ROM Vs Definitive Estimate

ROM (Rough Order of Magnitude) and Definitive estimation are budgeting parameters and commonly used terms n project management.

This blog post will discuss these concepts and the difference between them; i.e., ROM Vs Definitive Estimate.

The budget is one of the most important parameters of a project, and it is also a deciding factor in whether or not to proceed with a project.

Calculating the project budget is not an easy task, and the accuracy of the estimation depends on when you are asked to do it and the type of project.

If it is too early or little information is available, the cost estimate will be less accurate.

If it is a research project where the duration and cost cannot be easily calculated, it will be more difficult to calculate the budget. Here, most calculations will be based on expert judgment.

Based on the accuracy, you can categorize estimation into two types:

ROM or Rough Order of Magnitude
Definitive Estimate

ROM (Rough Order of Magnitude)

When it is very early in the project, or you have little information available for a project, and management has asked you to provide them with a budget estimate quickly, you will provide the ROM of the budget estimate.

The accuracy of this estimate is low. It varies between -25% to +75%.

You find this value by looking at any past similar types of projects or having an overlook of the broad scope of work and then deciding on it.

Here, the time required to calculate the cost estimate is the least.

Definitive Estimate

You use this metric when management needs a more accurate cost or time estimate, and you have enough project information.

This estimate requires more time than the ROM technique; however, its accuracy is between -5% to +10%.

With a definitive estimate, the management can be sure about the project or any bid they will participate in.

You will get the definitive estimate when you have a detailed scope of work or if the project is already running.

Now we will study estimation techniques and their accuracy.

Estimation Techniques

There are four techniques for estimation:

Analogous Estimation
Parametric Estimation
Three Point Estimation
Bottom Up Estimation

In an analogous estimation, you compare the project’s cost with any past similar projects and estimate the project. You use this technique when you have little information about the project.

The cost estimate of this technique can be considered a rough order of magnitude as the accuracy of the estimate is not good. This estimation is also known as a ballpark estimate.

In parametric estimation, you apply statistical data from past projects to the current project. For example, the cost of painting per square foot.

The accuracy of this estimation is better than analogous. The estimation of this technique can be definitive or ROM, depending on the quality of data and the effort involved.

In three point estimating, you find three estimates and take an average to remove the bias. The accuracy of this estimate is better than the two discussed above.

The bottom up estimation technique gives the most accurate result and is also known as the “definitive estimation technique.”

In this technique, you find the cost of each activity and add them up to get the project cost. Though this technique is time consuming, it provides the best results.

The estimation values obtained from three point estimating and bottom up estimating are the most accurate, and you can say that these estimates are definitive.