AACE International Recommended Practice No. 31R-03

The purpose of AACE International Recommended Practice No. 31R-03 is to provide guidelines for the review, validation and documentation of cost estimates. This practice defines the basic elements and provides broad guidelines for the estimate review and documentation process, applicable to any type of estimate in any industry. The objective is to ensure that estimates reflect the project strategy, objectives, scope and risks, and meet the financial and performance requirements of stakeholders. In addition, it seeks to ensure that estimates are clear, organized and presented at an appropriate level of detail, and that each cost in the estimate summary is traceable to the estimate detail and other support. This practice also emphasizes the importance of incorporating a structured feedback loop to ensure that important comments requiring corrective action are incorporated into the final estimate.


According to AACE International Recommended Practice No. 31R-03, the estimate review, validation and documentation process consists of several key steps. These steps include:


This step focuses on ensuring that the estimate meets technical and quality requirements. It verifies whether it was developed using contractually or procedurally required practices and data, whether it covers the entire scope of the project, whether it is free of errors and omissions at a macro level, and whether it is structured and presented in the expected format.

Crucial Elements in the Review of Estimates

Key elements in the review of estimates are critical to ensure the quality, accuracy and reliability of estimates prepared by third parties.

    • Quality of base documents: Ensure high quality and complete documents.
    • Organization and clarity of documentation: Clear structure and presentation of the estimate.
    • Validation of key metrics and ratios: Compare with metrics of similar projects.
    • Independence in the review: Objective and unbiased evaluation.
    • Planning and management of the review process: Structured process to cover all relevant aspects.
    • Technical review by the estimating team: Involvement of an experienced technical team.
    • Validation of estimate against similar project metrics: Ensure competitiveness and appropriateness.
    • Assessment of risks associated with the estimate: Understanding the reliability and accuracy of the estimate.

These elements ensure that estimates are clear, organized and detailed, meeting project and organizational requirements.


Validation is quantitative in nature and focuses on ensuring that the estimate meets project expectations and requirements in terms of its adequacy and competitiveness. The estimate is compared to cost metrics and cost targets, including data from third parties, similar projects and historical metrics.

Validation of the estimate involves comparing the estimate to key metrics and benchmark ratios, both internal and external. This may include comparison with historical data from similar projects, company key performance metrics (KPIs), and benchmarks from external sources. The objective is to ensure that the estimate’s key metrics are aligned with or represent an improvement over similar projects. Any significant discrepancies should be explained and justified.

In addition, validation of the estimate may include preparation of a check estimate, using more conceptual estimating methods. This allows any significant discrepancies between estimates to be identified and explained. Consideration should also be given to the analysis of risks associated with the estimate, as well as the preparation of quick estimates for comparison.


This step involves creating clear and reliable documentation that reflects the estimate and its support. The documentation should be concise, consistent and understandable to the project team and management.

The estimate documentation should include:

    • Organization and clarity: Documentation should be well structured and presented in a clear and understandable manner, both in the summary of the estimate and in the detail. This facilitates review and understanding by stakeholders.
    • Traceability and back-up: Each cost shown in the estimate summary should be traceable to the estimate detail and other back-up. This ensures transparency and consistency in the review and validation process.
    • Updating the estimate base document: It is essential that the estimate base document is updated to reflect the current base. This ensures that the final estimate is consistent, reliable and appropriate for its intended use.
    • Compliance with standards and best practices: The estimate documentation should follow industry standards and best practices in format, content, and level of detail.

The Cost Estimation Assurance Event

Cost Estimating Assurance Events are structured, independent assessments of the Project against Best Practice, identifying weaknesses and deficiencies and making specific recommendations for improvement. They help confirm that projects are consistently estimated in support of the input requirements and support the need for decision makers to have confidence in the cost estimate.
The greater the importance of the project, both in terms of company financial exposure and strategic relevance and risk, the more subject it is to these events and activity monitoring. These events may be mandatory steps according to the Company’s requirements or may be requested by the Joint Venture or the Project Team, according to the complexity and needs of the project. These activities may also be required for Pre-Execution Investment, major project changes and subsequent reauthorization of the Investment.
Cost Estimate Assurance Events are part of the Cost Estimate Value Assurance activities and can be classified as:

“Peer Assistance” Cost Estimate Workshop:

This is a meeting, workshop or desk review in which estimators, external to the Project Team, meet with the team with the objective of:

    • all attendees learn from the knowledge and experience shared by the participants.
    • assist in estimating and verifying work in progress.
    • suggest changes to the estimate and new areas of investigation.

The main need and advantage of these practices is that the project team gets help from peers outside the team and the exchange of learning between teams.

“Peer review” Cost Estimate Workshop:

In-depth review of a completed job, in which estimators, external to the project team, review the project scope and estimate support:

    • to question and verify assumptions made and information available;
    • to recommend changes to the estimate and other areas of investigation.

“Peer review” designed to provide an independent perspective:

Decision makers obtain assurance from peers outside the team that the project meets the business objectives from an estimating perspective by verifying that quality is built into the estimate development process. It is not about contributing to the work, but ensuring that the estimate is of the expected quality.

Costing assurance review:

This is a structured, independent and integrated review. It is conducted as part of a larger assurance review. The assurance review activity is performed by independent estimators.
An assurance review is not intended to be a technical audit, but is intended to

    • assess the robustness of key elements of the project and verify that everything is in place before starting the next phase;
    • challenge the project team to justify their work, such as the sources of information used to define the scope of work and the data supporting the estimate result;
    • identify weaknesses and recommendations for improvement.
    • Cost Benchmars and KPIs references should be requested by PM.

Project management and team commitment are critical to a successful outcome to ensure effective communication and planning of the activity.


The “Estimate Plan” and “Basis of Estimate” are essential documents for quality assurance in cost estimating. Together, they provide a framework for developing cost estimates in a methodical, transparent and reliable manner, which is vital for informed decision making, risk management and overall project success.

The importance of these documents lies in several key aspects:

a. Estimate Plan

The “Estimate Plan” is a document that details the methodology, processes, and standards that will be followed to develop the cost estimate. This plan is essential for several reasons:

    • Standardization: It provides a standardized approach to cost estimating, ensuring that all estimates are prepared consistently and in accordance with industry best practices.
    • Methodology: Defines the estimating techniques and tools to be used, which helps ensure that the estimate is performed using proven and reliable methods.
    • Roles and Responsibilities: Establishes who will be involved in the estimating process and what their responsibilities will be, encouraging clarity and collaboration between teams.
    • Timeline: Includes a timeline for the estimating process, ensuring that the estimate is completed in time for use in critical project decision making.

b. Basis of Estimate

The “Basis of Estimate” document provides a detailed record of the assumptions, inclusions, exclusions, and criteria used in preparing the cost estimate. This document is crucial for several reasons:

    • Transparency: It details the assumptions and conditions under which the estimate has been made, providing a clear understanding of how costs were derived.
    • Accuracy: By documenting the sources of information, calculation methods and adjustment factors used, the accuracy of the estimate is improved.
    • Verifiability: Allows third parties to review and verify how the estimate was compiled, which is critical to stakeholder confidence in the accuracy of the estimate.
    • Change Management: Facilitates change management by providing a baseline that can be updated as project assumptions or conditions change.
    • Communication: Serves as a communication tool between the cost estimating team and other stakeholders, allowing everyone to understand how the estimate has been formulated.

c. The careful and methodical transition between the “Estimate Plan” and the “Basis of Estimate”.

The effective transition between the “Estimate Plan” and “Estimate Basis” documents is critical for quality assurance in project cost estimating. This transition not only reflects a methodological flow from planning to estimate execution, but also establishes a solid basis for the accuracy, transparency and reliability of cost estimates. The following are key aspects that enrich the understanding and importance of this transition:

Methodological Integration

    • Coherent Flow: The transition ensures a consistent flow of information and methodologies from the “Estimate Plan,” where strategies and processes are defined, to the “Basis of Estimate,” which details the specific execution and assumptions used. This methodological consistency is crucial to maintain alignment and quality throughout the estimating process.
    • Consistency in Application: Effective transition ensures that the methods and tools defined in the Estimate Plan are consistently applied in the Basis of Estimate, which is essential to the validity and reliability of the final estimate.

Clarity and Transparency

    • Documentation of Assumptions: The transition allows for clear and detailed documentation of the assumptions, methods and data used in the “Basis of Estimate”. This clarity is vital for transparency and allows for effective third party verification and validation of the estimate.
    • Traceability: Facilitates traceability of decisions and assumptions from initial conception to finalized estimate. This is important for auditing the estimating process, making adjustments and responding to changes in project requirements.

Quality Assurance

    • Methodology Validation: The transition between documents ensures that the planned methodologies and strategies are validated through their practical application in the Basis of Estimate. This contributes directly to the quality assurance of the estimate, allowing to identify and correct deviations or inaccuracies.
    • Continuous Improvement: Allows the identification of areas for improvement in the cost estimating process. By analyzing the effectiveness of the transition and the application of the defined strategies, organizations can continuously adapt and improve their estimating practices for future projects.

Communication and Collaboration

    • Communication Facilitation: A clear and well-documented transition improves communication between project teams, cost estimators and stakeholders. This ensures that all involved have a unified understanding of the cost estimating objectives, processes and expected outcomes.
    • Effective Collaboration: Promotes effective collaboration by establishing clear expectations and providing a common framework for discussion and review of the cost estimate. This is essential for collaborative adjustment and validation of the estimate.

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