Definitive Estimate vs.

ROM/Rough Order of Magnitude (+ Calculator)

Definitive Estimate vs. ROM/Rough Order

of Magnitude (+ Calculator)
Estimating Cost, Time & Schedule, Tools & Templates / By Sebastian / 2 Comments
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When the cost of projects (or parts of a project) is estimated, the accuracy of these
estimates depends on various factors. These include but are not limited to the availability
and quality of information and the estimation technique used. The available options and
data to estimate costs typically vary among the phases of a project.

Definitive estimate and rough order of magnitude (ROM) are two classes of
estimates that are defined in PMI’s Project Management Body of Knowledge. They
differ in their levels of accuracy. ROM normally has an accuracy range between -
25% and +75%. For definitive estimates, it ranges from -5% to +10% (PMBOK®,
6th ed., ch. 7.2).
Read on to learn more about the types of estimates and use the calculator embedded in
this article to quantify the ranges of your project.

Contents
 Types and Accuracy Classes of Estimates
 Types of Estimates Mentioned in the PMBOK®
 Rough Order of Magnitude
 Definitive Estimate
  Other Types of Estimates
 Preliminary Estimates
 Budget Estimate
 Final Estimate
 How Are These Estimates Developed?
 Calculator: Definitive Estimate vs. Rough Order of Magnitude (ROM)
 Conclusion

Types and Accuracy Classes of Estimates

In project management, there is a terminology for the classification of cost estimates by
their accuracy. When communicating estimated costs (or durations), indicating the type
of estimates provides important background on the accuracy of the estimates.

Common terms include:

 Rough order of magnitude (ROM)*,

 Budget estimate,
 Definitive estimate*, and
 other terms, such as preliminary estimates, control estimate, bid estimate,
final estimate, etc.
The types marked with an asterisk (*) are in accordance with the current PMI framework.
Unfortunately, the use of these terms and the underlying ranges vary significantly across
industries and organizations. Some organizations use their own frameworks with
internally predefined ranges of such accuracy classifications. Read on for some examples
of such types and accuracy ranges.
Types of Estimates Mentioned in the PMBOK®
In this section, we focus on the terms and definitions set out in the Project Management
Institute’s framework which are also relevant for the PMP exam.
Rough Order of Magnitude

The rough offer of magnitude is a ballpark figure that is usually created in very early
phases of a project, e.g. during its initiation or even earlier – in the cost-benefit
analysis during the project selection process, for instance.
Its accuracy range is -25% to +75% according to the current PMBOK (ch. 7.2). In earlier
editions of the PMBOK®, such as its 4th edition, the range had been defined as +/-50%.
However, if you are preparing for a PMP exam right now, you should memorize -25%
and +75%.
This means that the cost that has been incurred by a project typically falls within that
range of the initial ROM estimate.

With its broad range of possible outcomes, ROM estimates are rather imprecise.
Therefore, they are normally replaced with more accurate estimates, such as the
definitive estimate, during the project.

Definitive Estimate

The definitive estimate is the most exact type of estimate defined in the PMBOK. Its
accuracy ranges from -5% to +10% (ch. 7.2).
This high level of accuracy can normally only be achieved when the project has been
planned in detail and the information relevant for a reliable estimation of the work is
available.

Thus, definitive estimates are usually developed later in a project while a rough order of
magnitude is more common in very early stages of a project.
The refinement of rough estimates during the course of the project is sometimes
referred to as progressive elaboration. Once a definitive estimate can be developed, it
usually replaces the precious, less precise estimate.
Other Types of Estimates
The following estimate types are not listed in the latest edition of PMI’s PMBOK.
However, they can be relevant in practice to bridge the large gap between the accuracy
ranges of the rough order of magnitude and the definitive estimate.

Preliminary Estimates

Preliminary estimates come with a range of -15% to +50% (source). While this is still not
very precise, it is a significant enhancement compared with the range of the rough order
of magnitude.
Budget Estimate

Budget estimates are way more exact than order of magnitude estimates. They come
with an accuracy range of -10% to +25% (source) or -15% to +30% (source).
This type of estimate is useful when a project proceeds in its planning or when budgets
need to be allocated across the work breakdown structure. A ROM could be too rough
to allow for a proper breakdown and allocation of a budget.

Final Estimate

The Final estimate is deemed not to have any deviation from the actual cost at
completion, hence the accuracy range is 0% (source).
In the early phases of a project, it may not be feasible to achieve this level of accuracy.
However, it could be achievable in some cases when the planning and work breakdown
structure has been developed, all required information is available and one of the more
accurate estimation techniques is used.

An example of the development of a final estimate is the re-estimation during a project.

In such cases, an Estimate at Completion (EAC) is developed that might come with a 0%
deviation if techniques with a high level of accuracy (such as bottom-up estimating) are
used.
How Are These Estimates Developed?
Among the most common estimation techniques are:

 Expert Judgement
 Analogous Estimating
 Parametric Estimating
 Bottom-up Estimating
 Three-Point Estimating
Read this article for a comprehensive introduction and comparison of estimation
techniques.
Of these techniques, parametric and bottom-up estimating are normally the most
accurate ones (yet time-consuming and resource-intense). Thus, they are commonly
used for definitive estimates and other relatively accurate types of estimates.

Analogous estimation and expert judgment are often deemed to produce rather rough
estimates. yet, this is not necessarily always the case. However, these techniques can be
used for ROM or preliminary estimates.

Three-point estimating as well as tri-angular and Pert distributions can be used to

enhance the accuracy of any of these estimation techniques. You will learn more about it
in this article that also includes an illustrative example of their uses.
Another technique relevant to cost estimating is progressive elaboration. This involves
updating initial rough estimates with more accurate numbers as more and more
information becomes available throughout a project.

Estimating Cost of a Project: Techniques and Examples

Calculator: Definitive Estimate vs. Rough Order of

Magnitude (ROM)
Use this calculator to get a quantification of the differences between the types of cost
estimates. Just enter the cost estimate and select the type of estimate to calculate the
range of possible outcomes.