The basis of estimates is an important tool in project management. It involves estimators and project managers to calculate the total cost needed for the entire project. It is used to support proposals, bidding and executing a project.
In a nutshell, the basis of estimates is a method of documenting different important aspects of the project cost estimate to mitigate the cost risk of the project.
It should be a clear document so that those involved in project management will be able to understand as well as assess the estimate. It will make it easier for those in project management to determine the cost, funding options, pricing basics, cost risk, allowances, opportunities and many others using the standard practices.
The basis of estimates requires attachments which include the estimate deliverable checklist, reference documents, benchmarking reports, risk analysis and reconciliation reports among many others. It is important to take note that the basis of estimates is concise, factual and should describe techniques used to create the cost estimate. A well-written basis of the estimate can help determine both the risks and opportunities involved in the project management blueprint.
This term is defined in the 5th edition of the PMBOK.