Cost Estimate Class

Activity allowance

  • Amounts and/or quantities, which are added to the estimate because of known occurrences of cost additions or demands. For example
  • Design growth allowance
  • Material take off allowance
  • Cutting losses

Contingency

  • Contingency is added to the “Base estimate” to take into account the “known unknowns” in a estimate.
  • (Known=Identified , Unknown=Risk)
  • Management tool

What is covered by contingency:

  • Design changes within the scope of the project
  • Concept variation
  • Project management
  • Contracting strategy
  • Variations in
  • Quantities
  • Labour rates
  • Equipment prices

Type of Estimate definition in a nutshell is as follows:

  1. Engineering Estimate (10/90)= Quantity * Unit/rate
  2. Base Estimate=Engineering Estimate + Activity Allowance
  3. ۵۰/۵۰ Estimate= Base Estimate+ Contingency
  4. ۹۰/۱۰ Estimate = 50/50 Estimate* +Overrun Allowance

* About this i will give some explanation , because for calculation of Overrun Allowance we need to run a Quantitative model and some of this model can be developed on Base Estimate cost instead of 50/50

In this figure you can see the difference between the Estimate Type

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