98R-

18

COSTESTI MATECLASSIFI
CATI
ON
SYSTEM-ASAPPLI EDIN
ENGINEERING,PROCUREMENT,
ANDCONSTRUCTI ONFORTHE
ROADANDRAI L
TRANSPORTATI ON
INFRASTRUCTURE
INDUSTRIES
 AACE International Recommended Practice No. 98R-18

COST ESTIMATE CLASSIFICATION SYSTEM –

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

Rev. August 7, 2020

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

Any terms found in AACE Recommended Practice 10S-90, Cost Engineering Terminology, supersede terms defined in
other AACE work products, including but not limited to, other recommended practices, the Total Cost Management
Framework, and Skills & Knowledge of Cost Engineering.

Contributors:
Disclaimer: The content provided by the contributors to this recommended practice is their own and does not necessarily
reflect that of their employers, unless otherwise stated.

August 7, 2020 Revision:

Peter R. Bredehoeft, Jr. CEP FAACE (Primary Contributor) John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life
Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life (Primary Contributor)
(Primary Contributor) Todd W. Pickett, CCP CEP (Primary Contributor)

March 26, 2019 Revision:

Robert H. Harbuck, PE CCP CEP (Primary Contributor) David Davies
John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
(Primary Contributor) Dr. Waleed M. El Nemr
Giulio Sansonetti, P.Eng. CCP (Primary Contributor) Michael Lesnie
Rodolfo Arellano, CEP H. Lance Stephenson, CCP FAACE
Stuart Chalmers

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.

This document is copyrighted by AACE International and may not be reproduced without permission. Organizations may obtain permission
to reproduce a limited number of copies by entering into a license agreement. For information please contact editor@aacei.org
AACE® International Recommended Practice No. 98R-18
COST ESTIMATE CLASSIFICATION SYSTEM – AS
APPLIED IN ENGINEERING, PROCUREMENT, AND
CONSTRUCTION FOR THE ROAD AND RAIL
TRANSPORTATION INFRASTRUCTURE INDUSTRIES
TCM Framework: 7.3 – Cost Estimating and Budgeting

August 7, 2020

TABLE OF CONTENTS

Table of Contents ..........................................................................................................................................................1

1. Purpose ......................................................................................................................................................................1
2. Introduction ...............................................................................................................................................................2
3. Cost Estimate Classification Matrix for the Road and Rail Transportation Infrastructure Industries ........................5
4. Determination of the Cost Estimate Class (and National Stage-Gate Alignment) .....................................................8
5. Characteristics of the Estimate Classes ...................................................................................................................11
6. Estimate Input Checklist and Maturity Matrix .........................................................................................................17
7. Basis of Estimate Documentation ............................................................................................................................20
8. Project Definition Rating System .............................................................................................................................20
9. Classification for Long-Term Planning and Asset Life Cycle Cost Estimates ............................................................21
References ...................................................................................................................................................................21
Contributors.................................................................................................................................................................23
Appendix: Understanding Estimate Class and Cost Estimate Accuracy .......................................................................24

1. PURPOSE

As a recommended practice (RP) 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 industries and scope content.

This recommended practice provides guidelines for applying the principles of estimate classification specifically to
project estimates for engineering, procurement, and construction (EPC) work for the road and rail transportation
infrastructure industries. It supplements the generic cost estimate classification RP 17R-97 [1] by providing:
• A section that further defines classification concepts as they apply to the road and rail transportation
infrastructure industries.
• A chart that maps the extent and maturity of estimate input information (project definition deliverables)
against the class of estimate.

As with the generic RP, the intent of this document is to improve communications among all the stakeholders
involved with preparing, evaluating, and using project cost estimates specifically for the road and rail
transportation infrastructure industries.

The overall purpose of this recommended practice is to provide the road and rail transportation infrastructure
industries with a project definition deliverable maturity matrix which is not provided in 17R-97. It also provides an

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 2 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

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, terminology, and may classify estimates in other ways. This guideline
provides a generic and generally acceptable classification system for the road and rail transportation infrastructure
industries that can be used as a basis to compare against. This recommended practice should allow each user to
better assess, define, and communicate their own processes and standards in the light of generally-accepted cost
engineering practice.

2. INTRODUCTION

For the purposes of this document, the term road and rail transportation infrastructure industries is assumed to
include facilities for major roads, highways, railroads, transit rail and similar facilities for transporting people and
goods in the infrastructure industries. Rail may be primarily for freight, people (transit) or both including
specialized systems such as metros, light rail, high speed, monorails and people movers. Projects may create new
assets or modify existing assets but exclude maintenance work. These are generally considered civil works
projects. This includes the right-of-way (ROW) and access site preparation and civil work (excavation, drainage,
causeway, etc.), structures (e.g., over and underpasses, bridged crossings, monorail structure, walkways, etc.),
electrical for lighting and for power (if electric driven), road surfaces, guides, rail components and rolling stock,
safety, signaling and signage, telecommunications, and other ancillary facilities.

This RP excludes some specialized scope elements. These specialized elements are commonly part of an overall
road or rail investment program, but their estimates are often based on unique deliverables using unique data and
methods, estimated by specialty firms or subcontractors, and often phased (i.e., these elements may have a
different estimate class). The specialized elements may include, but are not limited to the following:
• Major long-span bridges and viaducts (e.g., major river crossings, canyon crossings, etc.); however
elevated structure for urban monorail or people movers is included.
• Major tunnels.
• Major buildings such as toll stations, rail stations, rail maintenance, offsite fabrication (e.g., rail welding
facilities), fueling and remote operations and control facilities.
• Specialized systems such as hyperloop and traction/cable funiculars and cable car.
• Major system power generation, transmission and substations are also excluded but distributed traction
substations and power lines/rail for electric trains are included.

While these elements are not included in the RP, one must define the rail/road project’s interfaces with these
elements. The defining deliverables of some of those excluded project scopes are covered in other RPs; for
instance:
• Buildings of all types: 56R-09 [2]
• Power transmission lines: 96R-18 [3]
• Substations: 18R-97 [4]

See Professional Guidance Document 01, Guide to Cost Estimate Classification [5].

These varied scope elements are usually sub-projects in a program. Each sub-project will have its own estimate
within the overall project for which the classification should be determined using its respective classification RP. At
a program level, the classification of the combined estimates will usually be rated by the classification of the least

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 3 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

defined major scope element on the principle that a system is only as strong as its weakest link and the project
risks have considerable dependencies between projects.

Road and rail projects often involve utility (e.g., power, water, gas, etc.) relocation and modification and
consideration of this scope is included here. The location, condition and means of working with or on existing
underground utilities are a particularly significant source of uncertainty in urban areas. The scope also considers
potential effects of vibration, noise, settlement and other factors on facilities and structures near the road or rail
right-of-way. However, projects to remove, modify or otherwise build major facilities or structures are assumed to
be separate estimates. The same is true for major utilities relocated or modified as pre-work. For example, if a 30-
inch gas pipeline was re-routed through a new boring prior to road construction by the utility operator, that would
be estimated as a pipeline project. In any case, this interaction of scope adds complexity and is a source of
uncertainty.

Road and rail transportation is considered an element of the infrastructure industry. The Construction Industry
Institute has provided a good definition of infrastructure in its Project Definition Rating Index for Infrastructure
Projects as follows [6]:

“A capital project that provides transportation, transmission, distribution, collection or other capabilities
supporting commerce or interaction of goods, services, or people. Infrastructure projects generally impact multiple
jurisdictions, stakeholder groups and/or a wide area. They are characterized as projects with a primary purpose
that is integral to the effective operation of a system. These collective capabilities provide a service that is made up
of nodes and vectors into a grid or system.”

Using this definition, road and rail transportation are a vector or linear scope elements that connects buildings,
industrial plants, storage and loading facilities, or other nodal facilities, which may include major bridges and
stations at its terminations or intermediate points. The major bridge, tunnel, station and other facility nodes are
integral elements of road and rail project scope; however, because their design and execution (and often
contractors) differs greatly from the road and rail itself (including key plans and deliverables) they are excluded
here other than interfaces. Road and rail projects are often executed as part of a program that also involves node
project scope or existing system operational changes (or considerations for integrated system testing and startup).
Even in early planning, work breakdown structures will usually segregate the main vector and node project
elements allowing the classification specification for estimates for each element.

As the infrastructure definition states, a distinguishing feature of these projects is that they often traverse wide
areas cross country which puts an emphasis on the definition of routing, land ownership, terrain and
environmental conditions, and establishing right-of-way, etc. The route often intersects, interferes with, and/or is
in conjunction with other vector utilities (e.g., power lines, pipelines, other rail, other roads, etc.). Associated scope
definition challenges include defining stakeholder, permitting, and regulatory requirements. Road and rail
infrastructure are regulated industries and often government-owned, although sometimes in partnership with
private owners or privatized altogether. Often funding is provided by multiple government agencies which adds
definition and decision-making challenges (e.g., local, state, province, federal, international, etc.). Environmental
concerns are paramount, which greatly impacts planning and decision-making. Both road and track installation
typically require specialized equipment and contractors for key elements.

Typical road transportation scope or asset elements include:

• Embankments.
• Cuts.
• Pavement layers.
• Drainage and culverts.
• Retaining/shoring structures.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 4 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

• Noise barriers.
• Safety structures.
• Support structures (under/overpasses, minor bridges and walkways).
• Stripping, signage, signals and lighting.

Typical main installation elements include:

• Earthworks (land clearing, top soil removal, embankment and cut sections).
• Paving (with specialized equipment).
• Underground and surface drainage.
• Utility relocation and modification.
• Road and structure foundations including retaining/shoring features.
• Tunneling, rock blasting.
• Structural steel and/or concrete.
• Lighting electrical, signal electrical and controls.
• Various specialty items (sound barriers, guardrail, fence, speed control systems, smart systems, etc.).

Typical main physical rail transportation scope or asset elements include:

• Track components (rails, fastenings, sleepers, switches and crossings, catch point, trap point, buffer
stops).
• Ballast or slab track (if not ballast), and the railroad base (sub ballast, sub base).
• Earthworks (land clearing, top soil removal, embankment and cut sections).
• Tunnel boring.
• Underground and surface drainage.
• Utility relocation and modification.
• Station boxes and platforms.
• Elevated structures for monorail or other transitways.
• Grade crossings and safety barriers.
• Overhead lines and structure if electric propulsion.
• Power distribution such as traction substations, and high and medium voltage cable if electric propulsion.
• Signaling and telecommunication systems including related facilities (e.g. ETCS – European Train Control
System, GSM-R, antennas, facilities for signaling and telecom).
• Locomotives and rolling stock, trainsets and other vehicles.

In general, the more developed or urban the route, the more complex the installation will be. For urban areas,
obstructions are frequent. Noise, vibration and dust will be an issue for nearby developments. Settlement may
affect nearby foundations requiring monitoring and mitigation. In remote locations, difficult or environmentally
sensitive terrain, installation has its own challenges. Before any installation work can begin in an area, appropriate
land and ROW must be acquired which creates unique scheduling as well as cost challenges. Stakeholder
management is usually complex.

For the purpose of estimate classification, the main scope definition deliverables start with planning the traffic
capacity and loading, types of road and rail including technology; and establishing the routing including its
elevation profiles, interchanges, crossings, and other elements including interferences with utilities and structures.
Traffic planning capacity and loading provides an understanding of any specific technologies, which may include
vehicle type and size consideration (i.e. low floor cars), stop locations, feeder service requirements, operational
and public parking, etc. The route’s land characteristics and the nature of developments drive the need for special
design features and execution strategies. Stakeholder requirements need to be considered for each scope
definition decision.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 5 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

Often the early planning of alternatives is done as part of a long-term regional transportation and system
operating strategy development that is periodically revised. Then, as defined by regional and/or national agency
procedure, funding or grants for engineering and construction is obtained that requires further supporting scope
definition. This long-term consultative planning, and often politicized approval and funding (given that funding is
often from tax revenue), are somewhat unique features of transportation stage-gate processes and estimate
classification concerns.

This guideline reflects generally-accepted cost engineering practices. This RP was based upon the guideline
practices of multiple regional and national agencies as well as other published references and standards. [7] [8] [9]
[10] Company and public standards were solicited and reviewed, and the practices were found to have significant
commonalities (other than the stage number and estimate names). These classifications are also supported by
empirical industry research of infrastructure cost growth and accuracy by phase. [11]

This RP applies to a variety of project delivery methods such as traditional design-bid-build (DBB), design-build
(DB), construction management for fee (CM-fee), construction management at risk (CM-at risk), and private-public
partnerships (PPP) contracting methods.

3. COST ESTIMATE CLASSIFICATION MATRIX FOR THE ROAD AND RAIL TRANSPORTATION INFRASTRUCTURE
INDUSTRIES

A purpose of cost estimate classification is to align the estimating process with project stage-gate scope
development and decision-making processes. For road and rail, the stage-gate process is usually heavily integrated
with and driven by government long term planning, as well as funding processes. However, institutional stage-gate
processes and the names of phases and estimates vary considerably; each user must compare the stages of the
process governing their work and decide how the classification aligns with them. Examples of variations are shown
later in Figure 2.

Table 1 provides a summary of the characteristics of the five estimate classes. The maturity level of project
definition is the sole determining (i.e., primary) characteristic of class. In Table 1, the maturity is roughly indicated
by a percentage of 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 but may vary depending on the
circumstances.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 6 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

Primary Characteristic Secondary Characteristic

MATURITY LEVEL OF EXPECTED ACCURACY
ESTIMATE PROJECT DEFINITION END USAGE METHODOLOGY RANGE
DELIVERABLES Typical purpose of Typical variation in low and high
CLASS estimate
Typical estimating method
Expressed as % of complete ranges at an 80% confidence
definition interval

Cost/length factors,
Concept L: -20% to -50%
Class 5 0% to 2% parametric models,
screening H: +30% to +100%
judgment, or analogy
Study or Cost/length, 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%
Table 1 – Cost Estimate Classification Matrix for the Road and Rail Transportation Infrastructure Industries

This matrix and guideline outline an estimate classification system that is specific to the road and rail
transportation infrastructure industries. Refer to Recommended Practice 17R-97 [1] for a general matrix that is
non-industry specific, or to other cost estimate classification RPs for guidelines that will provide more detailed
information for application in other specific industries (e.g. 56R-09 for station buildings [2]). These will provide
additional information, particularly the Estimate Input Checklist and Maturity Matrix, which determines the class in
those industries. See Professional Guidance Document 01, Guide to Cost Estimate Classification. [5]

Table 1 illustrates typical ranges of accuracy that are associated with the road and rail transportation infrastructure
industries. The +/‐ value represents typical percentage variation at an 80% confidence interval of actual costs from
the cost estimate after application of appropriate contingency (typically to achieve a 50% probability of project
cost overrun versus underrun) for given scope. 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
within the ranges identified. However, this does not preclude a specific actual project result from falling outside of
the indicated range of ranges identified in Table 1. In fact, research indicates that for weak project systems and
complex or otherwise risky projects, the high ranges may be two to three times the high range indicated in Table 1
[12].

In addition to the degree of project definition, estimate accuracy is also driven by other systemic risks such as:
• Level of familiarity with technology.
• Unique/remote nature of project locations and conditions and the availability of reference data for those.
• Complexity of the project and its execution.
• 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.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 7 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

• Market and pricing conditions.

• Currency exchange.
• Regulatory, community, and landowner risks.
• Third parties, including utility owners.
• Associated betterments (for cities, local jurisdictions, third parties, etc.).
• Political risks and bias (see later discussion).

Systemic risks such as these are often the primary driver of accuracy, especially during the early stages of project
definition. As project definition progresses, project‐specific risks (e.g. risk events and conditions) become more
prevalent (or better known) and also drive the accuracy range. Considering that, it can be expected that more
complex projects in crowded areas, and/or with environmental issues, and/or with new technology or other
systemic risks, will have more potential for cost increases and wider accuracy ranges. Some authorities recognize
scope and risk (size, complexity, technology) differences in their approval process (e.g., FTA New Starts vs. Small
Starts [7]) which may be reflected in different accuracy expectations.

Another concern in estimates is potential organizational pressure for a predetermined value that may result in a
biased estimate. The goal should be to have an unbiased and objective estimate both for the base cost and for
contingency. The stated estimate ranges are dependent on this premise and a realistic view of the project. Failure
to appropriately address systemic risks (e.g. technical complexity) during the risk analysis process, impacts the
resulting probability distribution of the estimated costs, and therefore the interpretation of estimate accuracy.

In particular, road and rail projects are typically government-funded (i.e., taxes) or paid for by users (i.e., tolls), and
decisions can be highly politicized, particularly for mega-projects. As such, bias has been a topic of strong industry
interest. Some have stated that in a politicized environment bias is endemic, reflecting “strategic
misrepresentation” wherein estimators and cost engineers feel pressured or incentivized to underestimate base
costs and contingency [13]. Other research has not supported that contention [14] [15]. This RP, and its accuracy
range-of-ranges, is based on the underlying assumption that the base estimate is validated using empirically-based
cost metrics to identify and quantify bias (per TCM 6.3 and 7.3) [16], and contingency is determined using
empirically-valid, probabilistic risk quantification practices that consider systemic risk including bias (e.g., RP 42R-
08) [17] . In that situation, technical practices and not political bias is the controlling situation for accuracy. This is
supported by literature covering actual transit cost accuracy using appropriate statistical methods [11] [15] [18].

Figure 1 illustrates the general relationship trend between estimate accuracy and the estimate classes
(corresponding with the maturity level of project definition). 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 road or rail transportation
infrastructure project may have an accuracy range as broad as -50% to +100%, or as narrow as -20% to +30%.
However, note that this is dependent upon the contingency included in the estimate appropriately quantifying the
uncertainty and risks associated with the cost estimate. Increasing environmental and political risks become a
concern when stakeholders require reporting of maximum costs or similar dictates related to accuracy. Refer to
Table 1 for the accuracy ranges conceptually illustrated in Figure 1. [19]

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 if the Class 5 estimate of one project is based on a rural route, with
unobstructed flat terrain without major environmental issues and good cost history, whereas the Class 3 estimate
for another is for a project involving a dense urban area with new technology and many interferences. It is for this
reason that Table 1 provides ranges of accuracy values. This allows consideration of the specific circumstances
inherent in a project and an industry sector to provide realistic estimate class accuracy range percentages. While a
target range may be expected for a particular estimate, the accuracy range should always be determined through

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 8 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

risk analysis of the specific project and should never be pre-determined. AACE has recommended practices that
address contingency determination and risk analysis methods. [20]

If contingency has been addressed appropriately approximately 80% of projects should fall within the ranges
shown in Figure 1. However, this does not preclude a specific actual project result from falling inside or outside of
the indicated range of ranges identified in Table 1. As previously mentioned, research indicates that for weak
project systems, and/or complex or otherwise risky projects, the high ranges may be two to three times the high
range indicated in Table 1.

Figure 1 – Illustration of the Variability in Accuracy Ranges for Road and Rail Transportation Infrastructure
Industry Estimates

4. DETERMINATION OF THE COST ESTIMATE CLASS (AND NATIONAL STAGE-GATE ALIGNMENT)

For a given project, the determination of the estimate class is 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 the estimate class) is somewhat subjective, having standards for the design

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 9 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

input data, completeness and quality of the design deliverables will serve to make the determination more
objective.

Many national governments have instituted state-gate processes to help govern major investment decision making
and finance, especially for infrastructure projects. However, while all share similar characteristics, no two country
systems are the same. An example of how governance varies between countries is seen in Figure 2. [8] The figure’s
arrow boxes distinguish political decisions from technical assurance steps, of which classification is a part. In this
figure, Norway is perhaps closest aligned to the class view expressed in RP 17R-97. For Norway, the front-end
decision gates after the Idea, Pre-Study and Pre-Project stages align well with Class 5, 4 and 3 respectively. At the
end of Pre-Study (Class 4), a single alternative or concept is decided upon. At the end of Pre-Project (Class 3), a
funding decision is made with the estimate representing a realistic budget for control. It should be noted that in
Table 3 of this RP that at Class 3 most planning documents are to be defined and high-level technical plans
complete. This is a common feature of the AACE International estimate classifications for all industries.

Note that the first project cost estimate value that is reported to the public, press and elsewhere is the Class 4
estimate in all systems. This can create confusion in overrun discussions and studies as many do not understand
the wide accuracy range expected at the early Class 4 gate. Consistently measuring overruns from the Class 3
estimate, for which accuracy is expected to be reliable, would be a better basis for discussion and study. In some
countries such as the US, the Federal Transit Administration [7] do not make the national political decision at the
earliest gate (Class 5) which is focused on regional strategy development where multiple options are at play and
strategy is subject to frequent updates and evolution. Other countries wait on funding until more detailed design is
done and the major construction work (and rolling stock for rail) has been tendered, which is typically Class 2. By
Class 1, all the work is usually tendered.

In countries with stage gates not aligned with estimate classification, one must assess the governing stage-gate
process and decide what class the estimate will be for each gate. If a government withholds full funding until
tender based on nearly full definition, that is most likely a Class 2 estimate at funding (as compared to Norway,
which funds when a realistic budget is available at Class 3). If the gate is somewhere between the estimate classes,
say between Class 4 and 3, the estimate would be designated as Class 3 with Exceptions; and describe which
deliverables do not meet full class definitions for that decision gate. This is also true if the stage-gate system is
defined by 30/60/90 percent design reviews (or other percentages) where percent design completion may not
have much relationship to the status of any particular deliverable (e.g., definition at 30% design review may not be
adequate for Class 3 and therefore the associated estimate would be Class 3 with Exceptions as noted).

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 10 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

Political Assessment or Decision Technical/Economic Appraisal or Quality Assurance

NORWAY

Commissioning
Idea Pre- Pre- Detailed
Construction and
Phase Study Project Engineering
Operation

DENMARK

Phase 1 Phase 3 Phase 4 Phase 5

Phase 2
Preliminary Detailed Tendering and Construction
Decision Basis
Investigations Engineering Commissioning and Operation

NETHERLANDS

Exploration Planning/ Realization

Idea Phase
Phase Development Phase

CANADA

1. The 2. The 3. The 4. The 5. The

Front-End Initiating Planning Execution Closing
Phase Phase Phase Phase Phase

GREAT BRITAIN

IAAP Project Initiation Delivering the

Policy Integrated

Formulation Assurance
Strategic Outline Full Project Operations
and Approval
Plan Outline Case Business Case Business Case (design/build/test)

Figure 2. Example Stage-Gate Models for Infrastructure (for illustrative purposes only)
(Adapted from Concept Research Programme, with permission [8])

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 11 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

5. CHARACTERISTICS OF THE ESTIMATE CLASSES

The following tables (2a through 2e) provide detailed descriptions of the five estimate classifications as applied in
the road and rail transportation infrastructure 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.

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

• Maturity Level of Project Definition Deliverables Required (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. Typically, but not always,
maturity level 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 Methods Used (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 if contingency
appropriately forecasts uncertainty and risks.

• 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.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 12 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

CLASS 5 ESTIMATE

Description: Estimating Methods Used:

Class 5 estimates are generally prepared based on very limited Class 5 estimates generally use stochastic estimating methods
information and accordingly have wide accuracy ranges. As such as gross unit costs (cost/length), factoring and other
such, some companies and agencies have elected to parametric and modeling techniques.
determine that due to the inherent inaccuracies, such
estimates cannot be classified in a conventional and Expected Accuracy Range:
systematic manner. Class 5 estimates, due to the requirements Typical accuracy ranges for Class 5 estimates are
of end use, may be prepared within a very limited amount of -20% to -50% on the low side, and +30% to +100% on the high
time and with little effort expended—sometimes requiring less side, depending on the technology, route congestion and
than an hour to prepare. Often, there is little more definition complexity, and appropriate reference information and other
than the approximate load factor, general road or rail concept risks (after inclusion of an appropriate contingency
and length over approximate alternate routes on large scale determination). Ranges could exceed those shown if there are
maps at the time of estimate preparation. unusual risks including volatile stakeholder and political
situations. The range values will shift (show bias) to the extent
Maturity Level of Project Definition Required: that contingency included in the funding is over or
Key Deliverable and Target Status: assumed capacity or load underestimated.
factor, general design and technology concepts and routing
alternatives agreed by business stakeholders. 0% to 2% of full Alternate Estimate Names, Terms, Expressions, Synonyms:
project definition. FEL 1, strategic, ballpark, conceptual, gross, blue sky, seat-of-
pants, rough order of magnitude (ROM), screening, idea study,
End Usage: indicative, scoping, prospect estimate, guesstimate, rule-of-
Class 5 estimates are prepared for any number of strategic thumb.
business or regional planning purposes, such as but not limited
to market studies, assessment of initial viability, evaluation of
alternate schemes, project screening, routing studies,
evaluation of resource needs and budgeting, long-range
capital planning, etc.
Table 2a – Class 5 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 13 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

CLASS 4 ESTIMATE

Description: Estimating Methods Used:

Class 4 estimates are generally prepared based on limited Class 4 estimates generally use stochastic estimating methods
information and accordingly have fairly wide accuracy ranges. such as adjusted gross unit costs (cost/length) with adjustment
They are typically used for project screening, determination of for specific design elements or approximate unit or assembly
feasibility, concept evaluation, and preliminary budget costs for major structures and systems, factored design and
approval. Typically, engineering is from 1% to 15% complete, installation costs, and other parametric and modeling
and would comprise at a minimum the following for multiple techniques.
alternatives: highway capacity or rail load factor, preliminary
road or rail design and geometry, route topographic mapping Expected Accuracy Range:
with aerial photography, preliminary structure and system Typical accuracy ranges for Class 4 estimates are
features identified, and major environmental, community, -15% to -30% on the low side, and +20% to +50% on the high
regulatory and right-of-way (ROW) concerns identified. side, depending on the technology, route congestion,
complexity, appropriate reference information and other risks
Maturity Level of Project Definition Required: (after inclusion of an appropriate contingency determination).
Key Deliverable and Target Status: preliminary technology Ranges could exceed those shown if there are unusual risks
selection, preliminary road or rail design and geometry, including volatile stakeholder and political situations. The
routing corridors defined with optimization underway, and range values will shift (show bias) to the extent that
other system concepts defined. 1% to 15% of full project contingency included in the funding is over or underestimated.
definition.
Alternate Estimate Names, Terms, Synonyms:
End Usage: Screening, top-down, feasibility, factored, pre-design,
Class 4 estimates are prepared for a number of purposes, such advanced study, alternative analysis, basic engineering,
as but not limited to, detailed strategic planning, business planning, preliminary funding, and license.
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 or to establish binding
contracts with shippers. Usually there is only one major option
carried forward for more detailed Class 3 estimate
development.
Table 2b – Class 4 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 14 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

CLASS 3 ESTIMATE

Description: Estimating Methods Used:

Class 3 estimates are generally prepared to form the basis for Class 3 estimates generally involve more deterministic
full budget authorization, appropriation, and/or funding. As estimating methods than stochastic methods. They usually
such, they typically form the initial control estimate against involve detailed quantity surveying and predominant use of
which all actual costs and resources will be monitored. unit cost line items, although these may be at an assembly
Typically, engineering is from 10% to 40% complete (many call level of detail rather than individual components. Factoring
for a 30% design review), and would comprise at a minimum and other stochastic methods may be used to estimate less-
the following: completed road, rail, structure concept design, significant areas of the project.
rolling stock types selected, confirmed optimized route,
specific materials, telecommunication, electrification and Expected Accuracy Range:
signaling, utility and other systems defined, right-of-way Typical accuracy ranges for Class 3 estimates are
(ROW) title holders defined and negotiation in progress, and -10% to -20% on the low side, and +10% to +30% on the high
regulatory, permitting and stakeholder concerns addressed. side, depending on the technology, route congestion,
Adequate definition to obtain firm construction bid unit complexity, appropriate reference information and other risks
pricing and rolling stock price quotations, with execution and (after inclusion of an appropriate contingency determination).
contracting plans defined. Ranges could exceed those shown if there are unusual risks
including volatile stakeholder and political situations.
Maturity Level of Project Definition Required: However, projects in existing, developed/shared ROW may
Key Deliverable and Target Status: completed road, rail, have tighter ranges. The range values will shift (show bias) to
structure concept design, confirmed and optimized route and the extent that contingency included in the funding is over or
conditions confirmed by survey; all ROW title holders underestimated.
identified and ready to begin negotiations though some
negotiation may be complete, major permit applications Alternate Estimate Names, Terms, Synonyms:
prepared, license applications and environmental impact Budget, scope, sanction, semi-detailed, forced detail,
statement (EIS) prepared, and execution plans agreed. 10% to authorization, preliminary control, preliminary engineering,
40% of full project definition. front-end engineering and design (FEED), target estimate,
license, bid, and tender.
End Usage:
Class 3 estimates are typically prepared to support full project
funding requests and become the first of the project phase
control estimates against which all actual costs and resources
will be monitored for variations to the budget. They are used
as the project budget until replaced by more detailed
estimates. In most government systems, a Class 2 estimate will
be prepared based on tender pricing for major construction,
and rolling stock, however, these may be addressed via
changes made to the Class 3.
Table 2c – Class 3 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 15 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

CLASS 2 ESTIMATE

Description: Estimating Methods Used:

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 tender/bid estimate to establish undefined, an assumed level of detail takeoff (forced detail)
contract value. Typically, engineering is from 30% to 75% may be developed to use as line items in the estimate instead
complete (many call for a 60% design review), and would of relying on factoring methods.
comprise at a minimum the following: road, rail and structure
design well advanced, rolling stock in detail design, bulk Expected Accuracy Range:
materials quoted, telecommunication, electrification and Typical accuracy ranges for Class 2 estimates are
signaling, utility and other systems design advanced, most -5% to -15% on the low side, and +5% to +20% on the high
right-of-way (ROW) obtained, most permits and licenses side, depending on the technology, route congestion and
obtained, contracts in place and construction in progress. complexity, and other risks (after inclusion of an appropriate
contingency determination). Ranges could exceed those
Maturity Level of Project Definition Required: shown if there are unusual risks including volatile stakeholder
Key Deliverable and Target Status: detailed design well and political situations. The range values will shift (show bias)
advanced, rolling stock in detailed design, most ROW to the extent that contingency included in the funding is over
obtained, permits and licenses obtained, and supply and or underestimated.
installation contracts issued. 30% to 75% of full project
definition. Alternate Estimate Names, Terms, Synonyms:
Detailed control, execution phase, master control,
End Usage: engineering, tender, and change order estimate.
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

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 16 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

CLASS 1 ESTIMATE

Description: Estimating Methods Used:

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 change orders and claims. Typically, overall side, depending on the technology, route congestion and
engineering is from 65% to 100% complete (some parts or complexity and other risks (after inclusion of an appropriate
packages may be complete and others not) with some calling contingency determination). Ranges could exceed those
for a 90% review. Would comprise virtually all engineering and shown if there are unusual risks including volatile stakeholder
design documentation of the project, and complete project and political situations. The range values will shift (show bias)
execution and commissioning plans. to the extent that contingency included in the funding is over
or underestimated.
Maturity Level of Project Definition Required:
Key Deliverable and Target Status: All deliverables in the Alternate Estimate Names, Terms, Synonyms:
maturity matrix complete or near complete with rolling stock Full detail, release, fall-out, tender, firm price, bottoms-up,
in fabrication. 65% to 100% of full project definition. final, detailed control, forced detail, execution phase, master
control, fair price, definitive, change order estimate.
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

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 17 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

6. 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 road and rail
transportation infrastructure industries. The maturity level is an approximation of the completion status of the
deliverable. The completion is indicated by the following descriptors.

General Project Data:

• Not Required (NR): May not be required for all estimates of the specified class, but specific project
estimates may require at least preliminary development.

• Preliminary (P): Project definition has begun and progressed to at least an intermediate level of
completion. Reviews and approvals for its current status have occurred.

• Defined (D): Project definition is advanced, and reviews have been conducted. Development may be near
completion with the exception of final approvals.

Technical and ROW Deliverables:

• Not Required (NR): Deliverable may not be required for all estimates of the specified class, but specific
project estimates may require at least preliminary development.

• 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.

ESTIMATE CLASSIFICATION
MATURITY LEVEL OF PROJECT
CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
DEFINITION DELIVERABLES
0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100%

GENERAL PROJECT DATA:

A. SCOPE:
Project Scope of Work Description P P D D D
Site Infrastructure (Access, Construction
NR P D D D
Power, Camp etc.)
B. CAPACITY:
Rail (Passenger Demand, Vehicle Type,
Load Factors, Coordination & Connectivity
P P D D D
Measures, Feeder Requirements, Staging
Plans)
Road (Transit Load Factors, Traffic Study,
P P D D D
Ruling Grades, Staging Plans)

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 18 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

ESTIMATE CLASSIFICATION
MATURITY LEVEL OF PROJECT
CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
DEFINITION DELIVERABLES
0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100%
Electrical Power Requirements (when not
NR P D D D
the primary capacity driver)
C. PROJECT LOCATION:
Facility (stations, depots, yards, etc.) P P D D D
D. REQUIREMENTS:
Codes and/or Standards NR P D D D
Communication Systems NR P D D D
Fire Protection and Life Safety NR P D D D
Environmental Monitoring NR NR P P D
E. TECHNOLOGY SELECTION:
Pavement, Track, Rolling Stock, Systems,
P P D D D
etc.
F. STRATEGY:
Quality and Level of Service P P D D D
Regional Transportation Strategy
P P D D D
Alignment
Right-of Way (ROW) P P D D D
Contracting / Sourcing NR P D D D
Escalation NR P D D D
G. PLANNING:
Regulatory Approval & Permitting P P D D D
Logistics Plan P P P D D
Integrated Project Plan1 NR P D D D
Project Code of Accounts NR P D D D
Project Master Schedule NR P D D D
Risk Register NR P D D D
Stakeholder Consultation / Engagement /
NR P D D D
Management Plan
Utility Coordination / Agreements NR P D D D
Work Breakdown Structure NR P D D D
Startup and Commissioning Plan NR P P/D D D
Storm Water Management Plan NR P P/D D D
Systems Acceptance Plan NR P P/D D D

1 The integrated project plan (IPP), project execution plan (PEP), project management plan (PMP), or more broadly the project plan, is a high-
level management guide to the means, methods and tools that will be used by the team to manage the project. The term integration
emphasizes a project life cycle view (the term execution implying post-sanction) and the need for alignment. The IPP covers all functions (or
phases) including engineering, procurement, contracting strategy, fabrication, construction, commissioning and startup within the scope of
work. However, it also includes stakeholder management, safety, quality, project controls, risk, information, communication and other
supporting functions. In respect to estimate classification, to be rated as defined, the IPP must cover all the relevant phases/functions in an
integrated manner aligned with the project charter (i.e., objectives and strategies); anything less is preliminary. The overall IPP cannot be rated
as defined unless all individual elements are defined and integrated.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 19 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

ESTIMATE CLASSIFICATION
MATURITY LEVEL OF PROJECT
CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
DEFINITION DELIVERABLES
0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100%
Systems Plan (Signaling /
Telecommunication / Lighting / Electric NR P P/D D D
Traction / Control / Tolling, etc.)
H. STUDIES:
Routing Options P P D D D
Topography and/or Bathymetry P P P/D D D
Environmental Impact / Sustainability
NR P D D D
Assessment
Environmental / Existing Conditions NR P D D D
Geotechnical and Hydrology NR P D D D
Soils and Hydrology NR P D D D
TECHNICAL DELIVERABLES:
Route Mapping / Survey S/P P/C C C C
Design Specifications NR S/P C C C
Electrical One-Line Drawings NR S/P C C C
Equipment Datasheets NR S/P C C C
Equipment Lists: Electrical NR S/P C C C
Equipment Lists: Mobile NR S/P C C C
Equipment Lists: Process / Utility /
NR S/P C C C
Mechanical
General Equipment Arrangement
NR S/P C C C
Drawings
Instrument List NR S/P C C C
Major Structure Drawings (bridges,
NR S/P C C C
viaducts, etc.)
Plot Plans / Facility Layouts NR S/P C C C
Roadway / Pavement or Track Concept
NR S/P C C C
Plans
Utilities Systems Plans including
NR S/P C C C
Relocation
Construction Permits NR S/P P/C C C
Geometric Layout. Alignment, Profile,
NR S/P P/C C C
Cross Section
Land / ROW Title Negotiation NR S/P P/C C C
Minor Structure Plans (retaining walls,
NR S/P P/C C C
culverts, etc.)
Civil / Site / Structural / Architectural
NR S/P P C C
Discipline Drawings
Demolition Plan and Drawings NR S/P P C C
Erosion Control Plan and Drawings NR S/P P C C
Fire Protection and Life Safety Drawings
NR S/P P C C
and Details
Storm Water Drawings NR S/P P C C
Roadway / Track Discipline Drawings NR S/P P P/C C
Signaling / Telecommunication /
NR S/P P P/C C
Electrification Discipline Drawings
Electrical Schedules NR NR/S P P/C C

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 20 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

ESTIMATE CLASSIFICATION
MATURITY LEVEL OF PROJECT
CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
DEFINITION DELIVERABLES
0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100%
Instrument and Control Schedules NR NR/S P P/C C
Instrument Datasheets NR NR/S P P/C C
Spare Parts Listings NR NR P P/C C
Electrical Discipline Drawings NR NR S/P P/C C
Facility Emergency Communication Plan
NR NR S/P P/C C
and Drawings
Information Systems /
NR NR S/P P/C C
Telecommunication Drawings
Instrumentation / Control System
NR NR S/P P/C C
Discipline Drawings
Mechanical Discipline Drawings NR NR S/P P/C C
Table 3 – Estimate Input Checklist and Maturity Matrix (Primary Classification Determinate)

7. BASIS OF ESTIMATE DOCUMENTATION

The basis of estimate (BOE) typically accompanies the cost estimate. The basis of estimate is a document that
describes how an estimate is prepared and defines the information used in support of development. A basis
document commonly includes, but is not limited to, a description of the scope included, methodologies used,
references and defining deliverables used, assumptions and exclusions made, clarifications, adjustments, and some
indication of the level of uncertainty.

The BOE is, in some ways, just as important as the estimate since it documents the scope and assumptions; and
provides a level of confidence to the estimate. The estimate is incomplete without a well-documented basis of
estimate. See AACE Recommended Practice 34R-05 Basis of Estimate [21] for more information.

8. PROJECT DEFINITION RATING SYSTEM

An additional step in documenting the maturity level of project definition is to develop a project definition rating
system. This is another tool for measuring the completeness of project scope definition. Such a system typically
provides a checklist of scope definition elements and a scoring rubric to measure maturity or completeness for
each element. A better project definition rating score is typically associated with a better probability of achieving
project success.

Such a tool should be used in conjunction with the AACE estimate classification system; it does not replace
estimate classification. A key difference is that a project definition rating measures overall maturity across a broad
set of project definition elements, but it usually does not ensure completeness of the key project definition
deliverables required to meet a specific class of estimate. For example, a good project definition rating may
sometimes be achieved by progressing on additional project definition deliverables, but without achieving signoff
or completion of a key deliverable.

AACE estimate classification is based on ensuring that key project deliverables have been completed or met the
required level of maturity. If a key deliverable that is indicated as needing to be complete for Class 3 (as an
example) has not actually been completed, then the estimate cannot be regarded as Class 3 regardless of the
maturity or progress on other project definition elements.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 21 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

An example of a project definition rating system is the Project Definition Rating Index developed by the
Construction Industry Institute. It has developed several indices for specific industries, such as IR113-2 [22] for the
process industry and IR115-2 [23] for the building industry. Similar systems have been developed by the US
Department of Energy [24].

9. CLASSIFICATION FOR LONG-TERM PLANNING AND ASSET LIFE CYCLE COST ESTIMATES

As stated in the Purpose section, classification maps the phases and stages of project cost estimating. Typically, in
a phase-gate project system, scope definition and capital cost estimating activities flow from framing a business
opportunity through to a capital investment decision and eventual project completion in a more-or-less steady,
short-term (e.g., several years) project life-cycle process.

Cost estimates are also prepared to support long-range (e.g., perhaps several decades) capital budgeting and/or
asset life cycle planning. Asset life cycle estimates are also prepared to support net present value (e.g., estimates
for initial capital project, sustaining capital, and decommissioning projects), value engineering and other cost or
economic studies. These estimates are necessary to address sustainability as well. Typically, these long-range
estimates are based on minimal scope definition as defined for Class 5. However, these asset life cycle
“conceptual” estimates are prepared so far in advance that it is virtually assured that the scope will change from
even the minimal level of definition assumed at the time of the estimate. Therefore, the expected estimate
accuracy values reported in Table 1 (percent that actual cost will be over or under the estimate including
contingency) are not meaningful because the Table 1 accuracy values explicitly exclude scope change. For long-
term estimates, one of the following two classification approaches is recommended:

• If the long-range estimate is to be updated or maintained periodically in a controlled, documented life

cycle process that addresses scope and technology changes in estimates over time (e.g., nuclear or other
licensing may require that future decommissioning estimates be periodically updated), the estimate is
rated as Class 5 and the Table 1 accuracy ranges are assumed to apply for the specific scope included in
the estimate at the time of estimate preparation. Scope changes are explicitly excluded from the accuracy
range.

• If the long-range estimate is performed as part of a process or analysis where scope and technology
change is not expected to be addressed in routine estimate updates over time, the estimate is rated as
Unclassified or as Class 10 (if a class designation is required to meet organizational procedures), and the
Table 1 accuracy ranges cannot be assumed to apply. The term Class 10 is specifically used to distinguish
these long-range estimates from the relatively short time-frame Class 5 through Class 1 capital cost
estimates identified in Table 1 and this RP; and to indicate the order-of-magnitude difference in potential
expected estimate accuracy due to the infrequent updates for scope and technology. Unclassified (or
Class 10) estimates are not associated with indicated expected accuracy ranges.

In all cases, a Basis of Estimate should be documented so that the estimate is clearly understood by those
reviewing and/or relying on them later. Also, the estimating methods and other characteristics of Class 5 estimates
generally apply. In other words, an Unclassified or Class 10 designation must not be used as an excuse for
unprofessional estimating practice.

REFERENCES

[1] AACE International, Recommended Practice No. 17R-97, Cost Estimate Classification System, Morgantown,

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 22 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

WV: AACE International, Latest revision.

[2] AACE International, Recommended Practice No. 56R-08, Cost Estimate Classification System – As Applied in
Engineering, Procurement, and Construction for the Building and General Construction Industries,
Morgantown, WV: AACE International, Latest revision.
[3] AACE International, Recommended Practice No. 96R-18, Cost Estimate Classification System – As Applied in
Engineering, Procurement, and Construction for the Power Transmission Line Infrastructure Industries,
Morgantown, WV: AACE International, Latest revision.
[4] AACE International, Recommended Practice No. 18R-97, Cost Estimate Classification System – As Applied in
Engineering, Procurement, and Construction for the Process Industries, Morgantown, WV: AACE International,
Latest revision.
[5] AACE International, Professional Guidance Document (PGD) 01, Guide to Cost Estimate Classification,
Morgantown, WV: AACE International, Latest revision.
[6] E. Bingham, G. Gibson and R. Stogner, "Development of the Construction Industry Institute, Project Definition
Rating Index (PDRI) for Infrastructure Projects, Research Report 268-11," Construction Industry Institute,
Austin, 2011.
[7] US Federal Transit Administration, "Project and Construction Management Guidelines," US Federal Transit
Administration, March 2006.
[8] K. Samset, G. H. Volden, N. Olsson and E. V. Kvalheim, "Concept Report No. 47, Governance Schemes for
Major Public Investment Projects: A Comparative Study of Principles and Practices in Six Countries," The
Concept Research Programme, September 2016.
[9] Australian Government, Department of Finance, "Australian Government Assurance Reviews - Resource
Management Guide No. 106," Commonwealth of Australia, July 2017.
[10] Washington State Department of Transportation, "Master Deliverable List, WSDOT Headquarters Capital
Program and Management Office PMRS Unit," 2011-2013.
[11] US Federal Transit Administration, "Oversight Procedure 40c – Risk and Contingency Review – Full," US
Federal Transit Administration, September 2017.
[12] J. K. Hollmann, Project Risk Quantification, Sugarland, TX: Probabilistic Publishing, 2016.
[13] B. Flyvbjerg, M. Skamris Holm and S. Buhl, "Underestimating Costs in Public Works Projects, Error or Lie?,"
APA Journal, Summer 2002.
[14] P. Love and D. Ahiaga-Dagbuib, "Debunking Fake News in a Post-Truth Era: The Plausible Untruths of Cost
Underestimation in Transport Infrastructure Projects," Transportation Research Part A, April 2018.
[15] M. Terrill and L. Danks, "Cost Overruns in Transport Infrastructure," Grattan Institute, 2016.
[16] H. L. Stephenson, Ed., Total Cost Management Framework: An Integrated Approach to Portfolio, Program and
Project Management, (Chapters 6.3 and 7.3), 2nd ed., Morgantown, WV: AACE International, Latest revision.
[17] AACE International, Recommended Practice No. 42R-08, Risk Analysis and Contingency Determination Using
Parametric Estimating, Morgantown, WV: AACE International, Latest revision.
[18] R. H. Harbuck, "Are Accurate Estimates Achievable During the Planning of Transporation Projects?," in AACE
International Transactions, Morgantown, 2007.
[19] AACE International, Recommended Practice No. 104R-19, Understanding Estimate Accuracy, Morgantown,
WV: AACE International, Latest revision.
[20] AACE International, Professional Guidance Document (PGD) 02, Guide to Quantitative Risk Analysis,
Morgantown, WV: AACE International, Latest revision.
[21] AACE International, Recommended Practice No. 34R-05, Basis of Estimate, Morgantown, WV: AACE
International, Latest revision.
[22] Construction Industry Institute (CII), "PDRI: Project Definition Rating Index – Industrial Projects, Version 3.2

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 23 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

(113-2)," Construction Industry Institute (CII), Austin, 2009.

[23] Construction Industry Institute (CII), "PDRI: Project Definition Rating Index – Building Projects, Version 3.2
(115-2)," Construction Industry Institute (CII), Austin, 2009.
[24] U.S. Department of Energy (DOE), "Project Definition Rating Index Guide for Traditional Nuclear and Non-
Nuclear Construction Projects, DOE G 413.3-12," U.S. Department of Energy (DOE), 2010.

CONTRIBUTORS

Disclaimer: The content provided by the contributors to this recommended practice is their own and does not
necessarily reflect that of their employers, unless otherwise stated.

August 7, 2020 Revision:

Peter R. Bredehoeft, Jr. CEP FAACE (Primary Contributor)
Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life (Primary Contributor)
John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life (Primary Contributor)
Todd W. Pickett, CCP CEP (Primary Contributor)

March 26, 2019 and February 28, 2019 Revision:

Robert H. Harbuck, PE CCP CEP (Primary Contributor)
John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life (Primary Contributor)
Giulio Sansonetti, P.Eng. CCP (Primary Contributor)
Rodolfo Arellano, CEP
Stuart Chalmers
David Davies
Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
Dr. Waleed M. El Nemr
Michael Lesnie
H. Lance Stephenson, CCP FAACE

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 24 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

APPENDIX: UNDERSTANDING ESTIMATE CLASS AND COST ESTIMATE ACCURACY

Despite the verbiage included in the RP, often, there are still misunderstandings that the class of estimate, as
defined in the RP above, defines an expected accuracy range for each estimate class. This is incorrect. The RP
clearly states that “while a target range may be expected for a particular estimate, the accuracy range should
always be determined through risk analysis of the specific project and should never be predetermined.” Table 1
and Figure 1 in the RP are intended to illustrate only the general relationship between estimate accuracy and the
level of project definition. For the road and rail transportation industries, typical estimate ranges described in RP
98R-18 above are shown as a range of ranges:

• Class 5 Estimate:
• High range typically ranges from +30% to +100%
• Low range typically ranges from -20% to -50%
• Class 4 Estimate:
• High range typically ranges from +20% to +50%
• Low range typically ranges from -15% to -30%
• Class 3 Estimate:
• High range typically ranges from +10% to +30%
• Low range typically ranges from -10% to -20%
• Class 2 Estimate:
• High range typically ranges from +5% to +20%
• Low range typically ranges from -5% to -15%
• Class 1 Estimate:
• High range typically ranges from +3% to +15%
• Low range typically ranges from -3% to -10%

As indicated in the RP, these +/- percentage members associated with an estimate class are intended as rough
indicators of the accuracy relationship. They are merely a useful simplification given the reality that every
individual estimate will be associated with a unique probability distribution correlated with its specific level of
uncertainty. As indicated in the RP, estimate accuracy should be determined through a risk analysis for each
estimate.

It should also be noted that there is no indication in the RP of contingency determination being based on the class
of estimate. AACE has recommended practices that address contingency determination and risk analysis methods
(for example RP 40R-08, Contingency Estimating – General Principles [25]). Furthermore, the level of contingency
required for an estimate is not the same as the upper limits of estimate accuracy (as determined by a risk analysis).

The results of the estimating process are often conveyed as a single value of cost or time. However, since
estimates are predications of an uncertain future, it is recommended that all estimate results should be presented
as a probabilistic distribution of possible outcomes in consideration of risk.

Every estimate is a prediction of the expected final cost or duration of a proposed project or effort (for a given
scope of work). By its nature, an estimate involves assumptions and uncertainties. Performing the work is also
subject to risk conditions and events that are often difficult to identify and quantify. Therefore, every estimate
presented as a single value of cost or duration will likely deviate from the final outcome (i.e., statistical error). In
simple terms, this means that every point estimate value will likely prove to be wrong. Optimally, the estimator
will analyze the uncertainty and risks and produce a probabilistic estimate that provides decision makers with the
probabilities of over-running or under-running any particular cost or duration value. Given this probabilistic nature
of an estimate, an estimate should not be regarded as a single point cost or duration. Instead, an estimate actually

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 25 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

reflects a range of potential outcomes, with each value within this range associated with a probability of
occurrence.

Individual estimates should always have their accuracy ranges determined by a quantitative risk analysis study that
results in an estimate probability distribution. The estimate probability distribution is typically skewed. Research
shows the skew is typically to the right (positive skewness with a longer tail to the right side of the distribution) for
large and complex projects. In part, this is because the impact of risk is often unbounded on the high side.

High side skewness implies that there is potential for the high range of the estimate to exceed the median value of
the probability distribution by a higher absolute value than the difference between the low range of the estimate
and the median value of the distribution.

Figure A1 shows a positively skewed distribution for a sample cost estimate risk analysis that has a point base
estimate (the value before adding contingency) of $89.5. In this example, a contingency of $4.5 (approximately 5%)
is required to achieve a 50% probability of underrun, which increases the final estimate value after consideration
of risk to $93. Note that this example is intended to describe the concepts but not to recommend specific
confidence levels for funding contingency or management reserves of particular projects; that depends on the
stakeholder risk attitude and tolerance.

Figure – A1: Example of an Estimate Probability Distribution at a 90% Confidence Interval

Note that adding contingency to the base point estimate does not affect estimate accuracy in absolute terms as it
has not affected the estimate probability distribution (i.e., high and low values are the same). Adding contingency
simply increases the probability of underrunning the final estimate value and decreases the probability of
overrunning the final estimate value. In this example, the estimate range with a 90% confidence interval remains
between approximately $85 and $103 regardless of the contingency value.

As indicated in the RP, expected estimate accuracy tends to improve (i.e., the range of probable values narrows) as
the level of project scope definition improves. In terms of the AACE International estimate classifications,
increasing levels of project definition are associated with moving from Class 5 estimates (lowest level of scope
definition) to Class 1 estimates (highest level of scope definition), as shown in Figure 1 of the RP. Keeping in mind
that accuracy is an expression of an estimate’s predicted closeness to the final actual value; anything included in

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
98R-18: Cost Estimate Classification System – As Applied in Engineering, Procurement, and 26 of 26
Construction for the Road and Rail Transportation Infrastructure Industries

August 7, 2020

that final actual cost, be it the result of general uncertainty, risk conditions and events, price escalation, currency
or anything else within the project scope, is something that estimate accuracy measures must communicate in
some manner. With that in mind, it should be clear why standard accuracy range values are not applicable to
individual estimates.

The level of project definition reflected in the estimate is a key risk driver and hence is at the heart of estimate
classification, but it is not the only driver of estimate risk and uncertainty. Given all the potential sources of risk
and uncertainty that will vary for each specific estimate, it is simply not possible to define a range of estimate
accuracy solely based on the level of project definition or class of estimate.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.