AACE estimate classes 1 to 5 explained
AACE International classifies cost estimates into five classes, from Class 5 (a screening estimate with almost no project definition) to Class 1 (a check estimate on a fully defined project). The class is set by one thing above all: how far the project's definition has progressed. Matching an estimate's class to the decision it supports is one of the simplest ways to avoid funding a project on numbers that could not bear the weight.
The principle: maturity of definition
AACE's classification matrix uses the maturity of the project definition deliverables, expressed as a percentage of complete definition, as the primary characteristic. The other characteristics (what the estimate is used for, how it is prepared, its expected accuracy and the effort to prepare it) follow from that maturity. An estimate is not Class 3 because someone calls it Class 3; it is Class 3 because the scope, engineering and plan behind it are developed to that level.
The five classes
| Class | Project definition | Typical use | Typical method |
|---|---|---|---|
| Class 5 | About 0% to 2% | Screening or feasibility | Factors, parametric models or judgment |
| Class 4 | About 1% to 15% | Concept study or feasibility | Mostly factored and parametric |
| Class 3 | About 10% to 40% | Budget authorization or control | Mixed: factored for some parts, detailed for others |
| Class 2 | About 30% to 75% | Control, or a bid or tender | Mostly detailed unit costs and quantities |
| Class 1 | About 65% to 100% | Check estimate, or a bid or tender | Detailed: quantities, unit costs, crews and productivity |
The ranges overlap deliberately: definition does not jump between classes, and the boundaries are judgment calls supported by evidence.
Accuracy
Expected accuracy widens as definition falls. AACE expresses it as a range relative to Class 1: in the generic matrix, a Class 5 estimate's range is typically 4 to 20 times as wide as a Class 1 estimate's, Class 3 about 2 to 6 times, Class 2 about 1 to 3 times. Ranges are asymmetric, wider on the high side than the low, because projects overrun far more often and further than they underrun. Industry-specific recommended practices give the ranges as percentages for their sector. Accuracy is a range around the estimate, not a promise, and contingency is how it is funded.
Showing which class an estimate is
A credible class is backed by deliverables, not adjectives: the status of the scope statement, process or system definition, layouts, equipment lists, design drawings, the execution plan, the schedule and the contracting strategy. A good basis of estimate lists them, with their status, and states the class the evidence supports. When the evidence supports a lower class than the one claimed, either the estimate is relabelled or the gaps are closed before the decision.
Estimate and schedule classes together
AACE also classifies schedules by maturity. The same logic applies: a Class 3 estimate funded on a Class 5 schedule has a cost with no credible time basis behind it. Keeping the two at the same class, and handing the estimate to the schedule as its resource-loaded baseline, keeps cost and time telling the same story.
Estimate classes in DeltaSys
The DeltaSys Estimator records each estimate's class, checks it against a deliverables checklist and shows which class the evidence actually supports, runs reviews to a sign-off, writes the basis of estimate, and sets contingency by risk analysis. Its range rules start from company defaults by class, which your organization replaces with its own. The estimate passes to the Planner as a resource-loaded baseline with its class, so every project shows whether its estimate and schedule classes agree.
Sources
AACE International, Recommended Practice 17R-97, Cost Estimate Classification System; and Skills and Knowledge of Cost Engineering, 6th edition, chapter 9 (Cost Estimating), Figure 9.1. Industry-specific practices, such as 18R-97 for process industries, apply the system to particular sectors. Read the recommended practices for their full text and tables.
Questions
Which class should a funding decision use?
Most capital projects make the final funding decision on a Class 3 estimate: enough definition for the accuracy a commitment of funds needs. Owners typically prepare Class 5 and Class 4 themselves, and engineering contractors often prepare Class 3 and better.
Can a Class 5 estimate be accurate?
It can turn out close, but its expected range is wide because so little is defined. The classification describes what the estimate can be relied on for, not how lucky it was.
Related: cost risk and contingency · earned value management.
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