ROM Estimate: Everything You Should Know About Rough Order of Magnitude Estimates

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Being a project manager, getting accurate estimates is a dream for many. We get it in a competitive market, changes in variables in the cost and resources change the entire scenario.

Therefore, the project manager planned project management and designed a rough estimation on the basis of it. But do you know what helps a project manager in the first step while developing a scope? It is a rough order of magnitude estimate.

In this blog, we will discuss everything you should know about a ROM(Rough Order of Magnitude) estimate. That includes the difference between ROM estimates and definitive estimates, steps, and who can use ROM estimates.

First, let’s start with the definition of ROM, what is the rough order of magnitude?

What is ROM Estimate?

what is rom estimate

ROM estimate is an abbreviate of rough order of magnitude estimate. It is an estimate generally completed in the initial stage of the project. ROM estimate is an estimation of the project’s level of cost and effort to complete.

It helps the project manager to guide and create strategies for the project management. The ROM estimates are usually conducted during the approval or selection stage of the project. Moreover, it is used when there are fewer details about the project cost estimates budget.

Several contract companies choose ROM estimates because it helps to determine the total budget of the project and decide whether it is viable or not. With the estimation, the project manager can keep the track of the budget and its necessary changes.

By calculating ROM estimation, a project manager can know the project budget and how much resources and priority the project should be. In other words, it gives you a rough overview of the budget estimates.

It is helpful when the work is not that mandated and project managers can determine the requirements and scope of the work. However, comparing different ROMs can help to identify which project should be more focused on and which one to delay.

ROM estimates assist project managers in decision-making by providing a rough estimation of the total cost of the project. Companies that are looking for a ballpark number (rough estimation) choose rough order of magnitude.

ROM estimate provides an accuracy range within the range of -25% to +75%.

But do you know about another method to find cost estimation of the project? It is by using a definitive estimate. Both methods are essential for the cost estimation of the project. We will learn that ahead in this blog, first let us understand how to use ROM estimate.

Steps to Include While Do Estimation Using ROM

ROM estimate steps

It is essential to know what relevant information is required while calculating rough order magnitude estimates. Following are the points that will help you to know how to use ROM estimate:

  1. Estimating project size

    For project managers and stakeholders, it is crucial to know project size. The calculation can be done by comparing the size of the project and the total cost of the construction project. With this, the scope of the project is determined.

  2. Calculate cost and square foot unit

    While calculating the estimate for construction business by using ROM estimate, two factors- square foot unit size and cost are considered. The square foot can be specified by using median cost or the ¾ or ¼ cost values. It also depends on the target value of your particular project.

    Moreover, a project manager can estimate square foot unit cost by allowing ROM to multiply the cost modifier. The project manager also needs to calculate the location size and time factor after it.

  3. Detailed Information

    The number of resources and information matters while calculating estimates using ROM estimates. Even though you do not need detailed information in the ROM estimate, it is vital to have limited but valid information.

    The number of time and effort will also be decided on how detailed and accurate the information is. Moreover, you can approx the amount of time and cost while calculating the ROM estimate because it is not that precise.

  4. Required Changes

    The ROM estimate’s variance is higher because of its approx calculation and uncertainty in feasibility. Thus, the last step indicates that there can change by changes often during the initial stage of the project.

    After knowing how to use it, let’s discuss who uses ROM estimates and its examples.

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Who Uses ROM Estimate?

ROM estimate is an easy yet compressive term. It is useful for multiple reasons and in this section, we will discuss who uses ROM estimate and give you examples to make it less uncomplicated.

Who Uses ROM Estimate?

  • Larger Projects: When project managers want to have a rough estimation of the project and to know the value of the project scope.
  • Innovative Projects: It is used when the deliverable of the new project is unique and different. By using this method, they can manage projects with the calculated amount of cost.
  • International Projects: It is useful for international projects because it allows the project managers to include costs from various countries. With ROM estimate,
    currency conversion into account is possible.
  • Larger Budget Projects: Several project management uses ROM estimates because it makes the calculation of larger budget projects easier.

Let’s get more into detail by comparing ROM and a definitive estimate in the next section.

ROM Estimate v/s Definitive Estimate

For project management, both estimate- ROM and definitive are crucial because of their cost budget. However, the accuracy of the budget is more of a definitive estimate.

Confused about which is ideal for your business, let me simplify for you:

  • If you are looking for a rough cost estimate, the ROM estimate is for you.
  • If you are looking for an accurate estimate, the definitive estimate is for you.

According to the guide of the project management body of knowledge (PMBOK), the definitive estimate is the most accurate type of estimation.

Note: It is only possible when the information while calculating is valid and reliable.

Another difference in the rough order of magnitude and definitive estimate is information.

  • In ROM estimate, you can calculate the method with limited information, resource, and assumption.
  • In a definitive estimate, you need detailed and reliable information, then only an accurate estimate can be achievable.

Moreover, the ROM estimate is created during the initial stage of the project whereas the definitive estimate is created later when the project is in progress. A definitive estimate takes more effort and time compared to a ROM estimate.

Thus, the project life cycle of definitive estimates is more than ROM estimates as it does not take much time to create a rough estimate.

Wait, the comparison is not over, there are two more methods that are being compared with ROM and definitive estimates and that is a budget estimate and a preliminary estimate.

In the budget estimate, the accuracy range lies between -10% to +30%. Thus, it is more precise and almost exact like rough order of magnitude.

In the Preliminary estimate, the accuracy range lies between -15% to +50%. Hence, it is more significant and reliable compared to the ROM estimate. The outcome may be similar to a definitive estimate.

And that’s a wrap from our side. We hope you are clear about the concept of ROM estimate and how useful it is for your business.

Still uncertain about it? Let’s solve it into the frequently asked questions of ROM estimates.

Frequently Asked Questions
  1. How do you calculate ROM estimates?

    ROM estimates are calculated by classifying them into two boundaries: upper and lower. The method to calculate ROM estimates is:

    • Upper boundary=ROM estimate x (1+75%)= ROM Estimate x 1.75
    • Lower boundary =ROM estimate x (1-25%)= ROM Estimate x 0.75

  2. What is the difference between a ROM and definitive estimate?

    ROM estimate is developed in the early stage of the project and is less accurate. Whereas a definitive estimate is developed during the project and is more accurate.

Conclusion

For project management, the list of work to manage is high, and creating estimates is indeed the most challenging one. By using the ROM estimate technique, the work of the project manager becomes less complicated.

However, if you are still having a hard time, try estimate software like InvoiceOwl. It will help you to create an estimate in real-time and make the calculation of ROM estimate easier

Give a shot to the and avail the benefits of winning clients by providing professional estimates.

Author Bio
Jeel Patel
Jeel Patel
Founder

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.

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