Estimating Fundamentals and Concepts
The estimating landscape
Estimating is the disciplined prediction of the cost and resources required to deliver defined scope. Candidates must distinguish an estimate (a prediction of cost) from a budget (an authorized spending plan) and a bid (a priced offer carrying commercial risk). Understand the estimate classes (AACE Class 5 through Class 1) and how expected accuracy range and the maturity of project definition move together: early classes are order-of-magnitude with wide ranges, later classes are definitive with narrow ranges. Know that accuracy ranges are probabilistic, not guarantees, and that a range stated as "-20% to +30%" describes expected variability of the estimate, not of the final project cost alone.
Core terminology
Be fluent with scope basis, WBS, cost elements (labor, material, equipment, subcontract, indirects), direct vs. indirect cost, markups, and productivity. Distinguish cost from price: cost is what the work consumes; price adds overhead, profit, and risk. Understand capacity, utilization, and learning curve effects on labor hours.
Traps in questions
Common traps: conflating estimate class with method (a class is defined by definition maturity, not by which technique you use); treating accuracy range as symmetric; confusing contingency with escalation; and assuming a more detailed estimate is automatically more accurate.
Rule of thumb
Match method to maturity: if scope definition is below roughly 30%, use capacity-factored or parametric methods and present a wide, explicit range; reserve detailed takeoff for mature, well-defined scope. State the basis of estimate every time.
Worked example
If a Class 4 estimate of 1,000 hours carries a stated range of -25%/+35%, the low is 750 hours and the high is 1,350 hours. Report the range, not a single number.