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What Is an Independent Cost Estimate?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 24 March 2017
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    2003-2017
    Conjecture Corporation
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An independent cost estimate refers to the process of engaging the services of professionals who are in no way affiliated to an organization or project to conduct a detailed estimate as to the cost of a proposed project. The main idea behind the use of independent estimators for assessing the cost of a project is to obtain an objective view of the cost of the proposed project. Another function or use of an independent cost estimate is for the purpose of transparency. Assuming a company is preparing a report for the cost of a project for its shareholders, it may decide to use independent professionals rather than in-house estimators to infuse more transparency into the whole process.

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An individual may also obtain an independent cost estimate as a prudential measure when carrying out a project. Assuming a construction company has received a contract to build a home, the construction company will give the client an estimate of how much the project will cost. Such a client may contract an independent party to conduct an independent cost estimate, which will serve as a basis for comparison and analysis. The result of such an estimate might be roughly the same with that of the estimate provided by the construction company, in which case, the client might decide to proceed with the project. If the disparity between the estimate provided by the construction company and that of the independent cost estimate is too much, the client might decide to renegotiate with the construction company for a downward reversal of the cost of the project, or to look for another construction company with a more reasonable cost estimate.

When a company with a lot of shareholders is trying to embark on a new, sizable project, it may need to conduct an independent cost estimate in order to make the whole process more open and accountable to the shareholders. For instance, if a public company with lots of shareholders decides to build a new factory in Japan as part of its globalization process, it will have to obtain an independent cost estimate in order to assure the shareholders that everything is aboveboard. These independent estimators will give their assessment of the project based on a number of predetermined criteria that include factors like logistics, manpower, site costs, design and others. Such an independent cost estimate will ultimately have more value than any one conducted by in-house estimators.

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