Ever found yourself staring at a blank spreadsheet thinking, “We just need a number to get this moving”? You are not alone. One of the most common reasons clients contact IDEA is to obtain a cost estimate for a defined scope of work, often when the project is still taking shape.
And here is the awkward truth. Cost estimates are essential, but they are not magic. They are a structured prediction of the expected final cost, built from the best available information at the time. The quality of the estimate depends on the technique used, the quality of the inputs, and how honestly we treat uncertainty.
At IDEA, our engineers have led a wide range of conceptual studies, feasibility assessments, and Front End Engineering Design work. We use proven norms based on reference cost data when the project is early, and we switch to more refined cost breakdown models when the design maturity allows it. The goal stays the same in every case. Help you make business decisions with confidence while understanding the risks, the assumptions, and what could move the number.
In this article we break down how industrial project cost estimates are built, how accuracy changes by phase, and what that means for decisions
Why clients ask for cost estimates early
The real reason people need a number
Most early estimates are not about spending tomorrow. They are about deciding today. You might be answering questions like:
- Is this project viable at all?
- Which option is cheaper, lower risk, and faster?
- Do we need a full FEED, or can we go straight to detailed design?
- How does this fit into next year’s capital plan?
A cost estimate becomes the passport that lets a project travel from idea to approval.
Cost estimates as a decision tool
A good estimate is less like a fortune teller and more like a weather forecast. It tells you what conditions to expect and how wide the uncertainty band is. You would not plan an outdoor event based on the single number “18°C.” You would want the range, the risk of rain, and what might change.
Same for industrial projects.
What a cost estimate really is
A prediction of final cost
A cost estimate is the prediction of the expected final cost for a defined scope, in defined conditions, at a defined point in time. That last bit matters more than people think. A cost estimate is time sensitive because markets shift, lead times change, and supply chain pressures come and go.
Why different techniques produce different accuracy ranges
Different cost estimating techniques give different ranges of accuracy because they rely on different levels of detail. Early on, you might only know capacity, utility loads, and a rough plot area. Later, you might know equipment lists, line sizes, MTOs, and procurement strategies.
As the design matures, the estimate tightens. The number does not “change because estimating was wrong.” It changes because you learned more.
Where projects go wrong when estimating
The dangers of false precision
If someone gives you an early estimate to the nearest pound, that is a red flag. It can create a false sense of certainty and push teams into commitments that the project cannot support.
Underestimating scope and interfaces
Many overruns come from the boring stuff that is easy to miss:
- tie ins and shutdown constraints
- civil works and drainage
- electrical and controls integration
- access, maintenance, and operability
- permitting and compliance evidence
- commissioning and training
These are not “extras.” They are part of a real project.
Optimism bias and invisible assumptions
Every estimate contains assumptions. The danger is when those assumptions stay invisible. When the project later breaks those assumptions, the estimate appears to “blow up” even though it was never anchored correctly.
The common project phases and what estimating looks like in each
Concept and early screening
At concept stage, speed matters. You want to screen options, kill weak ideas early, and focus effort on the best paths. Here, reference data and high level norms are usually appropriate.
Feasibility studies
Feasibility is where you start testing whether the preferred concept can actually work in your real site conditions. The estimate typically improves because you confirm constraints, utilities, layout implications, and key technical risks.
Front End Engineering Design
FEED is where confidence starts to feel real. You clarify scope boundaries, define design basis, identify key equipment, develop preliminary layouts, and resolve major technical uncertainties.
Why FEED changes the confidence level
FEED turns “we think” into “we know.” It also produces the evidence your internal stakeholders need for approvals and governance. That usually reduces surprises later, which is where most cost pain lives.
The main cost estimating techniques
Reference cost data and norms
This is often the right tool early on. If you have strong historical benchmarks for similar equipment or similar plants, you can build an estimate quickly. The key is knowing when the reference is truly comparable.
Factored estimating
Factored methods use known costs for key items and apply factors for installation, piping, electrical, civils, and indirects. It is like building a meal cost starting with the main course, then estimating sides, service charge, and dessert using experience.
Parametric models
Parametric approaches use relationships, such as cost per unit capacity or cost per square metre, and adjust for complexity and conditions. They can be powerful, especially when supported by good data and consistent definitions.
Bottom up cost breakdown structures
When the design is mature enough, bottom up models can provide better traceability. You build up the estimate from equipment, bulk materials, labour, indirects, and contingency, all linked to a clear scope.
How we choose the right estimating approach
There is no single “best” method. The best method is the one that fits your project’s maturity, constraints, and decision need. Here are the key factors we consider when selecting the right technique.
Familiarity with the technology
If the technology is well established, you can lean more on references and proven norms. If it is novel, you need to widen uncertainty, focus on risk, and sometimes spend more time validating assumptions.
Complexity of the project
A straightforward swap out is not the same as integrating multiple systems into a live, constrained site with shutdown windows. Complexity drives effort, interfaces, and therefore uncertainty.
Quality of reference data
Good data is like good ingredients. It does not guarantee a perfect meal, but bad ingredients guarantee a bad one. If reference costs are outdated, poorly scoped, or not comparable, we either adjust carefully or change method.
Experience and skill level of the team involved
Estimating is not just maths. It is judgement. Strong estimators know where projects hide costs and how to challenge assumptions that look harmless on paper.
Time and level of effort budgeted
Sometimes you need a quick screening estimate in a week. Sometimes you need a robust estimate for investment approval. The technique must match the time available.
Political, geographical, and market conditions
A project in one region might face labour constraints, import duties, permitting timelines, or vendor scarcity that changes pricing and delivery risk. Market conditions also influence equipment lead times and contractor availability.
What a “good” estimate includes
Clear scope and boundaries
What is included. What is excluded. Where interfaces sit. Without boundaries, you do not have an estimate. You have a guess.
Assumptions register
We capture key assumptions plainly, like:
- site working hours and access
- shutdown availability for tie ins
- utilities availability and capacity
- procurement strategy and long lead items
- standards, compliance, and documentation needs
This protects decision makers from surprise later.
Risk and opportunity identification
Every estimate should show what could push cost up and what could pull it down. That turns the estimate into a practical management tool.
Accuracy range and confidence
A range is not weakness. It is honesty. The range tells you the uncertainty band and helps you choose the right next step.
Recommended next steps
We do not just deliver a number. We highlight what you should do next to improve confidence, reduce risk, or validate the business case.
Risk and opportunity: the twin levers
Risk driven allowances
Risks are not just threats. They are uncertainties that deserve structured treatment. When risks are identified early, you can decide whether to accept, reduce, or transfer them.
Opportunities that reduce capex and opex
Opportunities might include:
- alternative equipment selections
- smarter integration that reduces piping and controls scope
- layout changes that reduce civils and structural work
- phasing strategies that minimise shutdown time
- energy efficiency measures that reduce operating cost
A good estimating process sees both sides of the coin.
Making business decisions with confidence
When to progress and when to pause
Sometimes the best outcome of an early estimate is deciding not to proceed. That is a win. It saves capital, time, and focus for projects that truly deliver value.
How estimates support investment cases
A structured estimate helps you build a credible investment case, secure internal approvals, and communicate clearly with stakeholders. It also reduces the risk of later rework, which is one of the most expensive things in any project.
A practical example of how estimating evolves
Early range
At concept stage, you might have a broad range because scope is still forming and site constraints are not fully understood. That is normal.
Refined range after FEED
After FEED, you have defined equipment lists, clearer layouts, validated utilities, and a better view of risks and interfaces. The estimate usually tightens because uncertainty reduces.
Why the number tightens over time
Think of it like adjusting the focus on a camera lens. At first, the image is blurry, so you describe shapes. As you focus, details appear. The scene did not change, your understanding did.
Working with IDEA
What our engineers do differently
We combine engineering judgement with structured estimating methods, and we treat assumptions and risk as first class citizens. That makes the estimate useful for decision making, not just reporting.
Key deliverables we typically provide
Depending on phase and scope, deliverables can include:
- basis of estimate and scope definition
- assumptions and exclusions register
- risk and opportunity summary
- estimating methodology selection rationale
- cost breakdown structure and estimate outputs
- next step roadmap to increase confidence
For more detail, our website outlines the key deliverables and activities involved in each phase of a project.
Explore the project phase deliverables on our website
If you are unsure whether you need concept, feasibility, or FEED support, explore our webpage that lists key deliverables and activities for each project phase. It will help you pick the right level of effort for the decision you need to make.
Conclusion
Cost estimates are not just numbers. They are decision tools built from scope, data, judgement, and a clear understanding of uncertainty. The right estimating technique depends on technology familiarity, project complexity, data quality, team experience, time available, and market conditions. At IDEA, we help clients choose the right approach, capture assumptions transparently, identify risks and opportunities early, and build estimates that support confident business decisions. If you need a cost estimate you can stand behind, let’s talk.
FAQs
FAQ 1: How early can I request a cost estimate?
You can request an estimate at concept stage, but expect a wider range. The earlier the phase, the more the estimate depends on assumptions and reference data.
FAQ 2: Why does the estimate range matter more than the single number?
Because the range tells you uncertainty. Decisions based on a single number can be misleading if the estimate is at an early stage.
FAQ 3: What information should I provide to get a better estimate?
A clear scope, site constraints, known utility capacities, any existing drawings, and your preferred timeline. Even rough information helps tighten assumptions.
FAQ 4: Can IDEA help compare multiple options, not just estimate one solution?
Yes. Option screening and comparison is a common outcome of concept and feasibility work, especially when balancing cost, risk, and deliverability.
FAQ 5: When should I move from a high level estimate to FEED?
When the project looks viable and you need stronger confidence for approvals, procurement planning, or stakeholder alignment. FEED typically improves scope definition and reduces uncertainty.