What is Rough Order of Magnitude (ROM)

We never know the final project cost until the project is complete. What we can do however is create an estimate. An estimate can take many forms but you cannot rely on guessing or adding a certain percentage buffer (say 10%) as a fall back plan.

Regardless of scope or schedule, funding is critical in achieving project outcomes. Even projects that only require labour indirectly require funding. But consider for a moment what happens if you under estimate the amount of funds required to complete your project….A potential train wreck!

A Rough Order of Magnitude (ROM) estimate is an estimation of the cost and effort to complete a project.

The type of project you are working on will dictate which approach to estimating is most suitable. A ROM estimate is used early on in the project when there is lack of detailed information. Conversely, a Definitive Estimate is where there are accurate estimates and information available at the project detail level (usually utilising Work Breakdown Structures (WBS)).

The ROM is generally undertaken during the project selection and approval period. The ROM estimate will provide the decision making team with the information necessary to decide on whether the project is worth pursuing. If the rough order of magnitude seems viable in terms of completion time and cost, then the project initiation phase would then take place. As a project evolves, an estimates accuracy is fine tuned as more information is obtained. This also allows requirements to be further refined during the initiation and planning phase of the project. This is called a progressive elaboration. Project estimations start out broad, and get refined as project deliverables come into focus.

ROM estimate variance is often large (up around 50%) but this should not put you off. Each estimate should provide an acceptable range of variance, any associated conditions and/or assumptions. For example, an estimate to build a new housing estate may predict a cost of 1 million dollars +/- 10% if completed this year and ACME construction do the build.

Based on current information, an estimate should clearly define what the project outcomes are, any assumptions made, all costs and how long the estimate is valid. This estimate contains everything relevant to stakeholder.

Both ROM and definitive estimates can be totally off the mark. Experience will play a big part in this and as you do more ROM estimating you will get better. It only takes one experience of having to hold out your hat for extra funding to make you more careful next time. Poor planning is usually the cause for poor estimates. “High side” or “low balled” estimates may get the project moving quickly but they are bound for budget reviews, heated discussions, and project reassessments.

Please feel free to check out our professional ROM Estimation Tool and read our other articles on how to complete a Rough Order of Magnitude estimate.

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