A Guide to Developing a ROM Estimate

Developing a Rough Order of Magnitude (ROM) estimate will involve both subject matter experts and project managers. The “Rough Order of Magnitude” estimate should have at least a (plus or minus) 50% accuracy. The variance may not always be in this range but it should be the target for a useful “ballpark” estimate at a given point in time. From this, an expectation is set on both sides of the fence. The project team and client will both benefit from the ROM estimate and it will allow for decision making on both sides.

Coming up with a ROM estimate is a bit of an art and experience certainly goes a long way. A top down approach may be employed or existing expert knowledge and experience can be drawn upon.

The idea is not to spend a huge amount of time developing the ROM estimate. The estimate is generally undertaken during the planning phase of a project. Importantly, the estimate will be maintained throughout the remainder of the project.

The level of effort in preparing a ROM estimate will vary. For example, at the low end of the scale a ROM estimate may take a single person a couple of days to complete and cost a few thousand dollars. On the high end of the scale, a ROM may take a team of 20 people 3 months to complete and cost a $1 million dollars.

During creation of the ROM estimate, a Work Breakdown Structure (WBS) is not often available. A set of activities (and costs) however can be grouped however as part of the ROM. This will eventually form the basis of the WBS which is completed later in the project cycle. For example, Project Management, Software Development, Requirements Analysis, Testing, Deployment can each be grouped in sections.
With the ROM estimate both the range of variance and an explanation of how the estimate was created is required. A customer (or client) must realise that this is an estimate only and not be led to believe that the price is the final price that the customer will pay. Toward project completion the project’s price is likely to need adjustment. So it is worth repeating this point, he customer who reads the ROM estimate must be made aware that the final cost is likely going to be quite different from the estimate.

There are many reasons why ROM estimates are not accurate. A simple example might be that the cost of materials changed or the anticipated completion time was wrong. Usually it is more complicated than that and even if it isn’t I am sure many project managers will make it so. As many project managers could atest, the reason for variance is often due to a change in requirements from the client. Frustrating but that’s life.

Regardless of your role in a project, the ROM is pure gold when trying to ascertain a project perceived cost.

So how do you get started with your ROM estimate? The best way is to get your hands on a professional ROM estimation tool. This will guide you through the process and highlight many of the considerations that may not be obvious at the start of the project.

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