112R-

20

COSTESTIMATECLASSI
FI
CATI
ON
SYSTEM–ASAPPLI EDI
N
MAINTENANCETURNAROUNDS
FORTHEPROCESS
INDUSTRI
ES
 AACE® International Recommended Practice No. 112R-20

COST ESTIMATE CLASSIFICATION SYSTEM – AS APPLIED IN

MAINTENANCE TURNAROUNDS FOR THE PROCESS
INDUSTRIES
TCM Framework: 7.3 – Cost Estimating and Budgeting

Rev. March 19, 2021

Note: As AACE International Recommended Practices evolve over time, please refer to web.aacei.org for the latest
revisions.

Any terms found in AACE Recommended Practice 10S-90, Cost Engineering Terminology, supersede terms defined in
other AACE work products, including but not limited to, other recommended practices, the Total Cost Management
Framework, and Skills & Knowledge of Cost Engineering.

Contributors:
Disclaimer: The content provided by the contributors to this recommended practice is their own and does not necessarily
reflect that of their employers, unless otherwise stated.

Gordon R. Lawrence (Primary Contributor) John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life
Jeffery J. Borowicz, CCP CEP PSP FAACE Dave Kyle, CCP CEP
Bas Druijf, CCT Carlos Pina
Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
Copyright © AACE® International AACE® International Recommended Practices
Single user license only. Copying and networking prohibited.

This document is copyrighted by AACE International and may not be reproduced without permission. Organizations may obtain permission
to reproduce a limited number of copies by entering into a license agreement. For information please contact [email protected]
AACE® International Recommended Practice No. 112R-20
COST ESTIMATE CLASSIFICATION SYSTEM – AS
APPLIED IN MAINTENANCE TURNAROUNDS FOR THE
PROCESS INDUSTRIES
TCM Framework: 7.3 – Cost Estimating and Budgeting

March 19, 2021

TABLE OF CONTENTS

Table of Contents ..........................................................................................................................................................1

1. Purpose ......................................................................................................................................................................2
2. Introduction ...............................................................................................................................................................2
3. Cost Estimate Classification Matrix for Maintenance Turnarounds in the Process Industries ..................................3
4. Costs for Uncertainty and Risk...................................................................................................................................5
5. Systemic Risks and Accuracy Ranges .........................................................................................................................5
6. Relationship Between Accuracy Range and Cost Estimate Class ...............................................................................6
7. Determination of the Cost Estimate Class .................................................................................................................7
8. Characteristics of the Estimate Classes .....................................................................................................................8
9. Estimate Input Checklist and Maturity Matrix .........................................................................................................14
10. Basis of Estimate Documentation ..........................................................................................................................16
11. Turnaround Definition Rating System ...................................................................................................................16
References ...................................................................................................................................................................16
Contributors ................................................................................................................................................................17
Appendix: Understanding Estimate Class and Cost Estimate Accuracy.......................................................................18

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 2 of 20
Process Industries

March 19, 2021

1. PURPOSE

As a recommended practice (RP) of AACE International, the Cost Estimate Classification System provides guidelines
for applying the general principles of estimate classification to project and maintenance turnaround cost estimates
(i.e., cost estimates that are used to evaluate, approve, and/or fund projects or turnarounds). The Cost Estimate
Classification System maps the phases and stages of cost estimating together with a generic scope definition
maturity and quality matrix, which can be applied across a wide variety of industries and scope content.

This recommended practice provides guidelines for applying the principles of estimate classification specifically to
maintenance turnarounds for the process industries1. It supplements the generic cost estimate classification RP 17R-
97 [1] by providing:
• A section that further defines classification concepts as they apply to turnarounds in the process industries.
• A chart that maps the extent and maturity of estimate input information (turnaround preparation &
planning definition deliverables) against the class of estimate.

As with the generic RP, the intent of this document is to improve communications among all the stakeholders
involved with preparing, evaluating, and using turnaround cost estimates specifically for the process industries.

The overall purpose of this recommended practice is to provide the process industry with a turnaround definition
deliverable maturity matrix that is not provided in 17R-97. It also provides an approximate representation of the
relationship of preparation & planning input data and scope deliverable maturity to the estimate accuracy and
methodology used to produce the cost estimate. The estimate accuracy range is driven by many other variables and
risks, so the maturity and quality of the scope definition available at the time of the estimate is not the sole
determinate of accuracy; risk analysis is required for that purpose.

This document is intended to provide a guideline, not a standard. It is understood that each enterprise may have its
own project and estimating processes, terminology, and may classify estimates in other ways. This guideline provides
a generic and generally acceptable classification system for the process industries that can be used as a basis to
compare against. This recommended practice should allow each user to better assess, define, and communicate
their own processes and standards in the light of generally accepted cost engineering practice.

2. INTRODUCTION

For the purposes of this document, the term process industries is assumed to include firms involved with the
manufacturing and production of chemicals, petrochemicals, hydrocarbon processing, energy, and utilities. One
common thread among these industries is the continuous operation (as opposed to batch operation) of their process
plant, thus necessitating regular maintenance turnarounds. The other common thread (for the purpose of estimate
classification) is their reliance on process flow diagrams (PFDs), piping and instrument diagrams (P&IDs), and
electrical one-line drawings as primary scope defining documents. These documents are key deliverables in
determining the degree of scope definition, and thus the extent and maturity of estimate input information.

For the purposes of this document, the term maintenance turnarounds refers to maintenance, inspection and minor
upgrade/modification work carried out by the turnaround maintenance and inspection team during a planned,
periodic (total or partial) shutdown of a process unit or plant.

Maintenance turnaround events (which are sometimes viewed as a short-interval project by contractors) typically

1
A turnaround (in the context of the process industries) is defined here as a planned, periodic shutdown (total or partial) of a process unit or
plant to perform maintenance, overhaul and repair operations and to inspect, test and replace process materials and equipment. (Adapted
from API definition.)

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 3 of 20
Process Industries

March 19, 2021

also have traditional capital project tie-in scope which needs to be executed in the turnaround event window, as
well as the standard inspection and maintenance scopes. The cost estimates covered by this RP are for the inspection
and maintenance work only. RP 18R-97 [2] covers estimates for the traditional project scope that may be executed
during the same event window. (However, it should be noted that executing traditional capital project scope during
a turnaround affects the estimate of both the traditional project and the turnaround itself. Consequently, this guide
makes reference to the status of the capital projects integration plan and to the status of capital project engineering
packages as part of the estimate class discussion.)

To explain further, this RP applies to corrective maintenance, preventive maintenance, inspection work (statutory,
regulatory, risk-based, company mandated, etc.) and minor “management of change” projects, if carried out by the
maintenance team. It does not apply to capital investment project work, executed by a project team (either on-site
or corporate), even if that project work requires a shutdown of the plant for installation of tie-ins. This excludes
shutdowns for routine catalyst changes.

Examples of typical scopes for this RP include valve refurbishment, pipe clamp removal and pipe repair, repair of
corrosion under insulation (CUI), overhaul of compressors to meet original equipment manufacturer (OEM) warranty
requirements, cleaning of shell and tube heat exchanger tubes, replacement of heat refractory bricks in a reactor,
repair/replacement of damaged trays in a distillation column, etc.

This RP applies to a variety of field execution contract payment methods, including reimbursable, unit rate and lump-
sum. For the purposes of this document, the term premise document refers to a document produced in the early
stages of preparation & planning for a turnaround. It explains the reasons for holding the turnaround, the objectives
to be achieved by the turnaround (both in terms of improved and more reliable operation and in terms of targets
for the turnaround team) and, if written well, may also include clear scope inclusion criteria. Synonyms for the term
premise document include scoping document and business objectives document.

This guideline reflects generally accepted cost engineering practices, including those outlined in the Total Cost
Management (TCM) Framework [3] and uses standard AACE terminology. [4] This recommended practice was based
upon the practices of a range of companies in the process industries from around the world, as understood by a
range of AACE contributors. It also encompassed a literature search of published references and standards on
estimate classes for turnarounds, but only one was found in the public domain. [5] Company and public standards
were solicited and reviewed, and the practices were found to have significant commonalities. These classifications
are also supported by empirical process industry research of systemic risks and their correlation with cost growth.
[6]

3. COST ESTIMATE CLASSIFICATION MATRIX FOR MAINTENANCE TURNAROUNDS IN THE PROCESS INDUSTRIES

A purpose of cost estimate classification is to align the estimating process with the turnaround stage-gate scope
development and decision-making processes. It should be recognized that the maintenance turnaround world has
not universally accepted the concept of stage gates in front-end definition as widely as the capital project world. In
capital projects, the length of each stage is a function of the work required to be completed in that stage. The
culmination of each stage is a cost estimate, with the estimates getting more accurate with each succeeding stage
as risks are treated. Differences from the system used for capital projects include the fact that the length of each
stage is (more or less) fixed, based on the amount of time remaining until the turnaround starts. It is not dependent
on how far preparation and planning have progressed.

Table 1 provides a summary of the characteristics of the five estimate classes. This matrix in Table 1 and the
guidelines in Table 2 outline an estimate classification system that is specific to maintenance turnarounds in the
process industries. Refer to Recommended Practice 17R-97 for a general overview of estimate classes, or to other

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 4 of 20
Process Industries

March 19, 2021

cost estimate classification RPs for guidelines that will provide more detailed information for application in projects
in other specific industries. Also see Professional Guidance Document 01, Guide to Cost Estimate Classification [7].

Primary
Secondary Characteristic
Characteristic
APPROXIMATE
STAGE TIMING APPROXIMATE
Expressed as time MATURITY LEVEL EXPECTED
before start of OF SCOPE END USAGE
ESTIMATE METHODOLOGY ACCURACY RANGE
shutdown for the Typical purpose of
CLASS Event execution.
DEFINITION Typical estimating method Typical variation in low
estimate and high ranges at an 80%
(Durations are longer DELIVERABLES
Expressed as % of confidence interval
for larger, more
complex complete definition
turnarounds.)
Long-Range Previous Similar Event L: -20% to -50%
Class 5 3-12 years out 0% to 2%
Planning Cost H: +30% to +100%
Previous Similar Event
12-36 months Preliminary L: -15% to -30%
Class 4 1% to 15% Cost, with Scope
out budget indication H: +20% to +50%
Adjustments
Initial budget Detailed Material
L: -10% to -20%
Class 3 6-12 months out 10% to 40% approval, funding Take-Offs, Historically
H: +10% to +30%
request Priced
Detailed Material
Final budget Take-Offs, Mix of L: -5% to -15%
Class 2 3-6 months out 30% to 75%
approval Historical & H: +5% to +20%
Commercial Pricing
Detailed Material
L: -3% to -10%
Class 1 1-3 months out 65% to 100% Control Estimate
Take-Offs,
H: +3% to +15%
Commercially Priced
Table 1 –Cost Estimate Classification Matrix for Maintenance Turnarounds in the Process Industries

As with capital projects, the maturity level of preparation and planning definition is the sole determining (i.e.,
primary) characteristic of class, not the timeline and gate. In Table 1, the maturity is roughly indicated by a
percentage of complete definition; however, it is the maturity of the defining deliverables that is the determinant,
not the percent. The other characteristics are secondary and are generally correlated with the maturity level of
turnaround scope and organization deliverables. The specific deliverables, and their maturity or status are provided
in Table 3.

Table 1 illustrates typical ranges of accuracy ranges that are associated with the process industries. The +/- value
represents typical percentage variation at an 80% confidence interval of actual costs from the cost estimate after
application of appropriate contingency (the point estimate being the P50, and contingency being the difference
between the base estimate plus emerging and discovery allowances, and the mean) for given scope.

Regarding the maturity and accuracy characteristics, maintenance turnarounds do have one slight advantage over
capital projects, particularly in the early cost estimate phases. Unlike in a capital project, much of the work-scope
for a turnaround is repeated from one turnaround to the next; for example, cleaning a shell & tube heat exchanger,
or refurbishing a certain type and size of valve. Consequently, if a site or asset retains good cost data records, the
bulk of information for compiling a turnaround estimate should be available from historical records. This leads to a

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 5 of 20
Process Industries

March 19, 2021

situation where early estimates have a narrower range than a capital project person might expect. It also means that
Class 5 estimates are often not prepared, and teams move immediately to Class 4.

4. COSTS FOR UNCERTAINTY AND RISK

As with capital projects, turnaround estimates need to include costs for uncertainty and risk. For capital projects,
this is usually accounted as contingency (not considering reserves, escalation and currency for this discussion).
However, unlike capital projects, turnaround teams typically account for uncertainties and risks in three separate
accounts; the following two categories are added to traditional contingency:
• Emergent work, also known as additional work: Strictly speaking, this is work that arises after scope freeze
and before the start of shutdown. It usually arises because an item has unexpectedly failed in service or
broken down and now requires repair. However, it inevitably sometimes includes forgotten or overlooked
work; work that should have been known before scope freeze, but which was somehow missed off the
original scope due to a human or system error.
• Discovery work, also known as found work: Work that is discovered during the turnaround execution
window, when equipment is opened and inspected.

Emergent work and discovery work are generally tracked in a similar way to variations in a capital project. The base
scope is gathered on a scope list, which details the scope sufficiently to clearly define what it is. This scope is then
challenged (to verify that it should be included) and the list is frozen. This usually occurs at roughly 12 months before
the turnaround event shutdown. Scope arising after the scope freeze is then tracked as a variation additional to the
base scope, but included within the overall turnaround scope and budget.

The third risk cost account is contingency which is defined in RP 10S-90 as follows.
• “An amount added to an estimate to allow for items, conditions or events, for which the state, occurrence
or effect is uncertain and that experience shows will likely result, in aggregate, in additional costs.”

However, unlike on traditional capital projects, contingency for turnaround projects excludes most scope uncertainty
which is addressed by the emergent work and discovery works accounts. The allocation of risks to multiple categories
requires variations from traditional risk quantification practices. Companies that include these multiple accounts
should assure that their in-house definition of contingency is worded to exclude risk of emergent and discovery
work.

Research indicates that teams that separate the three risk cost categories (rather than have just contingency alone)
generally have more accurate estimates. However, this is very likely to be a correlation rather than a causation, (i.e.,
those estimating teams which go to the trouble of splitting the three accounts are generally the types of teams that
go to similar trouble over the detail of the rest of the estimate.) [8]

It is also well documented that turnaround teams tend to under-estimate how much contingency will be needed. [9]

5. SYSTEMIC RISKS AND ACCURACY RANGES

Although the range of ranges gives an indication of the likely 80% confidence interval, it is worth remembering that:
• An 80% confidence interval still means that 10% of expected results will fall below this range and 10% above.
• Turnaround estimates prepared by teams that have weak work processes, or weak risk management
processes, or poor capital project scope integration processes [10], or with certain contract payment
strategies [11] will tend to have wider accuracy ranges.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 6 of 20
Process Industries

March 19, 2021

• Turnarounds with more systemic risks will tend to have wider accuracy ranges. Examples of systemic
uncertainties include: [6]
• Level of on-site congestion.
• Local availability of skilled field labor.
• Recent changes to decontamination and cleaning procedures.
• Processes with particularly hazardous materials.
• High volumes of piping scope.
• High volumes of instrumentation scope.
• Turnaround complexity, in terms of overall scope size, proportion of capital project tie-in work and
length of the interval between turnarounds.

Systemic risks are often the primary driver of accuracy, especially during the early stages of turnaround definition.
As turnaround definition progresses, turnaround‐specific risks also start to drive the accuracy range.

For turnarounds, one way that bias may occur is to reassess preventive maintenance items as inspection scope (i.e.,
optimistically assume that the item will be found on inspection to be in better condition than forecast and not need
preventative maintenance work.) However, during execution it is often discovered that items inspected should be
maintained as was originally forecast, leading to increased need for discovery funds.

Other issues that can affect the accuracy of the cost estimate relate to the fact that turnarounds are under pressure
to complete in a fixed time window. If field work is running behind schedule, there is often a temptation to cut scope
in the field [12]. Work may then be shifted to a later turnaround. When evaluating turnaround project history, one
must check whether on-budget performance was the result of scope reduction/shifting. Alternatively, there may be
efforts to trade higher cost for faster schedule, by adding resources to meet the schedule deadline. All of these can
affect the estimate’s perceived accuracy when compared to the actual outcome cost.

The goal should be to have an unbiased and objective scope forecast and estimate for the base cost and realistic,
probabilistic analyses of the various risk funds to address the range.

6. RELATIONSHIP BETWEEN ACCURACY RANGE AND COST ESTIMATE CLASS

Figure 1 illustrates the general relationship trend between estimate accuracy and the estimate classes
(corresponding with the maturity level of turnaround definition). Depending upon the technical and execution
complexity of the turnaround, the availability of appropriate cost reference information, the degree of scope
definition, the biases and the inclusion of appropriate contingency determination, a typical Class 5 estimate for a
process industry project may have an accuracy range as broad as -50% to +100%, or as narrow as -20% to +30%.
However, note that this is dependent upon the contingency and other risk funds included in the estimate
appropriately quantifying the uncertainty and risks associated with the cost estimate. Refer to Table 1 for the
accuracy ranges conceptually illustrated in Figure 1.

Figure 1 also illustrates that the estimating accuracy ranges overlap the estimate classes. There are cases where a
Class 5 estimate for a particular turnaround may be as accurate as a Class 3 estimate for a different turnaround. For
example, similar accuracy ranges may occur for a Class 5 estimate of one turnaround that is based on a repeat scope
with good cost history and a Class 3 estimate for another turnaround involving a complex scope and site without
good cost history. It is for this reason that Table 1 provides ranges of accuracy value ranges. This allows consideration
of the specific circumstances inherent in a turnaround. While a target range may be expected for a particular
estimate, the accuracy range should always be determined through risk analysis of the specific turnaround and
should never be pre-determined. This point about the need for risk analysis is stressed here, because unfortunately
risk analysis is rarely used in turnaround estimating. AACE has recommended practices that address contingency

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 7 of 20
Process Industries

March 19, 2021

determination and risk analysis methods, but none at this time address multiple risk accounts. The general principles
of contingency calculation are given in RP 40R-08, Contingency Estimating – General Principles. [13] The
measurement of the level of scope and planning definition using this classification is excellent input to the parametric
method of quantifying systemic risks as documented in RP 42R-08, Risk Analysis and Contingency Determination
Using Parametric Estimating. [14]

If contingency and other risk funds have been addressed appropriately, approximately 80% of projects should fall
within the ranges shown in Figure 1. However, this does not preclude a specific actual project result from falling
inside or outside of the indicated range of ranges identified in Table 1. As previously mentioned, research indicates
that for weak scope preparation and planning systems, and/or complex or otherwise risky turnarounds, the high
ranges may be higher than the range indicated in Table 1.

Figure 1 – Illustration of the Variability in Accuracy Ranges for Maintenance Turnarounds in the Process Industry
Estimates

7. DETERMINATION OF THE COST ESTIMATE CLASS

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 8 of 20
Process Industries

March 19, 2021

For a given project, the determination of the estimate class is based upon the maturity level of turnaround
preparation and planning definition, which is in turn based on the status of specific key planning and scope
deliverables. The percent scope deliverable completion may be correlated with the status, but the percentage should
not be used as the class determinate. While the determination of the status (and hence the estimate class) is
somewhat subjective, having standards for the scope input data, completeness and quality of the scope deliverables
will serve to make the determination more objective.

While the maturity of planning and preparation is important for any estimate classification, the hard end date aspect
of maintenance turnaround preparation makes it of particular interest for turnarounds. For capital projects, if the
scope development is insufficient to meet the stage gate, the project can be recycled through the stage. Turnarounds
generally do not have that luxury. The hard end date to the preparation work is the start of shutdown for the
turnaround. Hence delaying the turnaround shutdown date to allow time for the team to recycle their preparation
work is usually not an option. Hence, the temptation exists with some turnaround teams to focus on the timeline
and the stage gate reached when declaring the class of an estimate, rather than focus on the maturity of the scope
definition. Consequently, the estimate class claimed may not reflect the level of scope definition available. As with
capital projects, the estimate accuracy must be a function of the scope definition and risks/uncertainties, not merely
a function of the time left before the start of shutdown.

8. CHARACTERISTICS OF THE ESTIMATE CLASSES

The following tables (2a through 2e) provide detailed descriptions of the five turnaround estimate classifications as
applied in the process industries. They are presented in the order of least-defined estimates to the most-defined
estimates. These descriptions include brief discussions of each of the estimate characteristics that define an estimate
class.

For each table, the following information is provided:

• Description: A short description of the class of estimate, including a brief listing of the expected estimate
inputs based on the maturity level of project definition deliverables.

• Maturity Level of Project Definition Deliverables (Primary Characteristic): Describes a particularly key
deliverable and a typical target status in stage-gate decision processes, plus an indication of approximate
percent of full definition of project and technical deliverables. For a turnaround, this correlates with
maturity of scope definition, work package planning and the contracting strategy.

• End Usage (Secondary Characteristic): A short discussion of the possible end usage of this class of estimate.

• Estimating Methodology (Secondary Characteristic): A listing of the possible estimating methods that may
be employed to develop an estimate of this class.

• Expected Accuracy Range (Secondary Characteristic): Typical variation in low and high ranges after the
application of contingency (determined at a 50% level of confidence). Typically, this represents about 80%
confidence that the actual cost will fall within the bounds of the low and high ranges if contingency
appropriately forecasts uncertainty and risks.

• Alternate Estimate Names, Terms, Expressions, Synonyms: This section provides other commonly used
names that an estimate of this class might be known by. These alternate names are not endorsed by this
recommended practice. The user is cautioned that an alternative name may not always be correlated with
the class of estimate as identified in Tables 2a-2e.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 9 of 20
Process Industries

March 19, 2021

CLASS 5 ESTIMATE

Description: Estimating Methodology:

Class 5 estimates are typically nothing more than an Class 5 estimates generally use nothing more than the historic
assumption that the turnaround being estimated will be of total cost of the previous turnaround (or average of recent
similar scope and will cost a similar amount to the previous previous turnarounds) on the same asset (or a similar asset, if
turnaround or an aggregate cost of several previous the asset is new), adjusted for escalation. If the historical
turnarounds on the asset in question, or even a benchmarking database of similar projects is extensive, the range of historical
cost from a third-party source. costs can help inform the estimate range and contingency
understanding. Clear indication should be given whether the
Maturity Level of Turnaround Definition Deliverables: estimated costs are money of the day or real term. If the
No definition at this time, beyond an assumption that the former, the estimated costs should be corrected for inflation
turnaround will have a similar purpose and scope to previous and market effects yearly.
turnaround(s) or benchmarks.
Expected Accuracy Range:
End Usage: Typical accuracy ranges for Class 5 estimates are
Class 5 estimates are typically only used for long-range -20% to -50% on the low side, and +30% to +100% on the high
planning purposes (often as part of life cycle cost analysis for a side, depending on the technological and execution
major plant investment), looking 3-12 years ahead, to forecast complexity of the project, appropriate reference information,
approximate budget needs for future operation of the asset. bias, and other risks (after inclusion of an appropriate
In some organizations, they do not exist. Instead, the contingency and other risk fund determination). Ranges could
estimating process begins with the Class 4 discussed next. exceed those shown if there are unusual risks.

Alternate Estimate Names, Terms, Expressions, Synonyms:

Ballpark, ROM, guesstimate, rule-of-thumb.
Table 2a – Class 5 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 10 of 20
Process Industries

March 19, 2021

CLASS 4 ESTIMATE

Description: Estimating Methodology:

Class 4 estimates are generally prepared based on limited Class 4 estimates generally use the historical cost of previous
information and subsequently have fairly wide accuracy turnarounds, but with adjustments based on the scope
ranges. They are typically used for preliminary budget boundaries laid out in the turnaround premise, adjusted for
approval. They are generally based on the previous escalation.
turnaround cost, with broad-brush adjustments for
differences between the previous turnaround scope and the Expected Accuracy Range:
current expected scope from operations/maintenance Typical accuracy ranges for Class 4 estimates are
experience, as laid out in the turnaround premise document. -15% to -30% on the low side, and +20% to +50% on the high
side, depending on the technological and execution
Maturity Level of Project Definition Deliverables: complexity of the project, appropriate reference information,
Premise document available, documenting the objectives of and other risks (after inclusion of an appropriate contingency
the turnaround and hence defining the scope criteria (i.e., and other risk fund determination). Ranges could exceed those
rules for including scope in the turnaround) and the process shown if there are unusual risks.
units of the asset that will be involved in the turnaround, as
well as the capital projects that may have tie-in scope to be Alternate Estimate Names, Terms, Expressions, Synonyms:
executed during the turnaround event. A preliminary or initial Early budget.
scope list of corrective maintenance, inspection and cleaning
items may be developed, based on maintenance records.

End Usage:
Class 4 estimates are typically prepared as the basis for
preliminary funding for the turnaround. If there are scope
alternatives (not common), Class 4 estimates are used to select
between them.
Table 2b – Class 4 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 11 of 20
Process Industries

March 19, 2021

CLASS 3 ESTIMATE

Description: Estimating Methodology:

Class 3 estimates are generally prepared to form the basis for Class 3 estimates generally involve more deterministic
final budget authorization, appropriation, and/or funding. But estimating methods than conceptual methods. At this class,
they are typically not the final control estimate against which the estimating switches from historical event cost pricing to
the team will track turnaround execution progress. historical work package pricing. Generally, the main discipline
(almost always mechanical) will be priced based on historical
Maturity Level of Project Definition Deliverables: costs of work list items. If labor hours (actual or estimated) of
The scope list of corrective maintenance, inspection, cleaning (historical) work packages are available, current tariffs of the
and preventive maintenance is complete, challenged (i.e., turnaround mechanical contractor can be applied. Other
reviewed against the scope criteria) and frozen. Any capital disciplines are usually still factored from the main contract
projects with tie-in scope to be executed in the turnaround total, correcting for anything out of the ordinary. Long lead
event window have provided issued for construction package materials will be on the basis of bids, while other materials are
details, to allow their effect on cost & schedule to be taken into on the basis of existing or historical prices.
account.
Expected Accuracy Range:
End Usage: Typical accuracy ranges for Class 3 estimates are
Class 3 estimates are typically prepared to support full -10% to -20% on the low side, and +10% to +30% on the high
turnaround funding requests. They are used as the turnaround side, depending on the technological and execution
budget until replaced by more detailed estimates. complexity of the project, appropriate reference information,
and other risks (after inclusion of an appropriate contingency
and other risk fund determination). Ranges could exceed those
shown if there are unusual risks.

Alternate Estimate Names, Terms, Expressions, Synonyms:

Budget, scope, authorization, target estimate.
Table 2c – Class 3 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 12 of 20
Process Industries

March 19, 2021

CLASS 2 ESTIMATE

Description: Estimating Methodology:

Class 2 estimates are generally prepared to form a final Class 2 estimates generally involve a high degree of
funding confirmation. Some owners (if not proceeding to a deterministic estimating methods. Typically, the main contract
class 1 estimate) use them as the detailed contractor control (usually mechanical) work packages are priced using
baseline against which all field execution work is monitored in contractor bids. Other discipline work packages are a mix of
terms of cost and progress control. historical package prices and bids. Material costs are generally
on the basis of order prices or quotes.
Maturity Level of Project Definition Deliverables:
All main (mechanical) work packages fully developed and Expected Accuracy Range:
issued. Most other disciplines (and emergent scope) also Typical accuracy ranges for Class 2 estimates are
developed into work packages. -5% to -15% on the low side, and +5% to +20% on the high side,
depending on the technological and execution complexity of
End Usage: the project, appropriate reference information, and other risks
Class 2 estimates are typically prepared as the final (after inclusion of an appropriate contingency and other risk
confirmation that the budget is adequate. fund determination). Ranges could exceed those shown if
there are unusual risks.

Alternate Estimate Names, Terms, Expressions, Synonyms:

detailed estimate, definitive estimate.
Table 2d – Class 2 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 13 of 20
Process Industries

March 19, 2021

CLASS 1 ESTIMATE

Description: Estimating Methodology:

Class 1 estimates are not universally prepared by all owners. Class 1 estimates generally involve the highest degree of
When prepared, they replace the class 2 estimate as the deterministic estimating methods. All work packages are
detailed control budget for the field execution phase. complete and most, if not all, priced using contractor bids
instead of historical data.
Maturity Level of Project Definition Deliverables:
All work packages (and inspection test plans) for all disciplines Expected Accuracy Range:
completed and issued. Typical accuracy ranges for Class 1 estimates are
-3% to -10% on the low side, and +3% to +15% on the high side,
End Usage: depending on the technological and execution complexity of
Generally, owners use Class 1 estimates to support field the project, appropriate reference information, and other risks
execution control. (after inclusion of an appropriate contingency and other risk
fund determination). Ranges could exceed those shown if
there are unusual risks.

Alternate Estimate Names, Terms, Expressions, Synonyms:

detailed control, execution phase, master control, definitive.
Table 2e – Class 1 Estimate

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 14 of 20
Process Industries

March 19, 2021

9. ESTIMATE INPUT CHECKLIST AND MATURITY MATRIX

Table 3 maps the extent and maturity of estimate input information (deliverables) against the five estimate
classification levels. This is a checklist of basic deliverables found in common practice in maintenance turnaround
preparation. The maturity level is an approximation of the completion status of the deliverable. The completion is
indicated by the following descriptors:

General Turnaround Execution Data:

• Not Required (NR): May not be required for all estimates of the specified class, but specific estimates may
require at least preliminary development.

• Preliminary (P): Preparation and planning development has begun and progressed to at least an
intermediate level of completion. Review and approvals for its current status has occurred.

• Defined (D): Preparation and planning development is advanced, and reviews have been conducted.
Documents are approved.

Scope Data:
• Not Required (NR): May not be required for all estimates of the specified class, but specific estimates may
require at least preliminary development.

• Initial List (IL): Scope gathering is preliminary based on existing records of past turnarounds at this or similar
plants.

• Frozen List (FL): Scope gathering is complete and has been challenged by stakeholders. While scope items
are listed, they are not complete (i.e., not detailed into work packages).

• Complete (Detailed Work Packages) (C): Each scope item has been developed into a full work package,
which has been reviewed and approved. This includes, where appropriate: equipment specifications,
marked-up P&ID, single line diagram, photographs, marked-up general arrangement, etc.

Organizational Data:
• Not Required (NR): Deliverable may not be required for all estimates of the specified class, but specific
estimates may require at least preliminary development.

• Preliminary (P): Preparation and planning development has begun and progressed to at least an
intermediate level of completion. Review and approvals for its current status has occurred.

• Complete (C): The deliverable has been reviewed and approved as appropriate.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 15 of 20
Process Industries

March 19, 2021

ESTIMATE CLASSIFICATION
MATURITY LEVEL OF
TURNAROUND PREPARATION & CLASS 5 CLASS 4 CLASS 3 CLASS 2 CLASS 1
PLANNING DELIVERABLES 0% to 2% 1% to 15% 10% to 40% 30% to 75% 65% to 100%

GENERAL TURNAROUND EXECUTION DATA:

Turnaround Premise NR D D D D

Capital Projects Integration Plan NR D D D D

Contract Strategy NR D D D D

Procurement Strategy NR D D D D

Team Organization – Preparation & Planning NR D D D D

Team Organization - Execution NR NR P D D

SCOPE DATA:

Risk-Based Inspection Data IL IL FL C C

Corrective & Preventive Maintenance Backlog IL IL FL C C

Hazard & Operability Study and Process

NR IL FL C C
Hazard Analysis Scope Items

Minor Plant Modifications, handled by the

maintenance team and controlled under the NR IL FL C C
management of change process

Corporate Capital Project Scopes NR FL C C C

Plant Based Project Scopes NR FL C C C

Leak Detection & Repair Scopes NR IL FL C C

ORGANIZATIONAL DATA:

Shutdown & Startup Plans NR NR P C C

Lockout/Tagout Requirements and

NR NR P C C
Procedures

Temporary Product and Intermediates

NR NR P C C
Storage Plan

Utilities Plan NR NR P C C

Flare Minimization Plan NR NR P C C

Logistics Plan, including contractor village,

NR NR P C C
laydown areas, etc.

Waste Plan NR NR P C C

Facility Plan NR P P C C

Warehouse and Material Plan NR P P C C

Table 3 – Estimate Input Checklist and Maturity Matrix (Primary Classification Determinate)

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 16 of 20
Process Industries

March 19, 2021

10. BASIS OF ESTIMATE DOCUMENTATION

A common issue with maintenance turnarounds estimates is the absence of a basis of estimate document. Any
turnaround team that wishes to improve its estimating capability and effectiveness is strongly advised to prepare a
BOE document with every estimate.

The basis of estimate typically accompanies the cost estimate. The basis of estimate is a document that describes
how an estimate is prepared and defines the information used in support of development. A basis document
commonly includes, but is not limited to, a description of the scope included, methodologies used, references and
defining deliverables used, assumptions and exclusions made, clarifications, adjustments, and some indication of
the level of uncertainty.

The basis of estimate is just as important as the estimate since it documents the scope and assumptions; and
provides a level of confidence to the estimate. The estimate is incomplete without a well-documented basis of
estimate. See AACE Recommended Practice 34R-05 Basis of Estimate for more information. [15]

11. TURNAROUND DEFINITION RATING SYSTEM

An additional step in documenting the maturity level of turnaround readiness or definition is to develop a readiness
rating system. This is another tool for measuring the completeness of turnaround preparation and planning
readiness. Such a system typically provides a checklist of scope definition elements and a scoring rubric to measure
maturity or completeness for each element. A better readiness score is typically associated with a better probability
of achieving turnaround success.

Such a tool should be used in conjunction with the AACE estimate classification system; it does not replace estimate
classification. A key difference is that a turnaround definition rating measures overall maturity across a broad set of
scope and organization definition elements, but it does not always ensure completeness of the key definition
deliverables required to meet a specific class of estimate. For example, a good turnaround definition rating may
sometimes be achieved by progressing on additional definition deliverables, but without achieving signoff or
completion of a key deliverable.

AACE estimate classification is based on ensuring that key turnaround preparation and planning deliverables have
been completed or met the required level of maturity. If a key deliverable that is indicated as needing to be complete
for Class 3 (as an example) has not actually been completed, then the estimate cannot be regarded as Class 3
regardless of the maturity or progress on other project definition elements.

An example of a turnaround definition rating system is the Turnaround Readiness Index developed by Asset
Performance Networks LLC. [16] Similar systems have been developed by RLG International [17] and others.

REFERENCES

[1] AACE International, Recommended Practice No. 17R-97, Cost Estimate Classification System, Morgantown,
WV: AACE International, Latest revision.
[2] AACE International, Recommended Practice No. 18R-97, Cost Estimate Classification System – As Applied in
Engineering, Procurement, and Construction for the Process Industries, Morgantown, WV: AACE
International, Latest revision.
[3] H. L. Stephenson, Ed., Total Cost Management Framework: An Integrated Approach to Portfolio, Program
and Project Management, 2nd ed., Morgantown, WV: AACE International, Latest revision.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 17 of 20
Process Industries

March 19, 2021

[4] AACE International, Recommended Practice No. 10S-90, Cost Engineering Terminology, Morgantown, WV:
AACE International, Latest revision.
[5] G. R. Lawrence, "Cost Estimating for Turnarounds," Petroleum Technology Quarterly (PTQ), no. Q1, pp. 33-43,
2012.
[6] G. R. Lawrence, "Improving Turnaround Performance Outcomes by Controlling the Leading Indicators,"
International Downstream Strategy & Technology Conference (IDTC), Cavalieri Hotel, Rome, Italy, May 23,
2012.
[7] AACE International, Professional Guidance Document (PGD) 01, Guide to Cost Estimate Classification,
Morgantown, WV: AACE International, Latest revision.
[8] G. R. Lawrence, "Analysis Yields Turnaround Benchmarks for Allowance and Contingency," Oil & Gas Journal,
pp. 106-118, April 12, 2012.
[9] G. R. Lawrence, "A Review of the Current State of Cost Estimating for Maintenance Turnarounds," Cost
Engineering Event, Ara Hotel, Zwijndrecht, The Netherlands, April 17, 2013.
[10] G. R. Lawrence, "Integrating Capital Work into Turnarounds," Petroleum Technology Quarterly (PTQ), no. Q2,
pp. 91-103, 2016.
[11] G. R. Lawrence, "Contract Payment Strategies - 2018 Update," in Turnaround Industry Networking
Conference (TINC), Hilton Hotel, Amsterdam, The Netherlands, March 20-22, 2018.
[12] G. R. Lawrence, "C Minus: Room for Improvement," Offshore Engineering (OE), pp. 38-40, August 2017.
[13] AACE International, Recommended Practice No. 40R-08, Contingency Estimating – General Principles,
Morgantown, WV: AACE International, Latest revision.
[14] AACE International, Recommended Practice No. 42R-08, Risk Analysis and Contingency Determination Using
Parametric Estimating, Morgantown, WV: AACE International, Latest revision.
[15] AACE International, Recommended Practice No. 34R-05, Basis of Estimate, Morgantown, WV: AACE
International, Latest revision.
[16] "Turnaround Readiness Pyramid," AP Networks, [Online]. Available: https://www.ap-
networks.com/innovative-web-based-tools/ta-readiness-pyramid/. [Accessed 08 September 2020].
[17] "Turnarounds," RLG International, [Online]. Available:
https://www.rlginternational.com/expertise/capability/turnarounds. [Accessed 08 September 2020].

CONTRIBUTORS

Disclaimer: The content provided by the contributors to this recommended practice is their own and does not
necessarily reflect that of their employers, unless otherwise stated.

Gordon R. Lawrence (Primary Contributor)

Jeffery J. Borowicz, CCP CEP PSP FAACE
Bas Druijf, CCT
Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life
John K. Hollmann, PE CCP CEP DRMP FAACE Hon. Life
Dave Kyle, CCP CEP
Carlos Pina

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 18 of 20
Process Industries

March 19, 2021

APPENDIX: UNDERSTANDING ESTIMATE CLASS AND COST ESTIMATE ACCURACY

Despite the verbiage included in the RP, often, there are still misunderstandings that the class of estimate, as defined
in the RP above, defines an expected accuracy range for each estimate class. This is incorrect. The RP clearly states
that “while a target range may be expected for a particular estimate, the accuracy range should always be
determined through risk analysis of the specific project and should never be predetermined.” Table 1 and Figure 1
in the RP are intended to illustrate only the general relationship between estimate accuracy and the level of project
definition. For the process industries, typical estimate ranges described in RP 112R-20 above are shown as a range
of ranges:

• Class 5 Estimate:
• High range typically ranges from +30% to +100%
• Low range typically ranges from -20% to -50%
• Class 4 Estimate:
• High range typically ranges from +20% to +50%
• Low range typically ranges from -15% to -30%
• Class 3 Estimate:
• High range typically ranges from +10% to +30%
• Low range typically ranges from -10% to -20%
• Class 2 Estimate:
• High range typically ranges from +5% to +20%
• Low range typically ranges from -5% to -15%
• Class 1 Estimate:
• High range typically ranges from +3% to +15%
• Low range typically ranges from -3% to -10%

As indicated in the RP, these +/- percentage members associated with an estimate class are intended as rough
indicators of the accuracy relationship. They are merely a useful simplification given the reality that every individual
estimate will be associated with a unique probability distribution correlated with its specific level of uncertainty. As
indicated in the RP, estimate accuracy should be determined through a risk analysis for each estimate.

It should also be noted that there is no indication in the RP of contingency determination being based on the class
of estimate. AACE has recommended practices that address contingency determination and risk analysis methods
(for example RP 40R-08, Contingency Estimating – General Principles [13]). Furthermore, the level of contingency
required for an estimate is not the same as the upper limits of estimate accuracy (as determined by a risk analysis).

The results of the estimating process are often conveyed as a single value of cost or time. However, since estimates
are predications of an uncertain future, it is recommended that all estimate results should be presented as a
probabilistic distribution of possible outcomes in consideration of risk.

Every estimate is a prediction of the expected final cost or duration of a proposed project or effort (for a given scope
of work). By its nature, an estimate involves assumptions and uncertainties. Performing the work is also subject to
risk conditions and events that are often difficult to identify and quantify. Therefore, every estimate presented as a
single value of cost or duration will likely deviate from the final outcome (i.e., statistical error). In simple terms, this
means that every point estimate value will likely prove to be wrong. Optimally, the estimator will analyze the
uncertainty and risks and produce a probabilistic estimate that provides decision makers with the probabilities of
over-running or under-running any particular cost or duration value. Given this probabilistic nature of an estimate,
an estimate should not be regarded as a single point cost or duration. Instead, an estimate actually reflects a range
of potential outcomes, with each value within this range associated with a probability of occurrence.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 19 of 20
Process Industries

March 19, 2021

Individual estimates should always have their accuracy ranges determined by a quantitative risk analysis study that
results in an estimate probability distribution. The estimate probability distribution is typically skewed. Research
shows the skew is typically to the right (positive skewness with a longer tail to the right side of the distribution) for
large and complex projects. In part, this is because the impact of risk is often unbounded on the high side.

High side skewness implies that there is potential for the high range of the estimate to exceed the median value of
the probability distribution by a higher absolute value than the difference between the low range of the estimate
and the median value of the distribution.

Figure A1 shows a positively skewed distribution for a sample cost estimate risk analysis that has a point base
estimate (the value before adding contingency) of $89.5. In this example, a contingency of $4.5 (approximately 5%)
is required to achieve a 50% probability of underrun, which increases the final estimate value after consideration of
risk to $93. Note that this example is intended to describe the concepts but not to recommend specific confidence
levels for funding contingency or management reserves of particular projects; that depends on the stakeholder risk
attitude and tolerance.

Figure – A1: Example of an Estimate Probability Distribution at a 90% Confidence Interval

Note that adding contingency to the base point estimate does not affect estimate accuracy in absolute terms as it
has not affected the estimate probability distribution (i.e., high and low values are the same). Adding contingency
simply increases the probability of underrunning the final estimate value and decreases the probability of
overrunning the final estimate value. In this example, the estimate range with a 90% confidence interval remains
between approximately $85 and $103 regardless of the contingency value.

As indicated in the RP, expected estimate accuracy tends to improve (i.e., the range of probable values narrows) as
the level of project scope definition improves. In terms of the AACE International estimate classifications, increasing
levels of project definition are associated with moving from Class 5 estimates (lowest level of scope definition) to
Class 1 estimates (highest level of scope definition), as shown in Figure 1 of the RP. Keeping in mind that accuracy is
an expression of an estimate’s predicted closeness to the final actual value; anything included in that final actual
cost, be it the result of general uncertainty, risk conditions and events, price escalation, currency or anything else
within the project scope, is something that estimate accuracy measures must communicate in some manner. With
that in mind, it should be clear why standard accuracy range values are not applicable to individual estimates.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.
112R-20: Cost Estimate Classification System – As Applied in Maintenance Turnarounds for the 20 of 20
Process Industries

March 19, 2021

The level of project definition reflected in the estimate is a key risk driver and hence is at the heart of estimate
classification, but it is not the only driver of estimate risk and uncertainty. Given all the potential sources of risk and
uncertainty that will vary for each specific estimate, it is simply not possible to define a range of estimate accuracy
solely based on the level of project definition or class of estimate.

Copyright © AACE® International AACE® International Recommended Practices

Single user license only. Copying and networking prohibited.