Understanding the Difference between ROM Estimate Vs Definitive Estimate

Table of Content

What is a ROM Estimate?

Components of a ROM Estimate

Advantages of ROM Estimates

What is a Definitive Estimate?

Components of a Definitive Estimate

Advantages of Definitive Estimates

Difference between ROM Estimate and Definitive Estimates

What is a ROM Estimate?

ROM Estimate is a project estimate that summarizes the work required to complete a project. It gives an idea of the major activities and tasks involved in the project, along with the effort and resources needed for them.

The ROM Estimate is used to calculate the size of work packages (WP) and duration. It also determines whether other elements must be considered in the estimation process, such as cost drivers and resource requirements.

Components of a ROM Estimate

The Following are the component of the ROM Estimate

• Relevant work is defined and quantified.
• A schedule is created based on the tasks, resources, and other relevant factors required to complete the project.
• The process of creating and updating this schedule is known as Project Management.
• The project manager or the team leads define their scope of work and then assign tasks to various group members.
• The scope of work can be divided into many other sub-tasks. Each sub-task has a set of resources that are required to complete it. These resources include human resources and the funds needed to pay them.

Advantages of ROM Estimates

In project management, the ROM estimate determines the time and money needed to complete a project. This is done by calculating the total cost for all activities (from start to finish) in one specific calendar year. Advantages of ROM are:

• Comparing projects with different scopes, sizes, and complexity is more manageable.
• Comparing projects with similar scope, size, and complexity is easier.
• It's more accurate than using detailed cost breakdowns.
• It's more flexible than using detailed cost breakdowns.
• It can negotiate price or scope changes with customers or vendors.

What is a Definitive Estimate?

A definitive estimate is an estimate that the project manager has confidence in because it has undergone a process of review, revision, and consensus. A final assessment is based on analyzing all relevant factors and includes the best information available at the estimation time.

A definitive estimate provides a more accurate view of what can be achieved than an estimate derived from preliminary data. This is because it takes into account all known facts, as well as assumptions about future events. These assumptions are based on current performance trends and experience with similar projects.

Suppose a project's budget is not updated in line with actual costs incurred. In that case, it will be challenging to manage effectively over time.

For example, if a company expects to spend $1 million on a project which costs $1 million to complete but then discovers that it costs $2 million to build, then this discrepancy between budgeted and actual costs will affect future business decisions by management.

Components of a Definitive Estimate

The components of a definitive estimate include:

• Cost baseline -Defines all costs associated with the project, including personnel costs and subcontractor fees. This component also includes any expenses related to the acquisition of the work.
• Activity list- Provides details about each activity required during the life cycle of your project.
• Resource requirements -Provides details about each resource needed to execute your project plan.

Advantages of Definitive Estimates

The advantages of definitive estimates are:

• Definitive estimates are more accurate than ROM estimates. This is because they include all the inputs and assumptions used to determine the original ROM estimate.
• Definitive estimates are easier to verify because they include all of the information used to make the previous estimates so that you can double-check them more easily.
• Definitive estimates are more detailed and comprehensive than ROM estimates. For example, they describe what the project will cost, how long it will take, how much it will cost, how much it will take to complete, etc., making it easier to manage and plan for.

Difference between ROM Estimate and Definitive Estimates

The main difference between a ROM estimate and a definitive estimate is that with a ROM estimate, you have to make sure that the project's scope is defined correctly. In contrast, with a final estimate, you must ensure that enough information has been gathered to go ahead with your project without any significant problems.

The ROM estimate will have more variables than a definitive estimate. For example, in a ROM estimate, you will include how much time it takes to develop the product, how much time it takes to test the product, and how long it takes to launch the product.

Suppose you include all these variables in your ROM estimate. In that case, you can quickly get an accurate idea of how long your project will take to complete according to your schedule.

Conclusion

The estimate for a project is a culmination of the various data and information gathered about the project. When sourcing quotes and compiling data or information, it is easy to make mistakes.

Understanding the difference between ROM estimates and definitive estimates will therefore be crucial in minimizing the possibility of making errors in predictive analysis.