Accuracy and purpose of capital cost estimates

The accuracy of an estimate depends on the amount of design detail available the accuracy of the cost data available and the time spent on preparing the estimate. In the early stages of a project only an approximate estimate will be required, and justified, by the amount of information by then developed. 

Capital cost estimates can be broadly classified into three types according to their accuracy and purpose  

Preliminary (approximate) estimates, accuracy typically 30 per cent, which are used in initial feasibility studies and to make coarse choices between design alternatives. They are based on limited cost data and design detail. 

Detailed (Quotation) estimates, accuracy 5-10 per cent, which are used for project cost control and estimates for fixed price contracts. These are based on the completed (or near complete) process design, firm quotations for equipment, and a detailed breakdown and estimation of the construction cost. 

The cost of preparing an estimate increases from about 0.1 per cent of the total project cost for 30 per cent accuracy, to about 2 per cent for a detailed estimate with an accuracy of 5 per cent. 

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