ROM Cost: Definition and Why It’s Important

A ROM Cost is a general approximation of the cost of providing a stated service. It is based on experience, costs of similar services, or on a cursory examination of other vendor’s rates. A ROM Cost is usually provided to a Customer who is seeking general information.

An owner or developer will look for a general cost estimate for a facility in the early stages of a project. They might not have much knowledge about a building at this early stage. They might only be aware of the building’s general size or have a general understanding of how the facility is used. Early on, it may be possible to create cost projections based on statistical information about the prices of structures of a similar type. A contractor may be able to offer helpful information about the price of comparable buildings in the area if they construct a large number of that type of building in the area where a future building will be built. Without this kind of knowledge, cost guides like RS Means offer a way to calculate a very rough cost estimate for a facility based only on future use or size projections and statistical averages and deviations.

Since it can be written on a napkin while having lunch with a client, the Rough Order of Magnitude (ROM) estimating approach is sometimes referred to as a “napkin” estimate and is used at the project’s beginning stages. Since they provide a relative scale of the costs, these estimates can be helpful to an owner or developer in assessing the project’s overall economic viability. They can also give information about the effects of various quality levels that they might be able to create within a certain price range.

Types of Cost Estimates | Rough Order of Magnitude (ROM) | Budget Estimate | Definitive Estimate

Why are ROM costs important?

ROM costs are important for several reasons, including:

What are ROM costs?

During the initial stages of a project or service, an estimate is made to determine a rough order of magnitude cost. The estimation is frequently made by project managers based on their experience and by looking at the prices of vendors and other service providers. The ROM cost is more of an educated guess than an exact figure that helps the client understand the scope of their requirements and project objectives. The difference between a project’s ROM cost and its actual cost can typically range from plus or minus 50%.

What’s the difference between a ROM estimate and a definitive estimate?

A definitive estimate is a more accurate cost estimate when compared to the ROM estimate. In order to ensure that the actual cost only varies by plus or minus 10%, calculating a precise estimate may take a lot of time and research, depending on the scope of the project. However, depending on the scope of the project and unforeseen events, some conclusive estimates may still prove to be inaccurate. Project managers must regularly conduct research and update the estimate to ensure its accuracy due to the uncontrollable project variables.

In comparison to the ROM estimate, which managers can typically prepare and present through experience, preparing and presenting a definitive estimate can also require more work. It’s crucial for businesses to have solid proof to back up their cost estimates when creating a definitive estimate report, such as contracts and invoices from various vendors. It’s also beneficial for project managers to make an itemized list of every material they want to use and how much it will cost if the project calls for different materials.

How to prepare a ROM estimate

The following list of steps will assist you in creating a ROM estimate:

1. Understand the time frame

Understanding a project’s timeline is crucial because it can help you assess the ROM estimate’s accuracy. The likelihood that the ROM estimate will be the most accurate approximation decreases with project length and complexity. Most frequently, unforeseen events like weather delays, inconsistent vendor prices, a lack of labor, and more are to blame for the decline in accuracy. The likelihood of running into problems that could raise the project’s overall cost increases as it takes longer to complete.

2. Examine previous similar projects

You can better understand the range of costs for the current project by looking at similar projects you’ve completed in the past. Finding the average cost across previous projects is useful when reviewing them. You should also look closely at the project’s small details, like labor, materials, and equipment. For instance, you can deduct some of the material costs from the current ROM estimation if you anticipate that the current project won’t require as many materials but will still require the same amount of labor and equipment.

3. Determine major costs

It’s helpful to start with the major costs when creating a ROM estimate for a client. You can determine the most expensive components of the project by starting with the major costs and adding in the smaller details later. For instance, if you are beginning a new construction project, some of the major expenses could be for vehicles, equipment, liability insurance, and facility rentals. Prior to deciding on the finer points, such as labor and materials, you can gain a solid understanding of the overall ROM estimate by first calculating those costs.

4. Talk with vendors and suppliers

Speaking with suppliers and vendors can assist you in estimating some project costs. To help you and the client better understand the scope of the project and begin comparing the costs of various suppliers, it can be helpful to contact various vendors when determining the ROM estimate and discuss their rental prices. Additionally, it’s possible that some businesses will provide you with a preliminary quote that you can use as proof to back up your ROM estimate. Although the quote might change as the project’s specifics are more clearly defined, it aids in providing you with a more accurate estimate.

5. Ask others for advice

You can arrive at a more precise ROM estimate by consulting others, particularly those with extensive project experience. It can be helpful to consult other managers and different project staff when seeking advice from others. The knowledge and experience of other project managers can be used to calculate the ROM cost or provide feedback on your current ROM estimate. Different project team members can assist you in determining some of the more minor project details they may be more familiar with, such as the costs of hiring labor or other incidental expenses you might have overlooked.

6. Consider using specialized software

A ROM estimate can be performed manually, but using specialized software will enable you to make more precise approximations and automate some of the calculations. In accordance with the requirements of the client, the software can also assist you in more easily changing the estimate. For instance, the software may only need to change a few variables to assist you in calculating the adjustments if the client decides to expand the project’s scope and timeline. You can use specialized software to estimate additional project costs, such as precise estimates.


What does ROM estimate stand for?

An estimate of a project’s level of effort and completion costs is known as a rough order of magnitude estimate (ROM).

What does ROM mean in contracting?

Answer. When there are few specifics about a government requirement, rough orders of magnitude (ROM) are quick and broad cost estimates that are typically completed. They help the Government to develop its own cost estimates. It should not be problematic to request an ROM for comparable work from an existing contractor.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *