What is the difference between Rough Order Of Magnitude Estimate and Definitive Estimate?

 

In project cost and time management, estimations are often used in arriving at the cost and time at various stage along the project management cycle as the accurate cost and time will not be 100% known until the very end of the project.

In estimating the cost and time, there are two important estimate metrics: Rough Order of Magnitude (ROM) Estimate vs Definitive Estimate (note: the degree of accuracy of the estimates must be clearly stated in the documents).

 

Rough Order of Magnitude (ROM) Estimate

 

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%.

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.

 

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Definitive Estimate

 

The definitive estimate is the most exact type of estimate defined in the PMBOK. Its accuracy ranges from -5% to +10%.

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.

 

In addition to the ROM Estimate and Definitive Estimate, there are some more estimation ranges:

  • Preliminary estimate: within the range of -15% to +50%
  • Budget estimate: within the range of -10% to +25%
  • Final estimate: 100% accurate

 

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