Let`s say we are in the initiation phase of the project. We don`t know the total cost of the project – at least not the exact cost. The business case has already been approved with a very large budget, and now the executive sponsor is asking for more information about what the work could realistically cost. There is no perfect “compartment” for the limits you should set for your ROM. The PMBOK guide® states that a ROM estimate is between -25% and +75%. SEER allows you to create ROM estimates with as little or as much detailed information as you have at your disposal – again, you capture the information you know about a project`s parameters and simulate what you don`t know. However, in any case, the estimate must be made in a reproducible, credible, comprehensible and justifiable manner. If senior management or your client asks you how you calculated the estimate, you have traceability to show how and why the estimate was made. While there is a more accepted variant with a ROM estimate, it`s still important that a project management professional does the work to make the estimate as accurate as possible. There are limits to what is acceptable in terms of price fluctuations. You can create an approximate scale for each project. However, there are several project management situations where it may be necessary to develop an idea of the resources needed: The approximate order of magnitude (ROM) is a type of cost estimate used in different types of projects.
These include strategy development and implementation projects, IT projects and construction projects. It is typically used in the project preparation and initiation phase, for example to develop a project business case or to determine the required financial resources specified in the project charter. We have given you general guidelines, but we have omitted details. When trying to understand what ROM estimation is, there are several techniques you can use. As mentioned earlier, analog tends to be the most popular, although parametric and a few others are also used. We take a quick look at previous projects – lessons learned are a good place to start. We consult with subject matter experts (who are not willing to commit to a “real” number because they have not yet seen the detailed requirements) and talk to them about what their efforts cost last time. After many back and forth, we have an idea of the cost of this project.
Almost always, the project manager starts by making a rough estimate of the order of magnitude (ROM), which is how his name sounds. This estimate gives an “approximate amount” or an order of magnitude for the project. In other words, this high estimate lets you know if the cost of the project will take $50,000 or $5,000,000. Whether it takes six weeks, six months or six years. A ROM estimate and a final estimate work differently in scope and detail. A customer or company requesting a ROM estimate will have completely different expectations than a customer requesting a final estimate. Your understanding of the differences between ROM cost, ROM price, ROM estimate, and final estimate is a crucial first step in developing the project scope. The method of producing a final estimate should be more detailed than a ROM estimate. In addition, more robust data must be available when a final estimate is made. A company or corporation cannot expect an accurate final estimate to be made if the exact data points are not provided. In general, there are contract documents and scope of work that are provided to support cost estimates.
A final estimate must be made from fully designed plans with different scenarios that can be projected. The PMBOK guide® suggests it could be between -5% and +10%, but again, you should use your common sense for what works for you and what your finance team or PMO recommends in their internal advice. However, it is based on so many “what ifs?” and assumptions that we cannot trust to present this figure to the steering group. Tip: If you`re stuck, talk to your finance department to see if they can help you get a better idea of what things cost. According to A Guide to the Project Management Body of Knowledge (PMBOK® Guide), a ROM estimate typically ranges from -25% to +75%.