Option-based budget estimate

An option-based budget estimate is a separate cost estimate for each of several possible solutions, so that they can be compared.

An option-based budget estimate is prepared at the concept stage. The problem has already been defined, and the investor knows what they expect from the installation, but they are considering several ways of achieving the goal. A separate cost estimate is prepared for each concept.

This makes it possible to compare the options not only technically (what works better), but also economically (how much they cost to buy and to run, and how quickly the investment will pay back). The cheapest solution at the outset is often not the most cost-effective in the long run, and an option-based budget estimate is exactly what makes this visible.

Example: A pet food manufacturer has three concepts to choose from:

• option A: adding a second sauce preparation tank next to the existing one,
• option B: replacing the current tank with a larger one, with a more efficient agitator and faster heating,
• option C: building a new, fully automated process kitchen with automatic ingredient dosing.

A separate cost estimate and a description of the pros and cons are prepared for each option. Option A is the cheapest, but it requires space in the production hall, which is limited. Option C is the most expensive, but it reduces the number of operators and the risk of errors. On this basis, the investor chooses option B.