# ROM Estimate and Definitive Estimate: The Differences

As a project manager, the ability to accurately estimate the cost of a project is crucial for success in the field. Two key metrics for this are ROM Estimate and Definitive estimates.

A ROM estimate, also known as a “back-of-the-envelope” estimate, is a quick and easy way to get a rough idea of a project’s cost or timeline, but it is not always accurate.

On the other hand, a definitive estimate is a more comprehensive and accurate projection, taking into account all known information and details.

It is important for project managers to understand and utilize both ROM and definitive estimates, as each have their own strengths and limitations. However, relying too heavily on historical data can lead to variations in estimated and final costs.

To create more accurate estimates, it is vital for project managers to gather all necessary inputs and consider both ROM and definitive estimates. The method used will also determine the level of tolerance for deviation from the estimate.

## Rom Estimate Definition

ROM estimate stands for Rough Order of Magnitude estimate. It’s a type of estimate that is used to give an idea of the cost or time required for a project, but it’s not a detailed or accurate estimate.

Think of it like an educated guess. It’s an estimate that is based on some information, but it’s not a final or definite number.

It’s usually used early on in a project, when there’s not much information available yet. It’s a quick and easy way to get a rough idea of what a project might cost or how long it might take.

For example, if you’re thinking about building a house, a ROM estimate would give you a rough idea of how much it might cost to build that house, but it wouldn’t give you an exact number. It’s just a rough estimate that can help you decide whether or not to move forward with the project.

ROM estimates are usually higher than the actual cost or time required for a project, because they are built on assumptions and incomplete information.

It is just an approximation, and it’s important to remember that the numbers are not accurate and may change as more information becomes available.

### How Do I Prepare a ROM Estimate?

Even though a Rough Order of Magnitude estimate allows for more leeway in terms of cost variation, it’s still crucial for project management professionals to strive for accuracy as much as possible. There are limits to how much deviation from the estimate is acceptable.

Projects can span multiple years, making it challenging to predict the cost of materials or labor over such a long period. However, there are certain inputs that can be known and factored in accurately. Generally, the longer the time frame of the project, the more potential for variation in the final cost.

For instance, if someone estimated the cost of building a new house to be \$200,000 but the final cost ended up being \$1,000,000, this level of variation would not be considered acceptable. The most important aspect of preparing cost estimates using the ROM method is to get the known factors right.

### Tools for Rough Order of Magnitude (ROM) Estimates

There are various useful tools available to assist project managers in creating accurate Rough Order of Magnitude (ROM) estimates.

One such tool is SEER, a collection of products that can assist project managers throughout various stages of the project, including software solutions for both ROM and Definitive estimates.

Another option is to use ROM templates, such as the one from Doctonic. These templates can help project managers map out and consider all relevant variables when creating their estimates.

## Definitive Estimate Definition

A definitive estimate, also known as a detailed estimate, is a more accurate and comprehensive estimate of the cost or time required for a project.

Unlike a ROM estimate which is a rough estimate based on assumptions and incomplete information, a definitive estimate takes into account all the known information, including detailed design and specifications, to give a more accurate projection.

Think of it like a final estimate. It’s an estimate that is based on all the information available, and it’s as accurate as possible. It’s usually used later on in a project, when more information is available, and the project design is more detailed.

For example, if you’re building a house, a definitive estimate would give you an accurate idea of how much it will cost to build that house, taking into account all the materials, labor, and other costs. It’s the estimate that you can rely on for budgeting and planning purposes.

A definitive estimate is considered more accurate and reliable than a ROM estimate, but it is not a guarantee, as unexpected events and uncertainty can still happen.

It’s also important to note that definitive estimate can be subject to change as the project progresses and more information becomes available.

### How To Prepare Definitive Estimate?

Preparing a definitive estimate requires a more detailed approach than a ROM estimate. It also requires more solid data to be accurate.

Without proper data points, it’s difficult to expect an accurate definitive estimate. Typically, contract documents and a scope of work are used to support the estimate claims.

A definitive estimate should be created from fully designed plans with multiple projected scenarios.

For example, if you’re building a house, direct costs such as building materials and labor should be itemized and a contingency should be included to account for potential changes in market conditions.

For instance, if the price of bricks suddenly increases by 50%, it’s not reasonable to expect the estimated cost of bricks to be the same as the final cost. To mitigate this, indirect costs should also be budgeted into the project.

### Tools for Definitive Estimates

Smartsheet offers a template and guide for project cost estimation to aid companies in creating definitive estimates. However, it is crucial to keep in mind that the accuracy of an estimate depends on the quality of the inputs used.

Any unexpected changes in market costs or deviations from the plan can affect the accuracy of the estimate.

## How Do I Calculate Variation for These Estimates?

As a project manager, it is crucial to accurately measure and report project cost variations. For example, if the estimated cost of a project is \$200,000 and the actual cost ends up being \$250,000, the dollar variation is \$50,000.

However, the percent variation, calculated by dividing the difference of \$50,000 by the estimated cost of \$200,000, would be 25%.

This percent variation would be considered acceptable for a rough order of magnitude estimate, but not for a definitive estimate. It’s important to remember that the accuracy of an estimate is dependent on the quality of inputs used.

Any unexpected changes in market costs or deviations from the plan can affect the accuracy of the estimate.

## Conclusion

In conclusion, project cost estimation is an essential task for project managers. It is important to measure and report project cost variations, not only in dollar terms but also in percentage terms.

Accurate cost estimation is crucial for project success and requires a thorough understanding of the project inputs.

However, it is important to remember that an estimate is only as good as the inputs that are used, and any unexpected changes in market costs or deviations from the plan can affect the accuracy of the estimate.

It’s important to use templates, calculators and guidelines as a support tool but also keep an open mind and be ready to adjust the estimate if necessary.