Project 90 Cost Estimation Overview
Description:
P90 is a statistical cost estimation method that provides 90% confidence level in project delivery. This means there is a 90% probability that the actual project costs will not exceed the estimated amount. The method accounts for uncertainties and risks in infrastructure planning by incorporating contingencies and risk-adjusted estimates.
How It Works:
Base Estimation
- Gather historical data from similar infrastructure projects
- Break down costs into detailed work packages
- Create baseline estimates using current market rates
- Document key assumptions and constraints
Risk Adjustment Process
- Identify potential risks and opportunities
- Quantify impact of each risk factor
- Apply Monte Carlo simulation for probability distribution
- Calculate risk-adjusted costs at P90 confidence level
Contingency Calculation
- Analyze estimate uncertainty
- Factor in market volatility
- Include scope variation allowance
- Add management reserve for unknown risks
Cost Categories Covered:
Direct project costs including labor, materials, and equipment
Indirect costs such as overhead and administration
Risk-based contingency
Escalation factors for multi-year projects
Professional services and specialized expertise
Benefits:
- More realistic budget forecasting
- Better risk management
- Improved stakeholder confidence
- Clear audit trail for estimates
- Standardized estimation process
This methodology helps organizations develop more reliable infrastructure planning budgets by accounting for uncertainties while maintaining a conservative yet achievable cost target.
Documents
- Australia, Queensland – Cost estimation guidance for federally funded projects
- Australia TfNSW – Get-NSW-Active-2025-26-Cost-Estimate-standard-template
- Australia TfNSW – Get-NSW-Active-2025-26-Cost-Estimate-standard-template
- Australia Government – Guidance Note 2 – Base cost estimation
