Cost Estimate Validation
Review asks "is it right?"; validation asks the harder question: "is it fit?" Validation is the independent confirmation that an estimate is credible, sound against benchmarks, and ready to carry a major decision — the confidence check before a board commits real capital. Built on AACE 110R-20.
What estimate validation is
Validation is the second pillar of the quality module. Where review is largely an internal, error-finding check, validation is a higher-level, fitness-confirming one — often performed independently of the estimating team, and focused less on line-item correctness than on whether the whole estimate can be trusted for its purpose.
Validation vs review
These two quality steps are complementary but distinct — confusing them is common:
| Review (31R-03) | Validation (110R-20) | |
|---|---|---|
| Asks | "Is the estimate correct and complete?" | "Is the estimate fit to rely on?" |
| Focus | Internal errors, gaps, arithmetic | Credibility, benchmarks, risk, purpose |
| By whom | Often the team / peers | Often independent of the team |
| Output | Corrections to the estimate | A confidence verdict for decision-makers |
How validation is done
Validation draws on a set of credibility checks, often by an independent party:
- Benchmarking — compare the estimate (and its key metrics, $/unit) against completed comparable projects. Big deviations demand explanation.
- Class & fitness check — is the estimate's class appropriate for the decision (Module 2A)? Does its accuracy match what the decision needs?
- Risk & contingency adequacy — is the contingency consistent with the project's risk and the estimate's maturity — not optimistically thin?
- Independent assessment — a reviewer outside the team (or external) judges credibility free of the original team's assumptions and optimism.
Using validation well
Reserve formal validation for estimates that carry significant decisions — funding gates, sanction, major bids. Use an assessor independent of the estimating team, benchmark hard against real comparable projects, confirm the class and contingency fit the decision and its risk, and deliver a clear confidence verdict to decision-makers. The deliverable isn't a corrected estimate (that's review) — it's a judgment on whether the estimate can be trusted.
Nine things to remember
- Validation confirms an estimate is fit for its purpose — credible and reliable.
- "Fit for purpose" is the test — not just "are the numbers right?"
- Review finds internal errors; validation confirms external fitness — two gates.
- Validation is often independent of the estimating team.
- Benchmark against real comparable projects — deviations demand explanation.
- Check class fitness and contingency adequacy against the decision and risk.
- Optimism bias is what validation guards against — independence is the antidote.
- Reserve formal validation for high-stakes estimates — gates, sanction, major bids.
- The deliverable is a confidence verdict, not a corrected estimate.
Glossary
- Benchmarking
- Comparing against completed comparable projects.
- Confidence verdict
- The validation's judgment for decision-makers.
- Contingency adequacy
- Whether contingency matches the project's risk.
- Estimate validation
- Independent confirmation an estimate is fit for purpose.
- Fit for purpose
- Credible and adequate for the decision it supports.
- Independent assessment
- Judgment by someone outside the estimating team.
- Optimism bias
- The tendency to underestimate cost and risk.
- Review
- The internal error-finding check (Lesson 29).