As the name suggest – Rough means not with that much accuracy (-50% to +50% )
Project cost estimation starts prior to initiation as the Owners want to know that how much they need to put to get the job done.
A Rough Order of Magnitude, also known as ROM Estimate, is the first estimate in the project life cycle.
For the sake of simplicity, we can say that it is an estimation of level of effort and cost to complete a project.
The main purpose of ROM estimate is to assist decision-makers to make right decisions by providing them with relevant information.
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- 1 When ROM is Used?
- 2 How to make ROM Estimate?
- 3 ROM Estimate Categories
- 4 Example of a ROM Estimate
- 5 Accuracy of ROM
- 6 Other Types of Estimations
- 7 Final Words
When ROM is Used?
ROM estimate is used;
At Project Initiation: to screen/prioritize for final decision making as to which project to choose among available options.
During Project Life Cycle: to estimate the final cost to conclude the project and are reviewed and refined as more and more information is gathered during the project execution phase.
How to make ROM Estimate?
Developing ROM estimate takes lot of skill and experience.
You’ll always need to involve relevant stakeholders and subject matter expert for their opinion on required level of estimation to complete certain milestone. And as the term itself describes it is a rough order magnitude i.e. there will be a chance of inaccuracies or the estimations will have limited accuracy.
It all depends on the experience and the information received from subject matter experts, ROM can have accuracy level -50% to +50% (As per PMBOK6). Ultimately we get a roughly estimated information regarding schedule and effort required to complete a milestone.
ROM estimates can also be made from the available references of similar projects from past. For example the total cost to establish new plant with 100 metric tons capacity will almost 2 times of the old plant with 50 metric tons capacity.
Tools Used in ROM Estimate
In general following are main tools & techniques to get to ROM estimate
- Ball Park estimate
- Top down estimation
- Historical data and expert opinion
It is recommended to make an estimate in terms of time and cost. It helps the subject experts to provide their expert opinions in most efficient and precise manner. As at the early stages, there is very limited information available so it wouldn’t be possible to provide an accurate estimate of time and cost so what we can do here is divide the estimates in three categories. i.e Low, Medium and High. It could look like as below
ROM Estimate Categories
ROM estimate can be categorized in these activities. This is based on level of effort.
- Hours: 30 to 50 hours for completion
- Cost: $1500 to $4500 dollars
- Duration: 1 to 2 weeks
- Number of Resources: 1 to 2 Resources
- Hours: 50 to 250 hours for completion
- Cost: $4500 to $10,000 dollars
- Duration: 1 to 3 months
- Number of Resources: 3 to 5 Resources
- Hours: 300 to 1000 hours for completion
- Cost: $15,000 to $50,000 dollars
- Duration: 4 to 6 months
- Number of Resources: 5 to 15 Resources
These kind of categories as listed above makes the life easier for everyone by breaking down the work into every possible manner at the early stages of project. Similarly subject experts would be more comfortable in providing the estimates with such kind of model.
Example of a ROM Estimate
For example, for the development of a new product, the statement of work might only give you limited information such as:
- Develop product requirement
- Product specification
- Target market
- Estimated time and budget
But we can apply above mentioned techniques to have a ROM estimate.
Accuracy of ROM
The accuracy of ROM estimate will increase with the passage of project life cycle.
At beginning it could be around -25% to +75%.
Similarly at halfway of project life cycle, as more and more information is available, the accuracy of ROM could be -15% to 15%.
Accuracy of Project Estimate = (Accuracy level of task A + Accuracy level of task B + Accuracy level of task C)/3
Accuracy of Project Estimate = 63.3%
In the end, it all depends on the type of organizations as to what level of ROM is acceptable for them.
Other Types of Estimations
As I said earlier, the ROM is the most initial estimation for any project and hence it can be +50% to -50% (PMBOK). There are other estimates that help the project stakeholders to know more about the cost variance later on.
Those estimates are;
Used once the project has started officially. It’s accuracy is -15% to +50%.
Once the quantities are are known then it helps to estimate the project budget. It’s accuracy is -10% – +25%.
When we have cost & the quantities both. It’s accuracy is -5% to +10%.
It is just final summary of the project. It’s accuracy is +/- 0%.
ROM Estimate is of lowest level of hierarchy in estimation techniques and it is just to decide to take or leave any project for an organization. This can be only performed by expert with a good experience.
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