To use a leading estimate type

Estimate types enable you to switch between top-down estimates and bottom-up estimates. Initially, project estimation is determined using a top down structure as detailed information of project costs is not available.

As a part of estimating, you create a feasible bid for your customer by calculating the approximate target cost price for your project. You can use this cost amount to allocate the estimate for the required work or the departments involved.

For example, a customer requests for the approximate cost for a luxurious yacht. The shipyard evaluates the request for the quotation. The sales price is determined to be approximately EURO 65 million. The yacht must be built, using the expertise of the Project Management (PM) and the Construction department. The PM department is required for redesigning an existing CAD drawing of a ship, which costs EURO 9 million. The Construction department requires approximately EURO 50 million to build the yacht and a subcontractor is assigned for the yacht's decor.

Specify the following estimates in the Estimate Versions (tpest1100m000) session:

Top down estimate (usually defined at a later stage of the estimation process):

Define an amount for TOP as EUR 60 million. The distributed amount is EUR 60 million.

01, 02, and 03 are linked as child activities to the TOP.

To create an estimate, the structural element with a top-down leading estimate type is required. In the Structural Elements (tpest1120m000) session, you can define the estimate type as top down or bottom up. The leading estimate type of a structural element determines the method of calculation of the estimate and you can also modify the estimate type.

Enter your top-down estimate in the Estimate Lines (tpest2100m000) session such as the line number, activity, description, estimate type, line level type, and amount in EURO.

Element 03, Line 25, is subcontracted to another company. A request for a quotation is sent to the subcontractor, but the estimate for the cost is EURO 1 million.

You must specify detailed estimate lines and you must define the entire estimate structure. Child activities, for which more bottom-up information is available, use the Bottom-Up leading estimate type option:

The structural element 011 is linked to 01. The structural element 021, 022, and 023 are linked to 02. Based on the linking, the 02 Building ship parent activity remains a top-down activity because of expected overhead costs.

In the example, a top-down estimate is used and amounts are allocated. However, the two internal departments involved in this project provide their own estimates for building the yacht. Based on their evaluation, they provide a more detailed calculation. Specify these lines and the related details in the estimate version.

If you view the details of the activity 011, a top-down total of EURO 5 million is expected. However, if you add the two bottom-up detail lines of 011, that part of the ship adds up to EURO 3 million or 5 million, depending on the Line Level Type. If all required estimate lines are specified, you can aggregate the totals and view the estimate amounts for the leading estimate type. For the formulas, refer to Estimate Lines (tpest2100m000) session.

If the leading estimate type (LET) in the Structural Elements (tpest1120m000) session is Bottom Up, you can calculate estimate totals for Total and Detail level types. If the leading estimate type is Top Down for a structural element, you cannot apply level type aggregation, but you can use level types to check the consistency of top-down lines.

In the User Profiles (tppdm0101s000) session, you can define the settings for a consistency check. You can also define, if the check of the Verify Top-Down Estimate Consistency (tpest2220m000) session is performed for each field or each record. Using the Level field types entered in the Estimate Lines (tpest2100m000) session, the check is performed in this order:

A bottom-up line can only have two level types: Total and Detail. Enter and add the costs, in the Structural Elements (tpest1120m000) session you can determine which level type must be used in the bottom-up estimate. The values of the Cost Level and Sales Level fields determine the lines that are aggregated for cost or sales. The Launch field’s level type determines which estimate lines linked to the defined level type are launched to budgeting. If the level type is set to Total, all estimate lines of that level type are launched to the project budget.

Click Aggregate Totals in the Estimate Lines (tpest2100m000) session, the structural elements’ total amount of the leading estimate type is calculated using the estimate lines. The amount is displayed in the various LET Total fields. If you use bottom-up estimating, the calculation also depends on the settings of the level type in the Structural Elements (tpest1120m000) session. For example, the LET of element 011 is top down and you have three top-down lines for 011 and two bottom-up lines. Consequently, only the top-down lines are used in the LET calculation.

In the Estimate Lines (tpest2100m000) session, the calculations of estimate lines totals are displayed. For example, the LET is EURO 60 million; the amount displayed is based on the setting of the view. When the setting of the view is TOP element, the value is displayed in the Top Down Total: EURO 60 million.

The calculation of the Bottom Up structure differs. The structural elements amounts are added (011 + 023 + 022 = 5 + 15 + 1 = EURO 21 million) and the Cost Level field type is used to determine the selected amounts.

For the bottom-up estimating, you can also calculate a total with the Detail level type. If Cost Level field type in the Structural Elements (tpest1120m000) session is set to Detail, the following result is displayed: 3 + 1 + 0 + 15 + 0,5 = EUR 19.5 million.

If you view the bottom-up lines of 011, there is a difference in amount; the Total line amount is an approximate amount, whereas the Detail lines are accurate labor hours. If the Cost Level field type is Detail, the total for 011 is 3 million; based on the combination of 2.7 and 0.3 million that is set for 011.

You can use the LET total and the cost total to calculate and recalculate different estimates before you send a bid. The aim is to create a cost estimate. With the same estimate, you can present a sales estimate with the required level of detail.