Cost estimate versus proposal, the difference matters

Posted in: Energy, Environmental, Military, Municipal, Water

Two, uncooked eggs is probably not what you had in mind when you meant to order breakfast, but the waiter would be responding to your request.
Two, uncooked eggs is not what you had in mind when you ordered breakfast, but the waiter would be responding to your request. The details in a request matter.

Have you ever asked for a cost estimate for an engineering project, and then discovered what you really needed was a proposal for professional services? It might sound like no big deal – just a different name for the same thing.  But as a 36-year veteran of the Water Resources and Dams and Hydropower engineering business, I’d like to convince you that the difference is important. As we think about it, a cost estimate is just a ballpark number without detail, where a proposal will include all the specifics of your project.

It is important for you and the Mead & Hunt team to agree upon what you are requesting (or need). For example, if you think you’re ordering breakfast but simply ask for two eggs, then a waiter could legitimately respond by bringing you two, uncooked eggs still in their shells. That’s probably not what you had in mind when you meant to order breakfast, but the waiter would be responding to your request.

The most important thing for us is to understand what you are asking for. Using the same breakfast scenario, did the server ask if you would like a side of bacon, sausage, toast or perhaps potatoes? And do you know if those sides are an additional cost? To receive exactly what you want, it is important that we understand your expectations clearly. We aim to please, but we need to know what you want.

Terminology defined

A cost estimate is an anticipated cost to provide a service that has yet to be clearly defined. It is a rough idea, based on past experience, of what a similar project might cost.

A proposal contains many components, of which the fee is just one of several critical pieces of information. In addition to the fee, a professional services proposal clearly defines:

  • Scope of the work – what will be done
  • Standards to which the work will conform – how will it be done
  • Schedule to perform the work – when will it be done
  • What constitutes the deliverable – what will be received
  • What services are excluded – what will be an additional service
  • Terms and conditions of the agreement – what rules will bind each of the parties

Using our breakfast scenario, a cost estimate from my waiter for a two egg breakfast might be $5 to $13. Now, I ask, what is included in that and when can I get it? Aha! I’m seeking additional information beyond an anticipated cost—this is now a request for proposal. If the service is not clearly defined, then the cost estimate may encompass a range of item options within the scope, schedule, deliverable, etc. It will give you a range but no detail.

Selecting the best option

Both a cost estimate and a RFP have their value. To select the best option, you must decide what information you need. Are you seeking a ballpark cost for a yet-to-be-defined service but need some numbers for planning purposes? Or are you seeking to hire a consultant based on a clearly defined scope, standards, schedule, deliverable and fee?

If you plan to evaluate several proposals, a RFP that clearly outlines your expectations is appropriate. Be detailed. Be specific. A well-crafted RFP will provide guidance for respondents, and likely simplify your evaluation process. After all, who is going to be happy with two uncooked eggs still in the shell when they were expecting two fried eggs with meat and potatoes?

Carson Mettel, PE

About the Author

Carson Mettel, P.E., is Mead & Hunt’s National Market Leader for Dams and Hydropower. He has 35+ years of experience working with water resources, dams and hydro power projects. In his hours away from work, Carson is a pie connoisseur and enjoys biking, two interests that definitely complement each other.

Read more posts by Carson Mettel, PE

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