Rough Order of Magnitude (ROM)

A Rough Order of Magnitude (ROM) is an early-stage cost estimate based on limited information. Because requirements, scope and risks are still being defined when it is prepared, it has a high probability of significant change. The Treasury Board of Canada Secretariat describes it in its Guide to Assessing Cost Estimates.

The Government of Canada uses ROM as one of three cost-estimate classifications, alongside indicative and substantive estimates. A ROM is a planning and decision-support tool. It is not a final price, a bid, an appropriation or a budget-quality estimate, so buyers use it to shape early decisions and not to commit funds.

How the Treasury Board defines a ROM estimate

The Treasury Board Secretariat defines a ROM estimate as one with a high probability of significant change over time. It is based on limited information and is usually produced during the early planning of an initiative or while requirements are being defined. The same guide recognizes indicative and substantive estimates as the other two classifications, and notes that estimates generally become more reliable as requirements, risks, costing methods and supporting information are developed.

An archived federal guideline, the Guideline on Cost Estimation for Capital Asset Acquisitions, describes the same idea. It places a ROM estimate in the preliminary stage of an initiative, built on an initial requirements list and limited knowledge of underlying risks. Its confidence level is relatively low.

Where ROM estimates appear in federal approvals

The Treasury Board Secretariat's Guide to Costing states that ROM estimates support requests for Treasury Board approvals or expenditure authorities for projects and programs. In other words, a ROM is part of the costing work departments do before a project is fully defined.

Other federal examples show the same pattern. A CanadaBuys project brief states that a ROM cost estimate was used to confirm that project scope was aligned with the project budget. Shared Services Canada used a ROM cost estimate to inform a comparative costing exercise for its Next Generation Human Resources and Pay initiative, as described in its final findings report. In both cases the ROM tests affordability or compares options. It does not set a contract price.

ROM in defence project planning

CanadaBuys material on agreements with the Department of National Defence uses ROM in project development. Two activities are named:

• delineating feasible solutions and their ROM costs
• identifying total ROM project-cost and schedule estimates

This puts ROM in defence capability planning, before requirements and solution design have matured.

The term is also used in allied acquisition. A U.S. Government Accountability Office report describes Department of Defense price-and-availability information as ROM estimates. It notes that these estimates are non-binding and not intended to be budget-quality estimates. Suppliers working with allied governments will see the same understanding of the term.

What a ROM request means for your bid team

If a solicitation or pre-contract request asks for a ROM, provide an early estimate that is clearly qualified. State the assumptions, scope, quantities, exclusions, risks and level of information behind the figure. Federal guidance establishes that a ROM is preliminary and changeable, and it does not set a single supplier format, so follow any format the buyer specifies.

• Expect ROM requests early. They tend to arise during market research, options analysis, capability development and project definition.
• Do not treat a ROM as a firm offer. Unless the procurement document expressly makes it one, it is not a binding quotation.
• Name what could move the number. Identify the conditions that could materially change the estimate, since buyers use it to test affordability, compare options or decide whether to proceed.
• Keep the ROM consistent with later pricing. As requirements firm up, expect to move toward more detailed estimates and be ready to explain changes.