The most common misuse of a Class 5 estimate is treating it as the first draft of the budget. It is not a draft of anything. It is a screening tool whose job is to tell an owner whether an idea is worth the money it will take to define it properly.
That distinction sounds semantic until the consequences arrive. A draft gets refined into a final version; everyone understands the first number will move. A screening answer gets acted on: study this idea, shelve that one, spend the engineering money here. The Class 5 exists to make that decision well, and judged against that job, a wide honest range is not a weakness. It is the product.
The job it is hired to do
Under AACE International Recommended Practice 17R-97, Cost Estimate Classification System (RP 17R-97), Class 5 sits at the very start: project definition between zero and two percent, the concept barely on paper. At that maturity, the estimate can answer exactly three kinds of question, and answer them fast.
- Is this a 50 million dollar idea or a 500 million dollar idea?
- Which of three concepts deserves the FEED spend?
- Is the business case still alive if the high end lands?
Those are real decisions worth real money, and a Class 5 answers them in days. That is the entire value proposition: decision-grade information at concept speed.
What it cannot answer
Whether the project will cost 212 million dollars. A Class 5 with a point estimate and no range is a number that will be quoted back at the team for the next four years, in meetings its authors are not invited to. The widely published screening ranges, roughly minus 50 to plus 100 percent, are not an apology for weak work. They are what zero-to-two-percent definition supports, honestly stated.
So the answer is always presented as a range, with a sentence about which end is more likely and why. “180 to 380, and closer to the low end if the site has grid access” is a screening answer. “260” is a future argument. How to put a range in front of decision-makers without losing the room is its own subject: see Presenting a range without losing the room.
How we build one
Capacity factoring from analogous projects, adjusted for location and year, cross-checked against two independent benchmarks, and accompanied by a short list of the scope assumptions that drive the answer. It takes days, not weeks, and that is the point.
The craft is in the adjustments and the honesty about them. The analogue’s cost is scaled to the new capacity with an exponent appropriate to the plant type, moved to the right country with a location factor that has a source, and brought to the pricing date with a construction index. Then the whole result is tested against benchmarks that were normalised the same way, because an unnormalised benchmark can push a screening answer anywhere: see Benchmarks that help and benchmarks that mislead.
A worked example
An owner is weighing a new process facility, call it double the capacity of a plant completed four years ago in another province at a recorded 140 million dollars. Scale it: doubling capacity with a scaling exponent of, call it, 0.65 multiplies cost by about 1.57, so roughly 220 million. Location factor to the new site, call it 1.08: about 238. Index the four years of market movement, call it 18 percent: about 280 million at today’s pricing date.
Now the honesty layer. The analogue had grid power at the fence; this site may not. The analogue excluded owner’s costs. The water treatment scope is undefined. Each assumption gets a line, and the result goes to the board as: 200 to 400 million, most likely around 280, with the three assumptions that move it most and a list of what to define next. Total effort: a few days. The owner can now decide whether the idea earns its FEED budget, which is all anyone asked.
The range is the deliverable. The midpoint is a convenience.
Where this goes wrong
The midpoint becomes the budget. The 280 escapes into a slide, the range dies in a footnote, and three years later the project is “40 percent over” a number that was never a budget. The overrun is fictional; the damage to credibility is not.
Polishing instead of defining. The team reworks the Class 5, refining the arithmetic, adding line items, tightening nothing that matters. An estimate matures only when the definition does: drawings, layouts, an equipment list. What actually moves between the classes is its own subject: see What actually changes between a Class 5 and a Class 3 estimate.
The trimmed range. Somewhere between the estimator and the boardroom, 200-to-400 becomes 260-to-300 because the wide version “looks indecisive”. The trimmed range keeps the authority of analysis while discarding the analysis; it is the worst of both.
The skipped screening. The idea goes straight to FEED on enthusiasm, and the first real number arrives after millions in engineering spend, answering a question that a week of screening would have answered before the cheque was written.
Days, not weeks
Speed is not a compromise in a Class 5; it is a design requirement. The decision it serves is “should we spend money defining this”, and that decision is cheapened by every week the answer takes. Build it fast, state the range honestly, name the assumptions, and then spend the real money on the definition, which is the only thing that ever narrows the next estimate.
Emerald Group prepares Class 5 screening estimates for energy, e-fuels, industrial and infrastructure concepts, delivered in days with the assumptions and the range stated for decision. If an idea on your desk needs a first honest number, get in touch.