101 – What is a ROM Estimate?

Not all estimates are created equally. You’ve come to the right place if you’re looking to get a better understanding of what a rough estimate is and what you should consider when working with them. This post will explain what a Rough Order of Magnitude (ROM estimate, and no, we don’t mean CD-ROM) is and how to use it in project management.

What is a Rough Order of Magnitude Estimate?

A rough estimate refers to an initial estimated cost based on prior experience or data related to a project. Other terms used for this is “Rough Order of Magnitude” or ROM or conceptual estimates. You can use a rough cost estimate for project screening and scenarios where you have to decide between several options to start a project. This type of estimate should only play a role in the very early stages of your project.

ROM Accuracy Range

The ROM estimate is known as rough because its accuracy varies a lot. Depending on who you ask, you will see ranges of anywhere between 30% and 50% accuracy to a simple +/- 50% rule of thumb (according to Project Management Body of Knowledge/PMBOK). But this is a range. The actual accuracy of the estimate depends on various factors and relies on the quality of your cost data and the level of detail an estimator places into the estimate.[1][2]

What is a Ballpark Estimate?

Businesses and contractors often ballpark estimate as an alternate term for ROM because they are more or less the same. However, a ballpark estimate is a rough figure that gives you an idea about your project’s cost. The numbers that come from a “ballpark” estimate are only an approximate cost of what you can expect to spend on a project and its primary purpose is to help you decide on the pursuit of a certain project or not. In other words, a ballpark estimate helps you decide if the estimated cost of a project falls within your budget.

You can get a ballpark estimate in project management with little time and effort invested. You can sit down with the client or vendor and discuss the details of the project. If you are a vendor, it will be up to you to quote a ballpark estimate for the client to decide if they can afford this kind of cost.

If you are a project manager speaking to vendors, they will give you a ballpark estimate to give you a rough idea about how much this project will cost you. You can get several ballpark estimates from different vendors and then decide which one suits your budget and needs best.

Remember, the ballpark figure is not to give you the highest accuracy of cost. This is just to provide you with a sense of the potential cost of a project. It can be higher or lower, depending on various factors such as market costs, any change in the project, delays, etc.

Cost engineers discussing project

Things to Consider When Working with ROM Estimates

Identify any features you discussed in negotiations that were not mentioned at any stage of the estimation process. Any misunderstood features stemming from communication errors will ultimately affect your estimate. This often happens when a customer/stakeholder has a different expectation than the project manager involved. Project alignment and communication are enormous factors to consider throughout the entire process.

Discuss every aspect of the project in detail. Failing to do so will create a disconnect between the scope of work and the cost quoted by the service provider/vendor.
Unexpected or unplanned tasks and features may surface during the development phase of the project. This can affect the rough estimate or ballpark figure quoted initially.[3]

Is Starting a Project Based on a ROM Estimate a Good Idea?

The simple answer is “no.” Rough Order of Magnitudes include the word rough for a reason. As a business, you shouldn’t work based on a hunch and bear the expenses. That being said, it helps to get a ballpark figure to get an idea of what a project is going to cost. The difference between a $10 million project and a $1 million project could end a project before it starts. A ROM will help you get a sense of whether it would be ok to pursue a project as a client or vendor.

However, you can still start a project based on a ballpark estimate based on two conditions. First, you know it is a rough cost with an approximate figure, and the price for the project may fluctuate towards a higher-end or vice versa. Second, if you can afford the cost if it increases due to any unforeseen factors[4].

But let’s take a step back and look at how project costs can affect us on a personal level. How often do we miscalculate the various factors involved in minor projects around the house? Think about the ‘easy’ fence repair project that had more material cost than originally predicted — material cost fluctuated or you had to go buy a new tool. Or the xeriscape yard makeover that took two weeks longer because of shipping delays and lack of available labor hours. Now take that and scale it up to an estimate for a new military base or commercial stadium. ROMs are valuable, but we want to work towards accurate detailed estimates to avoid underestimating or overestimating any project.

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