1As soon as the project is awarded to the contracting organization and the letter of intent issued by the client, the contractor appoints a project manager and a planning engineer for the project. The two then go through the entire contract document and prepare the estimates of executing each bid item. They also prepare the estimate for the overheads of the project.
Cost codes are established and the budgeted estimates for each of the cost codes are prepared. These budgeted estimates are scrutinized by the top management of the contracting organization and a mutually agreeable budgeted estimate is agreed to. This is called the accepted cost estimate (ACE) or zero cost by the contracting organization.