDs) issued for design. 10% to 40% of full project (after inclusion of an appropriate contingency determination).
definition. Ranges could exceed those shown if there are unusual risks.

End Usage: Alternate Estimate Names, Terms, Expressions, Synonyms:

Class 3 estimates are typically prepared to support full project Budget, scope, sanction, semi-detailed, authorization,
funding requests, and become the first of the project phase preliminary control, concept study, feasibility (for metals
control estimates against which all actual costs and resources processes) development, basic engineering phase estimate,
will be monitored for variations to the budget. They are used target estimate.
as the project budget until replaced by more detailed
estimates. In many owner organizations, a Class 3 estimate is
often the last estimate required and could very well form the
only basis for cost/schedule control.
Table 2c – Class 3 Estimate

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 7 of 10
Construction for the Process Industries

November 29, 2011

CLASS 2 ESTIMATE

Description: Estimating Methodology:

Class 2 estimates are generally prepared to form a detailed Class 2 estimates generally involve a high degree of
contractor control baseline (and update the owner control deterministic estimating methods. Class 2 estimates are
baseline) against which all project work is monitored in terms prepared in great detail, and often involve tens of thousands
of cost and progress control. For contractors, this class of of unit cost line items. For those areas of the project still
estimate is often used as the bid estimate to establish contract undefined, an assumed level of detail takeoff (forced detail)
value. Typically, engineering is from 30% to 75% complete, and may be developed to use as line items in the estimate instead
would comprise at a minimum the following: process flow of relying on factoring methods.
diagrams, utility flow diagrams, piping and instrument
diagrams, heat and material balances, final plot plan, final Expected Accuracy Range:
layout drawings, complete engineered process and utility Typical accuracy ranges for Class 2 estimates are
equipment lists, single line diagrams for electrical, electrical -5% to -15% on the low side, and +5% to +20% on the high
equipment and motor schedules, vendor quotations, detailed side, depending on the technological complexity of the
project execution plans, resourcing and work force plans, etc. project, appropriate reference information, and other risks
(after inclusion of an appropriate contingency determination).
Maturity Level of Project Definition Deliverables: Ranges could exceed those shown if there are unusual risks.
Key deliverable and target status: All specifications and
datasheets complete including for instrumentation. 30% to Alternate Estimate Names, Terms, Expressions, Synonyms:
75% of full project definition. Detailed control, forced detail, execution phase, master
control, engineering, bid, tender, change order estimate.
End Usage:
Class 2 estimates are typically prepared as the detailed
contractor control baseline (and update the owner control
baseline) against which all actual costs and resources will now
be monitored for variations to the budget, and form a part of
the change management program.
Table 2d – Class 2 Estimate

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 8 of 10
Construction for the Process Industries

November 29, 2011

CLASS 1 ESTIMATE

Description: Estimating Methodology:

Class 1 estimates are generally prepared for discrete parts or Class 1 estimates generally involve the highest degree of
sections of the total project rather than generating this level of deterministic estimating methods, and require a great amount
detail for the entire project. The parts of the project estimated of effort. Class 1 estimates are prepared in great detail, and
at this level of detail will typically be used by subcontractors thus are usually performed on only the most important or
for bids, or by owners for check estimates. The updated critical areas of the project. All items in the estimate are
estimate is often referred to as the current control estimate usually unit cost line items based on actual design quantities.
and becomes the new baseline for cost/schedule control of
the project. Class 1 estimates may be prepared for parts of the Expected Accuracy Range:
project to comprise a fair price estimate or bid check estimate Typical accuracy ranges for Class 1 estimates are
to compare against a contractor’s bid estimate, or to -3% to -10% on the low side, and +3% to +15% on the high
evaluate/dispute claims. Typically, overall engineering is from side, depending on the technological complexity of the
65% to 100% complete (some parts or packages may be project, appropriate reference information, and other risks
complete and others not), and would comprise virtually all (after inclusion of an appropriate contingency determination).
engineering and design documentation of the project, and Ranges could exceed those shown if there are unusual risks.
complete project execution and commissioning plans.
Alternate Estimate Names, Terms, Expressions, Synonyms:
Maturity Level of Project Definition Deliverables: Full detail, release, fall-out, tender, firm price, bottoms-up,
Key deliverable and target status: All deliverables in the final, detailed control, forced detail, execution phase, master
maturity matrix complete. 65% to 100% of full project control, fair price, definitive, change order estimate.
definition.

End Usage:
Generally, owners and EPC contractors use Class 1 estimates
to support their change management process. They may be
used to evaluate bid checking, to support vendor/contractor
negotiations, or for claim evaluations and dispute resolution.

Construction contractors may prepare Class 1 estimates to

support their bidding and to act as their final control baseline
against which all actual costs and resources will now be
monitored for variations to their bid. During construction,
Class 1 estimates may be prepared to support change
management.
Table 2e – Class 1 Estimate

ESTIMATE INPUT CHECKLIST AND MATURITY MATRIX

Table 3 maps the extent and maturity of estimate input information (deliverables) against the five estimate
classification levels. This is a checklist of basic deliverables found in common practice in the process industries. The
maturity level is an approximation of the completion status of the deliverable. The completion is indicated by the
following letters.

• None (blank): development of the deliverable has not begun.

• Started (S): work on the deliverable has begun. Development is typically limited to sketches, rough
outlines, or similar levels of early completion.
• Preliminary (P): work on the deliverable is advanced. Interim, cross-functional reviews have usually been
conducted. Development may be near completion except for final reviews and approvals.
• Complete (C): the deliverable has been reviewed and approved as appropriate.

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 9 of 10
Construction for the Process Industries

November 29, 2011

ESTIMATE CLASSIFICATION

CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1

MATURITY LEVEL OF PROJECT DEFINITION

0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100%
DELIVERABLES

General Project Data:

Project Scope Description General Preliminary Defined Defined Defined

Plant Production/Facility Capacity Assumed Preliminary Defined Defined Defined

Plant Location General Approximate Specific Specific Specific

Soils & Hydrology None Preliminary Defined Defined Defined

Integrated Project Plan None Preliminary Defined Defined Defined

Project Master Schedule None Preliminary Defined Defined Defined

Escalation Strategy None Preliminary Defined Defined Defined

Work Breakdown Structure None Preliminary Defined Defined Defined

Project Code of Accounts None Preliminary Defined Defined Defined

Contracting Strategy Assumed Assumed Preliminary Defined Defined

Engineering Deliverables:

Block Flow Diagrams S/P P/C C C C

Plot Plans S/P C C C

Process Flow Diagrams (PFDs) P C C C

Utility Flow Diagrams (UFDs) S/P C C C

Piping & Instrument Diagrams (P&IDs) S/P C C C

Heat & Material Balances S/P C C C

Process Equipment List S/P C C C

Utility Equipment List S/P C C C

Electrical One-Line Drawings S/P C C C

Specifications & Datasheets S P/C C C

General Equipment Arrangement Drawings S C C C

Spare Parts Listings P P C

Mechanical Discipline Drawings S/P P/C C

Electrical Discipline Drawings S/P P/C C

Instrumentation/Control System Discipline

S/P P/C C
Drawings

Civil/Structural/Site Discipline Drawings S/P P/C C

Table 3 – Estimate Input Checklist and Maturity Matrix (Primary Classification Determinate)

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18R-97: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 10 of 10
Construction for the Process Industries

November 29, 2011

REFERENCES

1. AACE International, Recommended Practice No.17R-97, Cost Estimate Classification System, AACE
International, Morgantown, WV. (latest revision)
2. Hollmann, John K., PE CCE, Editor, Total Cost Management Framework: An Integrated Approach to Portfolio,
Program and Project Management, AACE International, Morgantown, WV, 2006.
3. AACE International, Recommended Practice 10S-90, Cost Engineering Terminology, AACE International,
Morgantown, WV. (latest revision).
4. John R. Heizelman, Estimating Factors for Process Plants, 1988 AACE Transactions, V.3, AACE International,
Morgantown, WV, 1988.
5. K.T. Yeo, The Cost Engineer Journal, UK Vol. 27, No. 6, 1989.
6. Stevens, G. and T. Davis, How Accurate are Capital Cost Estimates?, 1988 AACE Transactions, B.4, AACE
International. Morgantown, WV, 1988. (* Class 3 is inferred)
7. Behrenbruch, Peter, article in Journal of Petroleum Technology, Vol. 45, No. 8, Society of Petroleum Engineers,
August 1993.
8. AACE International, Recommended Practice 42R-08, Risk Analysis and Contingency Determination Using
Parametric Estimating, AACE International, Morgantown, WV, (latest revision).

CONTRIBUTORS

Peter Christensen, CCE (Author)

Larry R. Dysert, CCC CEP (Author)
Jennifer Bates, CCE
Jeffery J. Borowicz, CCE CEP PSP
Peter R. Bredehoeft, Jr. CEP
Robert B. Brown, PE
Dorothy J. Burton
Robert C. Creese, PE CCE
John K. Hollmann, PE CCE CEP
Kenneth K. Humphreys, PE CCE
Donald F. McDonald, Jr. PE CCE PSP
C. Arthur Miller
Todd W. Pickett, CCC CEP
Bernard A. Pietlock, CCC CEP
Wesley R. Querns, CCE
Don L. Short, II CEP
H. Lance Stephenson, CCC
James D. Whiteside, II PE

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Estimate Classes
Contaminated Site Program (CSP) 1,2,3 4,5,6 7 8 9,10
Step
Item (Class) - TB (NEW) Indicative Substantive
Item (Class) - AACE Class 5 Class 4 Class 3 Class 2 Class 1
Concept Screening Study or Feasibility Budget, Control or Check Estimate or
Authorization,or Bid/Tender Bid/Tender
Control
Item (Class) - TB / PUBLIC WORKS Class D Class C Class B Class A

Item (Class) -MERIT Class D Class C Class B Class A

Concept Pre-Feasibility Bankable Feasibility Basic Implementation
Purpose Prelim Investigation. Economic Feasibility Project Approval Detailed Control Change/Variation
Project Screening Identify data required Provide basis for Monitoring & Control
Comparison & cost of Type 3 Study securing finance

Risk Profiling & Contingencies Up to 30% Up to 15% Up to 15% Up to 10%

Indicative Probability Range Not greater than 90% Not greater than 90% Not greater than 90% Not greater than 90%

Accuracy - Indicative Range + 30 to -15% +30 to -15% +20 to -10% +10% to -5%
CSP Cost Estimate Accuracy or L -20% to -50% L -15% to -30% L -15% to -30% L -5% to -15% L -5% to -10%
Appropriate Contingency H +30% to +100% H +15% to +50% H +10% to +30% H +5% to +20% H +5% to +20%
AACE Cost Estimate Classification L -20% to -50% L -15% to -30% L -10% to -20% L -5% to -15% L -3% to -10%
System - Expected Accuracy Range H +30% to +100% H +20% to +50% H +10% to +30% H +5% to +20% H +3% to +15%
30% to 70% 50% to 100%
AACE -Level of Definition of Project 0% to 2% complete 1% to 15% complete 10% to 40% complete
complete complete
Level of Engineering Definition 0% to 10% 1% to 15% 10% to 40% 30% to 100%
TB/ Public Works -Definition of
1% to 5% complete 5% to 15% complete 20% to 35% complete 95% to 100% complete
Project

Typical Engineering Deliverables For Each Class Of Estimate

BASIS OF CAPITAL COST ESTIMATES
SITE
Location Assumed Preliminary Optimal Final
Maps and Surveys None Preliminary Some Detail Detail
Soil Tests & Geotechnical None Prelim Final Final
Site Visits Not Essential Desirable Essential Construction Commenced
Construction Support Assumed Proposed Method Detail Support Final
Construction Site Agreement Assumed Assumed Prelim Discussion Final / In Place
Delivery Strategy Assumed Preliminary Initial Strategy Specific

MINING
Site Visits Desirable Essential Essential Frequent
Maps and Surveys Required Good Quality Detailed Detailed
Drilling Explorations Exploration Delineation Grade Control
Resource Estimate Indicative Probably Measured/Indicated Measured
Reserve Estimate Indicative Indicative Proven/Probably Proven
Mining Method Assumed Preliminary Optimised Finalised
Mining Schedule By Analogy Preliminary Detailed Finalised
Mine Geotechnical & Hydrology Assumed Preliminary Detailed Finalised
Equipment Selection Not Essential Preliminary Type & Capacity Make & Model
PROCESS
Plan Capacity Assumed Preliminary Final Final
Ore Samples Available Samples Representative Samples Representative Actual
Samples
Metallurgical Test Work Commenced Advanced Completed Complete
Pilot Plan Identify need and Commenced, some All Results Available Finalised
specify bulk sample results available
Energy & Material Bal. Estimated Advanced Optimised Final
Process Flowsheet Assumed Preliminary Optimised Final
DESIGN
Scope of Estimate Concept Probable Actual Actual
Equipment Selection Assumed Preliminary Optimal Final
GA - Mechanical None Minimum Fair Detail Complete
GA - Structural None Outline Fair Detail Complete
Piping Drawings None Single-line Some Detail Advanced
Electrical Drawings None Single-line Some Detail Advanced
Detailed Design Drawings None None Some Detail Mostly Complete
Specifications None Preliminary Advanced Mostly Complete
CAPTICAL COST ESTIMATE
Infrastructure costs: Power, Water, Assumed Investigated Finalise Detail Finalised
Roads, Rail
General Approach Factored block costs Preliminary Quantity Detail Quantity Detail / Actual Quantity
where possible
Major Equipment Costs Data bank / factored Single Source Multiple source Fixed tender
Civil Work Rough quantity Preliminary Take-off Tender Prices
Structural Work $/unit vol Prelim take-off Take-off Tender Prices
Piping & Instrumentation % machinery Prelim take-off /% Take-off Tender Prices
Electrical $/Kw Prelim take-off Take-off Detailed Estimates
Installation Factored / % Man-hours / unit rates Man-hours Man-Hours / Contract

Indirect Costs % of total Prelim calculation Calculation Detail Calculation

Spare Parts % of total % of total % of total % of total
OPERATING COST DETERMINATION
Staffing Levels Factored Preliminary Detailed Estimate Known
Labour costs Factored Calculated Known Basis Known
Admin/Management cost e.g. Factored Preliminary Final Final
insurance, taxes, duties, etc
Power costs Factored Estimated Quoted Known
Fuel costs Factored Estimated Quoted Known

Legend
Merit
Contaminated Sites Program
Treasury Board
Public Works
AACE