Understanding the estimating process

This chapter provides you with an overview of estimates for a project and the various related processes.

Project Estimates

An estimate is a statement of probable cost and sales value for supplying certain goods or services. An estimate is created in anticipation of receiving an order. Project Estimating is used for the preparation of tenders/quotations to calculate the costing for the project, in order to arrive at an estimate.

Estimate types

An estimate type is calculated using either a top down or a bottom up structure.

  • Top down: When calculating the cost or sales amount in a top down structure, you distribute a top amount to the lower level elements.
  • Bottom up: When calculating the cost or sales amount in a bottom up structure, you enter the exact amounts for the lowest level elements and aggregate the same to calculate top amount.

Leading Estimate Types

The estimate type of the structural elements of the project are the leading estimating types. If the leading estimate type is bottom up, LN calculates the total leading estimate type (LET) amount by adding all the estimate line amounts with the same level type. If the leading estimate type for the top structural element is top down, the total LET is the structural element amount that is defined as top down. Top-down structural elements are only checked to determine if the estimate amounts do not exceed the parent amount; However, these elements are not used when calculating the total estimate.

Budget types for launching estimates

You can select one of the following budget types when launching an estimate to a budget:

Estimate Version

Estimate versions are part of an estimate project and use structural elements to define the structure of an estimate. Versions can be used to differentiate between various approaches or internal or external requests for a price calculation.

Estimate Version Structures

Estimate version structures are used to order or to classify the estimate. In many cases, multiple estimate-version structures enable you to create different classifications of the estimate data. An estimate-version structure can be an imported activity structure, element structure, cost component structure, or an extension assigned to the structure. These structures are imported from an existing project. You can also link a user-defined structure to an estimate version. It is optional to use structures in the estimating phase.

Estimate Series

The estimate series is used to create a unique project number. Organizations can have separate project ranges for estimating projects or use estimating as a phase of a project, and include estimating in the project used for execution. Estimate series are ideally used to create a project number.

Bid

The objective of the estimation process is to prepare a quotation or bid that comprises of the sales price information of the deliverables (primary structural elements).