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Last edited 30 Sep 2020
Top down and bottom up estimating
An estimate is an attempt to predict the likely expenditure associated with a project as accurately as possible. The degree of detail and the accuracy of estimates will typically increase as the project progresses, more decisions have been made, and more information is available, however, their true accuracy only becomes apparent once the project is complete and the actual costs have been incurred.
- Benchmarking, which is a process by which other similar projects are used as comparisons.
- Breaking down an overall estimated construction cost into percentages for different elements, based on the experience of the cost consultant.
- Measuring defined quantities from drawings and specifications.
There are two approaches that can be used to create an estimate. These are known as top down estimating or bottom up estimating. These terms are also used in other areas of business, finance, investing and economics.
Simply put, top down looks at general project scope and works its way down to specifics. Bottom up works in the opposite manner. It starts with specific project details and moves up to general project scope. Both techniques rely on data and can be used during different stages of the project. Top down is generally used first, followed by bottom up.
 Top down
This estimating approach starts with the overall project and highlights the significant components of the work as percentages of the overall cost. Top down estimates are often based on past projects with similar characteristics. Estimates created at the top down approach tend to be broad. They are most often used during the early stages of a project with the recognition that concrete details and accurate data will be limited.
Top down estimates can be produced relatively quickly and cheaply when compared to bottom up estimates. They are often large or rough estimates based on tentative scenarios. As such, there is less likelihood for error due to omission, since the estimates are not based on granular details. By looking at the bigger picture, top down estimates can help support decisions that will dictate the viability of a project.
While the abstract nature of top down estimates has its benefits, this also means there can be an issue with accuracy, since details are lacking. This can result in estimates with loosely defined tasks, and can make it difficult to compare alternatives
 Bottom up
The bottom up approach looks at the project from the most specific practical level producing estimates for individual tasks or elements that have been defined at that stage of the project. These estimates are then compiled to create a total budget.
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