Basis of Estimate
The story behind the number. A bare cost figure is an opinion; a figure with a documented basis is evidence. The basis of estimate records what an estimate includes, assumes, excludes, and how it was built — and it is arguably the estimator's most important deliverable, more than the number itself. Built on AACE 34R-05.
What a basis of estimate is
You met the BOE briefly in Foundations as the estimator's key deliverable. This lesson opens it up. The BOE is the narrative and supporting record that travels with every professional estimate. It answers the questions any thoughtful reader has: what's included, what isn't, what did you assume, where did the prices come from, and how confident is this?
Why the BOE matters so much
A good basis of estimate does four jobs that a bare number simply can't:
- Enables review — a reviewer can only check an estimate if they can see its assumptions and method. The BOE is what makes a meaningful review possible.
- Sets expectations — by stating scope, exclusions, and accuracy, it tells stakeholders exactly what the number does and doesn't cover, preventing nasty surprises.
- Enables reuse & comparison — future estimates and benchmarks can build on a documented basis; an undocumented number can't be safely reused.
- Defends the estimate — in a change, dispute, or audit, the contemporaneous BOE is the evidence of what was, and wasn't, included. (This is gold in claims.)
What goes into a BOE
A complete basis of estimate typically documents the following — the checklist a reviewer expects to find:
| Element | What it records |
|---|---|
| Purpose & class | Why the estimate exists and its estimate class/accuracy |
| Scope description | What's being estimated, with the documents it's based on |
| Assumptions | What was taken as given where information was missing |
| Exclusions | What is deliberately not covered |
| Methodology | How it was built (parametric, detailed, factored…) |
| Pricing basis | Rate sources, currency, date, escalation |
| Allowances & contingency | What's covered by allowances and the contingency rationale |
| Risks & references | Key risks, and the documents/data relied upon |
Using the BOE well
Treat the basis of estimate as a living, first-class document: issue it with the estimate, keep it proportionate to the estimate class (a Class 5 BOE is short; a Class 1 BOE is thorough), and update it whenever the estimate is revised. A clear, honest BOE is the single best protection against the two great estimating failures — being misunderstood, and being unable to defend your number later.
Ten things to remember
- The BOE documents how an estimate was prepared — scope, assumptions, method, pricing.
- The estimate and its basis are one deliverable — a number alone is incomplete.
- A number alone is opinion; with a basis it's evidence.
- It enables review, sets expectations, allows reuse, and defends the estimate.
- Exclusions are critical — unstated ones cause the worst disputes.
- Document purpose, scope, assumptions, exclusions, method, pricing, contingency, risks.
- Write it as you go — capture assumptions when fresh, not after the fact.
- Scale it to the class — short for Class 5, thorough for Class 1.
- Issue it with the estimate and update it on every revision.
- The contemporaneous BOE is decisive evidence in changes, disputes, and audits.
Glossary
- Allowance
- A provision for known but undefined items.
- Assumption
- Something taken as given where information was missing.
- Basis of estimate (BOE)
- Documentation of how an estimate was prepared.
- Contemporaneous record
- Documentation made at the time — most credible.
- Contingency basis
- The rationale for the contingency included.
- Exclusion
- Scope deliberately not covered by the estimate.
- Methodology
- The estimating approach used (parametric, detailed…).
- Pricing basis
- Rate sources, currency, date, and escalation used.