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Costs Associated with Constructed Facilities Approaches to Cost Estimation Type of Construction Cost Estimates Effects of Scale on Construction Cost Unit Cost Method of Estimation Methods for Allocation of Joint Costs Historical Cost Data Cost Indices Applications of Cost Indices to Estimating Estimate Based on Engineer's List of Quantities Allocation of Construction Costs Over Time Computer Aided Cost Estimation Estimation of Operating Costs References Problems Footnotes
5. Cost Estimation
5.1 Costs Associated with Constructed Facilities
The costs of a constructed facility to the owner include both the initial capital cost and the subsequent operation and maintenance costs. Each of these major cost categories consists of a number of cost components. The capital cost for a construction project includes the expenses related to the inital establishment of the facility:
• • • • • •
Land acquisition, including assembly, holding and improvement Planning and feasibility studies Architectural and engineering design Construction, including materials, equipment and labor Field supervision of construction Construction financing
• • • •
Insurance and taxes during construction Owner's general office overhead Equipment and furnishings not included in construction Inspection and testing
The operation and maintenance cost in subsequent years over the project life cycle includes the following expenses:
• • • • • • • •
Land rent, if applicable Operating staff Labor and material for maintenance and repairs Periodic renovations Insurance and taxes Financing costs Utilities Owner's other expenses
The magnitude of each of these cost components depends on the nature, size and location of the project as well as the management organization, among many considerations. The owner is interested in achieving the lowest possible overall project cost that is consistent with its investment objectives. It is important for design professionals and construction managers to realize that while the construction cost may be the single largest component of the capital cost, other cost components are not insignificant. For example, land acquisition costs are a major expenditure for building construction in high-density urban areas, and construction financing costs can reach the same order of magnitude as the construction cost in large projects such as the construction of nuclear power plants. From the owner's perspective, it is equally important to estimate the corresponding operation and maintenance cost of each alternative for a proposed facility in order to analyze the life cycle costs. The large expenditures needed for facility maintenance, especially for publicly owned infrastructure, are reminders of the neglect in the past to consider fully the implications of operation and maintenance cost in the design stage. In most construction budgets, there is an allowance for contingencies or unexpected costs occuring during construction. This contingency amount may be included within each cost item or be included in a single category of construction contingency. The amount of contingency is based on historical experience and the expected difficulty of a particular construction project. For example, one construction firm makes estimates of the expected cost in five different areas:
• • • • •
Design development changes, Schedule adjustments, General administration changes (such as wage rates), Differing site conditions for those expected, and Third party requirements imposed during construction, such as new permits.
Contingent amounts not spent for construction can be released near the end of construction to the owner or to add additional project elements. In this chapter, we shall focus on the estimation of construction cost, with only occasional reference to other cost components. In Chapter 6, we shall deal with the economic evaluation of a constructed facility on the basis of both the capital cost and the operation and maintenance cost in the life cycle of the facility. It is at this stage that tradeoffs between operating and capital costs can be analyzed. Example 5-1: Energy project resource demands  The resources demands for three types of major energy projects investigated during the energy crisis in the 1970's are shown in Table 5-1. These projects are: (1) an oil shale project with a capacity of 50,000 barrels of oil product per day; (2) a coal gasification project that makes gas with a heating value of 320 billions of British thermal units per day, or equivalent to about 50,000 barrels of oil product per day; and (3) a tar sand project with a capacity of 150,000 barrels of oil product per day. For each project, the cost in billions of dollars, the engineering manpower requirement for basic design in thousands of hours, the engineering manpower requirement for detailed engineering in millions of hours, the skilled labor requirement for construction in millions of hours and the material requirement in billions of dollars are shown in Table 5-1. To build several projects of such an order of magnitude concurrently could drive up the costs and strain the availability of all resources required to complete the projects. Consequently, cost estimation often represents an exercise in professional judgment instead of merely compiling a bill of quantities and collecting cost data to reach a total estimate mechanically. TABLE 5-1 Resource Requirements of Some Major Energy Projects Oil shale (50,000 barrels/day) Cost ($ billion) Basic design (Thousands of hours) Detailed engineering (Millions of hours) Construction (Millions of hours) Materials 2.5 80 Coal gasification (320 billions BTU/day) 4 200 Tar Sands (150,000 barrels/day) 8 to 10 100
3 to 4
4 to 5
6 to 8
($ billion) Source: Exxon Research and Engineering Company, Florham Park, NJ Back to top
5.2 Approaches to Cost Estimation
Cost estimating is one of the most important steps in project management. A cost estimate establishes the base line of the project cost at different stages of development of the project. A cost estimate at a given stage of project development represents a prediction provided by the cost engineer or estimator on the basis of available data. According to the American Association of Cost Engineers, cost engineering is defined as that area of engineering practice where engineering judgment and experience are utilized in the application of scientific principles and techniques to the problem of cost estimation, cost control and profitability. Virtually all cost estimation is performed according to one or some combination of the following basic approaches: Production function. In microeconomics, the relationship between the output of a process and the necessary resources is referred to as the production function. In construction, the production function may be expressed by the relationship between the volume of construction and a factor of production such as labor or capital. A production function relates the amount or volume of output to the various inputs of labor, material and equipment. For example, the amount of output Q may be derived as a function of various input factors x1, x2, ..., xn by means of mathematical and/or statistical methods. Thus, for a specified level of output, we may attempt to find a set of values for the input factors so as to minimize the production cost. The relationship between the size of a building project (expressed in square feet) to the input labor (expressed in labor hours per square foot) is an example of a production function for construction. Several such production functions are shown in Figure 3-3 of Chapter 3. Empirical cost inference. Empirical estimation of cost functions requires statistical techniques which relate the cost of constructing or operating a facility to a few important characteristics or attributes of the system. The role of statistical inference is to estimate the best parameter values or constants in an assumed cost function. Usually, this is accomplished by means of regression analysis techniques. Unit costs for bill of quantities. A unit cost is assigned to each of the facility components or tasks as represented by the bill of quantities. The total cost is the summation of the products of the quantities multiplied by the corresponding unit costs. The unit cost method is straightforward in principle but quite laborious in application. The initial step is to break down or disaggregate a process into a number of tasks. Collectively, these tasks must be completed for the construction of a facility. Once these tasks are defined and quantities representing these tasks are assessed, a unit cost is assigned to each and then the total cost is determined by summing the costs incurred in each task. The level of detail in decomposing into tasks will vary considerably from one estimate to another.
(3) construction equipment. These basic costs may then be allocated proportionally to various tasks which are subdivisions of a project. plus a markup to cover general overhead and profits. Ideally. For example. For the contractor. of the total project cost. Design Estimates. a bid estimate submitted to the owner either for competitive bidding or negotiation consists of direct construction cost including field supervision. For establishing the financing of a project. (4) construction supervision. the allocation of joint costs should be causally related to the category of basic costs in an allocation process. the accuracy of a cost estimate will reflect the information available at the time of estimation. in construction projects. Bid Estimates. the amount of design information available typically increases. Back to top 5. a causal relationship between the allocation factor and the cost item cannot be identified or may not exist. However.3 Types of Construction Cost Estimates Construction cost constitutes only a fraction. The direct cost of construction for bid estimates is usually derived from a combination of the following approaches. 1. ranging from ball park figures in the early stage to fairly reliable figures for budget control prior to construction. however. and (5) general office overhead. (2) material. the cost estimates made at the earlier stage are expected to be less accurate. either a design estimate or a bid estimate is used. though a substantial fraction. the accounts for basic costs may be classified according to (1) labor. For the owner or its designated design professionals. it is the part of the cost under the control of the construction project manager. A construction cost estimate serves one of the three basic functions: design. 2. Since design decisions made at the beginning stage of a project life cycle are more tentative than those made at a later stage. Construction cost estimates may be viewed from different perspectives because of different institutional requirements. The basic idea in this method is that each expenditure item can be assigned to particular characteristics of the operation. o Subcontractor quotations . Generally.Allocation of joint costs. the types of cost estimates encountered run parallel with the planning and design as follows: o Screening estimates (or order of magnitude estimates) o Preliminary estimates (or conceptual estimates) o Detailed estimates (or definitive estimates) o Engineer's estimates based on plans and specifications For each of these different estimates. In spite of the many types of cost estimates used at different stages of a project. cost estimates can best be classified into three major categories according to their functions. bid and control. Allocations of cost from existing accounts may be used to develop a cost function of an operation. The required levels of accuracy of construction cost estimates vary at different stages of project development. In many instances.
Bid Estimates The contractor's bid estimates often reflect the desire of the contractor to secure the job as well as the estimating tools at its disposal. e. Some contractors have well established cost estimating procedures while others do not. The level of detail in decomposing the facility into tasks depends on the type of cost estimate to be prepared. an engineer's estimate can be made on the basis of items and quantities of work. the level of detail in defining tasks is quite coarse. As an example. various design estimates reflect the progress of the design. a detailed estimate is made on the basis of the well defined scope of the project. Control Estimates. The detailed estimate or definitive estimate is made when the scope of work is clearly defined and the detailed design is in progress so that the essential features of the facility are identifiable. .g. a preliminary estimate is made on the basis of the layout of the selected bridge form on the basis of the preliminary or conceptual design. such as a tied arch bridge or a cantilever truss bridge. For monitoring the project during construction. A preliminary estimate or conceptual estimate is based on the conceptual design of the facility at the state when the basic technologies for the design are known. 3. and must therefore rely on the cost data of similar facilities built in the past. When the detailed plans and specifications are completed.Quantity takeoffs Construction procedures. the technology is chosen to be a tied arch bridge instead of some new bridge form. At the very early stage. Since only the lowest bidder will be the winner of the contract in most bidding contests. the contractor may put in the least amount of possible effort for making a cost estimate if it believes that its chance of success is not high. for example. for detailed estimates. 3. For conceptual estimates. A screening estimate is made for each of the potential alternatives. The engineer's estimate is based on the completed plans and specifications when they are ready for the owner to solicit bids from construction contractors. As the bridge type is selected. o o Design Estimates In the planning and design stages of a project. a control estimate is derived from available information to establish: o Budget estimate for financing o Budgeted cost after contracting but prior to construction o Estimated cost to completion during the progress of construction. consider the cost estimates for a proposed bridge across a river. any effort devoted to cost estimating is a loss to the contractor who is not a successful bidder. the level of detail can be quite fine. The costs associated with a facility may be decomposed into a hierarchy of levels that are appropriate for the purpose of cost estimation. the screening estimate or order of magnitude estimate is usually made before the facility is designed. the design professional will include expected amounts for contractors' overhead and profits. Consequently. In preparing these estimates. When the detailed design has progressed to a point when the essential details are known.
For the contractor.If a general contractor intends to use subcontractors in the construction of a facility. The grout liner can be between 4 and 6 feet thick. Control Estimates Both the owner and the contractor must adopt some base line for cost control during the construction. For example. A revised estimated cost is necessary either because of change orders initiated by the owner or due to unexpected cost overruns or savings. material and equipment needed to perform various tasks may be used as parameters for the cost estimates. However. the contractor may want to assess the actual cost of construction by considering the actual construction procedures to be used and the associated costs if the project is deemed to be different from typical designs. A layer of soil at a minimum of 5 ft. Consequently. items such as labor. Holes are bored at regular intervals throughout the landfill for this purpose and the grout tubes are extended from the surface to the bottom of the landfill. For the owner. Hence. the general subcontractor will shift the burden of cost estimating to subcontractors. This grout would then harden into a permanent. a budget estimate must be adopted early enough for planning long term financing of the facility. it may solicit price quotations for various tasks to be subcontracted to specialty subcontractors. If all or part of the construction is to be undertaken by the general contractor. the detailed estimate is often used as the budget estimate since it is sufficient definitive to reflect the project scope and is available long before the engineer's estimate. The budgeted cost should also be updated periodically to reflect the estimated cost to completion as well as to insure adequate cash flows for the completion of the project. As the work progresses. the cost of a footing of a certain type and size may be found in commercial publications on cost data which can be used to facilitate cost estimates from quantity takeoffs. Example 5-2: Screening estimate of a grouting seal beneath a landfill  One of the methods of isolating a landfill from groundwater is to create a bowl-shaped bottom seal beneath the site as shown in Figure 5-0. A typical material would be Portland cement grout pumped under pressure through tubes to fill voids in the soil. impermeable liner. The seal is constructed by pumping or pressureinjecting grout under the existing landfill. which will be used for control purposes as well as for planning construction financing. thick is left between the grouted material and the landfill contents to allow for irregularities in the bottom of the landfill. the bid estimate is usually regarded as the budget estimate. the budgeted cost must be revised periodically to reflect the estimated cost to completion. . a bid estimate may be prepared on the basis of the quantity takeoffs from the plans provided by the owner or on the basis of the construction procedures devised by the contractor for implementing the project. Thus.
Th he quantities for these tw items are estimated on the basis o the landfi area: wo e o of ill 3 8 acres = (8)(43. Hence.Grout Bo -1: ottom Seal L Liner at a La andfill The work items in th project include (1) dri k his illing explor ratory bore h holes at 50 ft intervals fo t or grout tub and (2) pumping gro into the voids of a soil layer betw bes. p out v ween 4 and 6 ft thick.000 ft2 to account for the bowl shape) n.480 ft2 (As an ap pproximation use 360.880 ft. The volu of the so layer for grouting is estimated to be: ume oil g e . ) The num mber of bore holes in a 50 ft by 50 ft grid pattern covering 36 h 0 g 60. t total amo f oles ated 0 the ount of drilli is ing (144)(20) = 2.000 ft2 is g given by: The aver rage depth of the bore ho is estima to be 20 ft.Figure 5.560 ft2/acre) = 348.
000 to $4.798 2.129.000) = 648.381.160. volume = (4 ft)(360. The three low bidders were: 1. In addition to the variation in the unit cost. the total project cost is estimated to be: (5 ft)(360. grouting cost = $1. for a 4 ft soil layer: grouting in 20% voids = (20%)(1.000 ft3 It is estimated from soil tests that the voids in the soil layer are between 20% and 30% of the total volume.000 ft3 and for a 6 ft soil layer: grouting in 20% voids = (20%)(2. .000 The total cost of drilling bore holes is so small in comparison with the cost of grouting that the former can be omitted in the screening estimate. Danville CA $14. Murray.000 An important point to note is that this screening estimate is based to a large degree on engineering judgment of the soil characteristics.160.000 for a 6 ft layer with 20% voids. for completing the project within 320 working days. grouting cost = $2. The disparity in pricing can be attributed either to the very conservative estimate of the engineer in the Utah Department of Transportation or to area contractors who are hungrier than usual to win jobs. an average value of a 5 ft soil layer with 25% voids is used together with a unit cost of $ 7 per cubic foot of Portland cement grouting.000 to $ 6.320. Ball & Brosame. Alternatively. AR $15.146.000 ft3 grouting in 30 % voids = (30%)(1..000 to $2. volume = (6 ft)(360.152.592.714 It was astounding that the winning bid was 32% below the engineer's estimate. Kiewit Western Co.480.000 ft2)(25%)($7/ft3) = $3.950. the total cost of boring will be between (2.000 ft2) = 1. Bids were submitted on March 10. In this case. 1987. That is: for a 4 ft layer with 20% voids. Thus.800. additional soil tests can be used to better estimate the unit cost of pumping grout and the proportion of voids in the soil. the total cost of the bottom seal will depend upon the thickness of the soil layer grouted and the proportion of voids in the soil.440.000 to $4.859.480.000 ft3 The unit cost for drilling exploratory bore holes is estimated to be between $3 and $10 per foot (in 1978 dollars) including all expenses. The unit cost of Portland cement grout pumped into place is between $4 and $10 per cubic foot including overhead and profit.000 even though the probabilities of having actual costs at the extremes are not very high.640 and (2. Ball.880)(3) = $ 8.880)(10) = $28. Even the third lowest bidder was 13% below the engineer's estimate for this project. and the range of the actual cost may vary from $ 1. Example 5-3: Example of engineer's estimate and contractors' bids The engineer's estimate for a project involving 14 miles of Interstate 70 roadway in Utah was $20. grouting cost = $1. Phoenix.320. Inc. grouting cost = $1.000) = 288. and the engineer must exercise judgment in narrowing the range of the total cost.for a 4 ft layer.000) = 432.000) = 432.160.880.789 3.152.440..440.000 to $6.000 ft3 for a 6 ft layer.000 ft2) = 2. the range of unit cost varies greatly with soil characteristics. Suppose that. Thus.728. Utah $18.150. Furthermore.000 for a 4 ft layer with 30% voids. in addition to ignoring the cost of bore holes.000 ft3 grouting in 30% voids = (30%)(2.728. National Projects.000 for a 6 ft layer with 30% voids. Inc..
000 362.30 1.00 40.10 10.00 30.600 29. TABLE 5-2: Unit Prices in Two Contractors' Bids for Roadway Construction Items Mobilization Removal.000 1.00 30. ci AA (AE) Small structure Barrier.50 0.00 0.00 4.00 20.00 5. type III Warning lights Pavement marking.00 25.00 27. 10'' thick Concrete.50 100 2 569.500 525 7. Inc.410 4.50 12.020 1.00 0.00 12.00 10.40 0.00 12. right-of-way. 4'' thick 10'' thick Slope protection Metal.00 110 12.920 7. precast Flatwork. type I type II Constructive signs fixed Barricades.207.554 8. 15'' 18'' Post.000 475 16.330 140 52.00 100 12.50 2. 4'' thick PCC.20 0. epoxy material Black Unit ls lf sy lf cy ton sy sy ls cy lf sy sy sy ea ea lf lf cy ea lb ea sf lf day gal 1 Quantity Unit price 1 115.10 0.680 32 54 1.104 39 3 4.00 100 150 3.241 2.500 6.200 820.00 3. berm Finish subgrade Surface ditches Excavation structures Base course.00 5. untreated. 3/4'' Lean concrete. The similarity of their unit prices for some items and the disparity in others submitted by the two contractors can be noted.50 3.000 500 15.00 125 200 2. modification Salvage and relay pipe Loose riprap Braced posts Delineators.00 5. Ball & Brosame.The unit prices for different items of work submitted for this project by (1) Ball.700 1. end section. pavement. and (2) National Projects. Inc.00 0.00 190.10 90.310 76.90 200.20 0.300 475 . are shown in Table 5-2.00 1.00 8.00 3.00 15.010 1 50 7.
00 20.00 100 100 150 150 . 12'' Catch basin grate and frame Equal opportunity training Granular backfill borrow Drill caisson.00 14.60 0.00 700 19.000 274 722 20.000 10.00 15. wood post 24'' 30'' 36'' 42''x60'' Unit gal gal ea cy acr sy lf lf ea hr cy lf hr ea ea lb lb ls sf sf ea ea ea sf ea sf ea ea ea ea Quantity 740 985 342 260 103 500 580 2.00 18.00 20.TABLE 5-2: Unit Prices in Two Contractors' Bids for Roadway Construction Items Yellow White Plowable.00 15.80 16. 141'x4'' 132'x4'' Reinforced steel Epoxy coated Structural steel Sign. 18'' Polyethylene pipe.00 100 100 200 15.55 5. 2'x6'' Flagging Prestressed concrete member type IV.00 150 2.25 Unit price 80.600 4.00 350 0. 48''x60'' type 3.00 500 15. metal pipe.00 280 0. one-way white Topsoil.00 0.00 13.00 12.241 1 16 98 3 2 11 61 11 669 23 1 12 8 90. covering type C-2 wood post 24'' 30'' 48'' Auxiliary Steel post.50 0.00 200 2.00 90.00 125 150 180 220 12.50 1. method A Excelsior blanket Corrugated.300 122.80 10.000 7 6 6.250 35 18.00 10. contractor furnished Seedling.00 400 160 300 12.00 100 8.000 0.00 6.00 50.00 70.00 80.00 17.000 11.50 16.
00 5. not vary linearly with y respe to differe facility si ect ent izes. For examp the cons ple. . then the cos of a facilit st ty corresp ponding to an x within the specified range may be obtained by linear in ny t d nterpolation. a fix cost of y = a at x = 0 is implied as shown in Figure 5-2. struction cost of a school building ca be estimat on the ba of a line l an ted asis ear relations ship between cost and flo area if th unit cost p square fo of floor a is know for n oor he per oot area wn school buildings within certain limits of si l w n ize.1).00 35. nship can be expressed in the form: n (5. onomies or d diseconomie exist. Th a linear cost relation hen. ale es nversely.00 100 300 100 30. If the values of y correspon t f nding to x = c and x = d are known.00 150 650 100 36. Em e ase ater mpirical data are sought t a to estab blish the econ nomies of sc for vario types of facility. sca ale diseco onomies exist if average costs increa with grea size. Con ge u city ing.00 40. in order to tak cale ous f hey ke advant tage of lower costs per u of capaci r unit ity. In general. If th es he averag cost per unit of capac is declini then sca economie exist.4 Effects of Scale on Co s onstructi Cost ion t Screeni cost estim ing mates are oft based on a single var ten n riable repres senting the capacity or so ome physica measure of the design such as floo area in bu al o n or uildings.TABLE 5. ro closed W oad Unit ea sf sf ea ea ea lf Back to top 7 Quantity 200 15. su as betwe x = c and x = uch een d d.1) where a and b are po a ositive consta to be de ants etermined on the basis of historical d n f data. this on xed n relations ship is applic cable only in a certain ra n ange of the v variable x. volume of e storage bins and prod b duction volu umes of proc cessing plant Costs do n always v ts.00 135 1. Note th in hat Equatio (5. if th exist. Typical scale eco lly. leng of highw gth ways. a y be the r b e y and resulting con nstruction co ost.Unit Prices in Two Contractors' B for Roa -2: C Bids adway Const truction Items 48 8'' Au uxiliary St post teel 12 2''x36'' Fo oundation. 48''x4 42'' Wood post. concrete Barr ricade. Let x be a variable representing the facility capacity.610 28 60 40 100 Unit price 270 13.
as show in Figure 5-3.Figure 5-2: Lin Cost Re near elationship w Econom of Scale with mies A nonlin cost rela near ationship bet tween the facility capaci x and con ity nstruction co y can ofte be ost en represen in the fo nted orm: (5.gt 1. the relations ship become the case of decreasing returns to sc es f g cale. Taking the wn e g log garithm of bo sides this equation. For 0 < b < where a and b are po 1. Equation (5.2) represent the case of increasing returns to sc E ts f cale.2) ositive const tants to be de etermined on the basis o historical d n of data. a linear relati oth s ionship can be obtained as follows: . and for b .
where m usually var from 0. Then from the em city n. A n o me n E nonlinear cos relationsh often used in st hip d estim mating the cos of a new industrial pro st i ocessing pla from the k ant known cost of an existin ng facility of a differ size is known as the exponentia rule.9.6 is of used for chemical pr ften r rocessing pla ants.3) Although no fixed co is implied in Eq.4) i used: is (5.5) or . mpirical dat it can be a ta. and y be the estimat cost of th new facili which ha a ng ith e ted he ity as capac Q.(5.5 to 0.3). The sam limitation applies to Eq. A value of m = 0.4) ries 5 pe . depending on a specific typ of facility. The exp xponential ru can be red ule duced to a li inear relationship if the logar p rithm of Equ uation (5. on y ertain range of x. assumed tha at: (5.2) the equatio is usually applicable only for a ce h ost d ). Let yn be the kno cost of a rent k e al own an existin facility wi capacity Qn.(5.Figure 5-3: Nonli inear Cost Relationship with increasing or Decre R w easing Econo omies of Sca ale (5.
Ex xample 5-4: Determinat tion of m fo r the expon nential rule Figu 5-4: Log ure g-Log Scale Graph of Ex xponential R Example Rule e n The emp pirical cost data from a number of se d n ewage treatm plants a plotted on a log-log s ment are scale for ln(Q n) and ln( n) and a linear relatio Q/Q (y/y onship between these log garithmic ra atios is show in wn Figure 5-4. it c be determ he t he can mined from t the geometric relation as fo r follows: For ln(y n) = 0. 5. ng Q/Q n 0. here derable ince entive to prov extra ca vide apacity since scale econo e omies exist a illustrated in Figure 5 When m is as d 5-3. th is consid nts.1765.6) The expo onential rule can be appl to estim the total cost of a co e lied mate l omplete facil or the co of lity ost som particular component of a facility. the co of a plan increases only 1.3 301.585. ln(y/yn) = 0. The values of m for several t types . to increase as the numb of duplicate units in a system inc ber creases. For (Q/Qn) = 1 or ln 5 n(Q/Qn) = 0.(5.5 time when the capacity is d ost nt o es doubled. for m = y/y 65. In words. close to 1. /Q n(Q/Qn) = 0. the co is directly proportiona to the desi capacity The value of m tends t e ost y al ign y.176 y/yn = 1. Since m is th slope of the line in th figure. me . ln(y/yn) = 0 and for Q/ n = 2 or ln 0. Example 5-5: Cost exponents for water and w E w wastewater t treatment p plants The magnitude of th cost expo he onent m in th exponentia rule provi he al ides a simple measure of the e f economy of scale ass y sociated with building ex capacity for future g h xtra y growth and s system reliab bility for the pr resent in the design of tr e reatment plan When m is small.5 while the correspondin value of Q n is 2.
60 0. then t cost y fo a proposed new facilit of the or d ty specifie capacity Q can be rea ed adily comput ted.1-2 20 0. or Examp 5-6: Som Historica Cost Data for the Exp ple me al a ponential R Rule The exp ponential ru as represe ule ented by Equ uation (5.of treatm plants with differen plant comp ment w nt ponents deri ived from sta atistical corr relation of ac ctual const truction cost are shown in Table 5-3 ts 3. gal 58.M. Waste treatment ry stion (small) ) Primar with diges Primar with diges ry stion (large) Trickli filter ing Activa sludge ated Stabili ization pond ds Exponen nt m 0.75 0.4) c be expre can essed in a dif fferent form as: m where If m and K are know for a give type of fa d wn en acility.57 Capacity range y (mil llions of gall lons per day y) 1-10 00 0.55 0.8 84 0.6 67 .5 50 0.6 60 0. gal 2 ft l.3 35 0.77 0.000 3. mil. See the refe erences in his article fo the primary sources.7-100 0.1-1 10 0.820 399 700 170.67 0.000 46. Water treatment 2.1-100 Source: Data are coll D lected from various sour v rces by P. TABL 5-4 Cost Factors of Processing U LE t P Units for Tre eatment Plan nts Pr rocessing unit 1.5 57 0. mil. TABLE 5-3 Estimated Values of Cost Expone for Water Treatmen Plants d C ents nt Treatm plant ment type t 1.7 71 0. Berthouex.1-100 0.000 0.000 0 21. Liquid processing d Oil sep paration Hydroc clone degritt ter Primary sedimentat y tion Furial clarifier c Sludge aeration bas sin Ticklin filter ng Aerated lagoon bas d sin Unit of y capacity K Value e (1968 $) ) m valu ue mgd mgd ft2 ft2 l.
the project can be decomposed into elements at various levels of detail for the purpose of cost estimation. Preliminary Estimates.e.g. The range of data from which the K and m values are derived in the primary sources should be observed in order to use them in making cost estimates.52 0. the unit cost method is commonly used when the project is decomposed into elements at various levels of a hierarchy as follows: 1.70 0.60 for a primary sedimentation component in Table 54.360 318 0. Back to top 5.M.. The unit cost for each element in the bill of quantities must be assessed in order to compute the total construction cost. The project is decomposed into detailed items of various components as warranted by the available cost data. 3. As an example. This concept is applicable to both design estimates and bid estimates. For a proposed new plant with the primary sedimentation process having a capacity of 15. The project is decomposed into components of various major systems.500 9. Detailed Estimates. Examples of detailed items are slabs and beams in a floor panel.Equalization Neutralization 2.000 67. Sludge handling Digestion Vacuum filter Centrifuge mil.81 Source: Data are collected from various sources by P. The project is decomposed into major structural systems or production equipment items.000. mgd ft3 ft2 lb dry solids/hr 72. the entire floor of a building or a cooling system for a processing plant. . although different elements may be selected in the decomposition. See the references in his article for the primary sources. The estimated values of K and m for various water and sewage treatment plant components are shown in Table 5-4. the estimated cost (in 1968 dollars) is: y = ($399)(15.000 60. Engineer's Estimates. For design estimates. a single floor panel for a building or a heat exchanger for a cooling system.000)0. take K = $399 and m = 0..60 = $128. ft. e. Berthouex. gal. The K values are based on 1968 dollars.000 sq. 2.5 Unit Cost Method of Estimation If the design technology for a facility has been specified. i.84 0.59 0. or the piping and connections for a heat exchanger.
T g Then. If the con C nstruction pr rocedure of a proposed p project is use as ed the basis of a cost estim mate. Then. the pro oject may be decompose into items such as labor.8) . an industrial pro U i ocess require several m es major equipm compon ment nents such as furnaces. e ed s mate erial and equ uipment need to perfor various t ded rm tasks in the p projects. The actor and the levels of detail may vary according to the des of the ge v sire eneral contra e ost availability of co data. Usually. Based on ch ber haracteristics of the cons s struction site the technol e. composition of a project into subcon n t ntractor item for ms quotation inv q volves a min nimum amou of work f the gener contracto However the unt for ral or. the total s cost of a pro c oject is estim mated by: (5. Let Qi be the quan ntity th of the i element and ui be the co d orresponding unit cost. the unit cos method ca also be ap id . val lves and elec ctrical eleme ents. ui for ea ach element may be adju usted. Simple Un Cost Fo nit ormula Suppose that a proje is decomp e ect posed into n elements fo cost estim or mation. Subcontract Quotatio The dec S tor ons. accuracy of the resulting estimate depends on th reliability of the subcontractors si f g he y ince th general co he ontractor sel lects one am mong several contractor q quotations su ubmitted for each item of subcontrac o cted work. the estimated unit c cost. Construction Procedures. the tot cost of the project is g tal given by: (5. 3. logy employ or the management of the const yed. m truction proc cess. Ci be th purchase cost of a maj equipme componen i and fi be a factor acc he c jor ent nt e counting for the r cost of ancillary item needed fo the install a ms or lation of this equipment component i. 2. The decompo T osition of a p project into i items of quan ntities that a are measured (or taken off) from the eng m r f gineer's plan will result i a procedur similar to that in re adopted for a detailed es a stimate or an engineer's e n estimate by t design p the professional. to s owers drums and pump in a chemica processing plant. r. st an pplied even t though the contractor ma ay choose to decompose th project into different l d he levels in a h hierarchy as f follows: 1. Quantity Takeoffs.For bi estimates.7) where n is the numb of units. plus ancillary ite s i al g ems such as piping. The tota cost of a p al project is dom minated by t the costs of purchasing and installing the major equipment c p a g components and their ancillary items Let s. Factored Estimate F F E Formula A spe ecial applica ation of the unit cost met u thod is the "f factored esti imate" comm monly used i in process industries.
the units fo all terms in Equation ( or n (5. for a bid estimate. Ei be the unit equ t uipment rate for task i. the to with is otal cost y is: c (5.000 40. Li be the units of s labor re equired per unit of Qi.000 61. ho owever.0 000 $10. the decomp ns.0 000 15. cing bars and concrete may be prefe m erred since th contractor can get quo he r otations of su uch reinforc cont tract items more conveni m iently from s specialty sub bcontractors. he nto founda ation walls an elevator pit is preferr since the designer ca easily keep track of th nd p red an p hese design elements.0 000 18. Mi be the unit mate t erial cost of task i. The v nd r r value of Ci ma be obtaine by applyin the expon ay ed ng nential rule s the use of Equation (5 may inv so f 5.9) Note tha WiLi yield the labor cost per unit of Qi. an Wi be the wage rate a u nd e associated w Li. Let Qi be th quantity o work for t i he of task i. The factor or t ts in red metho is essentia based on the principle of comput od ally n uting the cost of ancillary items such as t y piping an valves as a fraction or a multiple of the costs of the major equipment items.00 00 15.00 00 Example 5-8: Cost es stimate usin labor. e The con ncept of deco omposition is illustrated by the exam mple of estim mating the co of a building osts foun ndation exclu uding excava ation as show in Table 5-5 in which the decomp wn h posed design n eleme are show on horizo ents wn ontal lines an the decom nd mposed contr elements are shown in ract vert tical column For a desi estimate. the decom mposition of the project into formwo f ork.000 $129. Exa ample 5-7: Decompositi of a buil D ion lding found ation into d design and c construction n elements.00 00 $29.00 00 28.000 $5.00 00 9. rial quipment Consid the simpl case for which costs of labor.where n is the num mber of majo equipment component included i the project.9) are con nsistent.00 00 Total co ost $28.00 00 $57.8) volve a com mbination of cost estimat f tion method ds.0 000 $43. ma ng aterial and equipment rates. . Consequen at ds c t e cost ntly. Su uppose that a project is decomposed into n tasks. TAB BLE 5-5 Illu ustrative Decomposition of Building Foundation n g n Costs Design elements e Footin ngs Found dation walls Elevat pit tor Total cost T Contra elements act Formw work Reba ars Concrete $13.00 00 16. ign position of th project in footings. In thi case. Fo ormula Bas on Lab Mater and Eq sed bor. mat der le w o terial and equ quipment are assigned to all tasks. or the labor unit c of task i.
One co ommon appl lication is fo ound in the allocation of field superv vision cost am mong the ba asic costs of various elem ments based on labor. let z be the total dir field cos which inc ludes the tot basic cost and the field supervis sion cost of the project. and zi be the direct field cost for task i. ma aterial and eq quipment co osts.9) The result is tabulated in the last c ).0 2 $50. ABLE 5-6 Illustrative Cost Estimat Using Lab Material and Equipm Rates I C te bor. the joi costs are often prorat in propor ts d int ted rtion to the b basic costs fo for vario elements ous s. Suppose that a projec is decomp ct posed into n tasks. then a typical prop hat ask t portional allo ocation is: (5.6 Method for Allocatio of Joi Costs ds A on int s The principle of allocating jo costs to various elem p a oint v ments in a pr roject is often used in cos n st estimat ting. column of the same table e e. Then ral c he nd t e n.0/yd3 $0 0. and the allocation o the of genera overhead cost to vario elements according t the basic a field sup al ous s to and pervision cost.For th given qua he antities of wo Qi for th concrete fo ork he foundation of a building and the labo f or.2/lb 0 5.11) Finally let w be th grand total cost of the project whic includes t direct fie cost and the y. material and equipment rates in Table 5-6.4/ft2 0. th hen (5. If F is the total field s c e supervision c and Fi is the proratio of cost s on th cost to ta i.440 0 3 3 15 5/hr 0. l ment TA Descri iption Formw work Rebars s Concre ete To otal uantity Qu Qi 12.3/lb 0 50/yd3 W Wage r rate Wi Lab bor inp put Li Lab bor unit c cost WiLi Direc ct cost t Yi $1 15/hr 0.6/ /lb 4. . Becaus of the diff se ficulty in esta ablishing cas sual relation nship betwee each elem en ment and it associated cost. If G is th general of t a e d k he ffice overhe for prora ead ation to all ta asks.000 ft2 4. .8 hr r/yd 12.50 00 $88.10) e rect st tal Similarly. th cost estim is compu on the b T he mate uted basis of Equ uation (5. he ch the eld gener office overhead cost charged to th project an wi be that attributable task i.0 lb 000 50 yd3 00 Ma aterial Equ uipment unit cost un cost nit Ei Mi $0 0. and Gi is the share for task i.2 h 2 $3.04 h hr/lb 0.30 00 Back to top 5. Let y be the total basic cost fo the projec and or ct yi be the total basic cost for task i.0/ /yd 33.8/ft2 0.40 hr/ft 0/ft 00 15 5/hr 0.
960 660 5.062 $105.062 w = 101. neral office overhead ch harged to the project is 4% of the dir e rect field co which is the sum of basic costs and field sup ost b a pervision cos find the pr st.545 $2.245.13) Example 5-9: Prora e ated costs fo field supe or ervision and office over d rhead f $ in 5-8) otal If the field supervision cost is $13.545 + 4.12) and (5.245 $1 101.500 $88. Hence: z = 13.262 1.545) = $4.607 The results of the prorat o tion of costs to various e elements are shown in Ta 5-7.279 202 5.245 for the project i Table 5-6 (Example 5 with a to direct cost of $88 t 8.04)( (101.400 4.025 $13.300 = $ $101.607 Exam mple 5-10: A standard cost report for allocati overhead ing The relia ance on labor expenses as a means of allocating o r a f overhead bu urdens in typ pical manage ement accou unting system can be illu ms ustrated by the example of a particul product's standard co t lar s ost sheet  Table 5-8 is an act product's standard co sheet of a company f t. able TABLE 5-7 Proration of Field Supervision and Office Overhead C E n Costs Description Form mwork Reb bars Con ncrete Total Allocated A Total Allocated Basic cost field supervis f sion cost fie cost ov eld verhead cost Total cost yi Fi zi Gi Li $50. y = $88. find th prorated field supervi he f ision costs fo various el or lements of th he project Furthermo if the gen t.300 and F = $13.525 5.066 $4. 5 tual s ost following the procedu of using overhead bur ure o rden rates as ssessed per d direct labor h hour.400 33. ore.300 $7.560 $ $57. rorated gene eral office overhe costs for various ele o ead r ements of the project.541 40. e For the pro oject.300.060 38.062 = $ 5 $105.319 $60.545 G = (0.(5. The m material and labor .245 + 88.
face. These amounts are summarized in Columns 2 and 3 of Table 58. Boston. The information must be updated . Kaplan.0577 0.costs for manufacturing a type of valve were estimated from engineering studies and from current material and labor prices.3241 0.5233 29% Source: H.1980 $0.1046 0.3818 1.4501 0. Harvard Business School Press. the arbitrary allocation of joint costs introduces unintended cross subsidies among products and may produce adverse consequences on sales and profits.3773 0. S.0337 0. Back to top 5. tap (2) Degrease Remove burs Total cost.5233 $1.1980 0.1469 0.3523 1.0031 0.5982 1.2404 0.0438 0.1583 $5.6456 0. Reprinted with permission. a particular type of part may incur few overhead expenses in practice. this item Other subassemblies Total cost. Even though material costs exceed labor costs.1349 $3. Johnson and R.9008 2. while labor costs are 11% of the total cost. The overhead costs shown in Column 4 of Table 5-8 were obtained by allocating the expenses of several departments to the various products manufactured in these departments in proportion to the labor cost.2842 0.7 Historical Cost Data Preparing cost estimates normally requires the use of historical data on construction costs. Although this type of allocation method is common in industry.4766 4. this item Cost component.1980 $0. but this phenomenon would not be reflected in the standard cost report. T.2994 0.0234 $0. subassemblies Assemble and test Pack without paper Total cost.0368 0. the material cost represents 29% of the total cost.0837 60% (2) Labor cost (3) Overhead cost (4) Total cost $1. Relevance lost: The Rise and Fall of Management Accounting. Organizations which are engaged in cost estimation continually should keep a file for their own use. % $1.5743 11% $0.4987 0.4040 0.8519 2. only the labor costs are used in allocating overhead. As shown in the last line of the table. TABLE 5-8 Standard Cost Report for a Type of Valve (1) Material cost Purchased part Operation Drill. Historical cost data will be useful for cost estimation only if they are collected and organized in a way that is compatible with future applications. The allocated overhead cost constitutes 60% of the total cost.1813 100% 1. For example.
provides similar information. Cost Engineering. One source of such information is ENR. changes in design during the construction process. should be organized according to the current standard of usage in the organization. or overoptimism. It is difficult.with respect to changes that will inevitably occur.8 Cost Indices Since historical cost data are often used in making cost estimates. such as unit costs for various items. to foresee all the problems which may occur in construction and operation of facilities. i. The Dodge Digest of Building Costs and Specifications provides descriptions of design features and costs of actual projects by building type. Historical cost data must be used cautiously. A major source of vendors' information for building products is Sweets' Catalog published by McGraw-Hill Information Systems Company.. the construction contractors. the following types of information are available: Catalogs of vendors' data on important features and specifications relating to their products for which cost quotations are either published or can be obtained. the owner. Dodge Manual for Building Construction. ENR publishes the bid prices of a project chosen from all types of construction projects. systematic changes over a long period of time for such factors are difficult to predict. Since the future prices of constructed facilities are influenced by many uncertain factors. This is due to the effects of greater than anticipated increases in costs. Inc. An example is the Building Construction Cost Data published annually by R. The input price indices of labor and/or material reflect the price level changes of such . of course. Errors in analysis also serve to introduce uncertainty into cost estimates. the McGraw-Hill Construction Weekly. • Periodicals containing construction cost data and indices.e. Trends in price changes can also serve as a basis for forecasting future costs. it is important to recognize that this risk must be borne to some degree by all parties involved. These publications are useful as references for comparison. The format of cost data. a journal of the American Society of Cost Engineers. which contains extensive cost data including quarterly cost reports. which contains unit prices on building construction items. Construction cost data are published in various forms by a number of organizations. When inflation adjustment provisions have very different risk implications to various parties. There is some evidence that estimates of construction and operating costs have tended to persistently understate the actual costs.. published by McGraw-Hill. • Digests of actual project costs. Unfortunately. Changes in relative prices may have substantial impacts on construction costs which have increased in relative price. • Commercial cost reference manuals for estimating guides. Means Company. Once a week. and the financing institution. the design professionals. also publishes useful cost data periodically. Back to top • 5. it is important to note the price level changes over time.S. the price level changes will also be treated differently for various situations. Basically. It is to the best interest of all parties that the risk sharing scheme implicit in the design/construct process adopted by the owner is fully understood by all.
t the price in ndices of var rious types of completed facilities re o d eflect the pri changes of constructi ice ion outpu including all pertinent factors in th constructi process. The building constructio ut a he ion g on output indices com t mpiled by Tu urner Constru uction Comp pany and Ha andy-Whitm Utilities a man are com mpiled in the U. ent r. the dex year t. and lt+1 be the price index in the following year t+1. ce elated to construction are also collect by indus sources s e ted stry since some in nput factors for construc ction and the outputs fro constructi may disp e om ion proportionat tely out tpace or fall behind the general price indices. Special pric indices re .15) If the pr index at the base year t=0 is set at a value o f 100.2. all th hese indices measure onl the price c ly changes of respective co onstruction in nput factors as represen by cons s nted stant quantiti of materi and/or lab On the o ies ial bor. l2. then t price ind rice t the dices l1.. Then. he The best-known in ndicators of general pric changes ar the Gross Domestic P f ce are s Product (GDP) deflator compiled periodically by the U. Both EN cost indi NR ices measure the effects of wage rate and materi price tren but they are e e ial nds.S.14) or (5.. A pric index is a weighted ag ce ggregate me easure of con nstant quanti ities of good and services ds selected for the pack kage. uction cost in ndex and the building co index are reported pe e ost e eriodically in the Engine n eering News-Record (EN NR). Statist e tical Abstrac published each year. other hand. both compiled by the U. index (CPI) compiled periodically by the U. Ex g e xamples of s special price indices for construc ction input fa actors are th wholesale Building M he Material Price and Buildin Trades U e ng Union Wages. where available. d broad ga auges of the changes in production costs and in consumer pr p c rices for esse ential goods and services. re eflect the pri ice level cha anges of the completed facilities. n.input components of construct c tion. cts d .ln for the su ubsequent years t=1.S.. Department of Commer and the consumer price rs y t rce. e s. ogy s. thu to some d f us degree also m measuring the productivi of ity construction. the outp price ind put dices. Departm of Labo They are widely used as ( U ment or.S. competitive conditions or technolo changes a y.n can be com mputed succe ssively from changes in the total pri m ice charged for the package of goods me c t easured in th index. t percent c t r the change in pr rice index for year t+1 is: f (5. .S. Consequ uently. y not adjusted for productivity efficiency.. The pri index at a subsequen year represents a proportionate change ice nt in the sam weighted aggregate measure bec me d m cause of chan nges in price Let lt be t price ind in es. Departme of Labor In addition the constru b .
0 95.7 94.2 92.5 133.Buildings GDP Deflator 90.0 104.9 88.6 110.0 100.3 95.6 96.0 104.0 Note: Index = 100 in base year of 2000.Buildings 84.0 95.2 105.5 ENR .0 103.0 102.8 98.8 97.Figure 5-7 and Table 5-9 show a variety of United States indices.8 100.2 112.9 107.4 110.3 143. using 2000 as the base year with an index of 100.6 118.5 95.4 112. 1996-2007 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year Turner Construction .0 101. TABLE 5-9 Summary of Input and Output Price Indices. and the Turner Construction Company Building Cost Index from 1996 to 2007.8 123. . the ENR building index.0 102.1 120. including the Gross Domestic Product (GDP) price deflator. Figure 5-7 Trends for US price indices.6 100.4 104.3 104.2 108.5 126.
i.t ar j1. blishes periodically the in ndices of loc cal constru uction costs at the major cities in diff a ferent region of the Uni States as percentage of ns ited s es local to national co o osts.Price and cost indices for constru -8 d s uction. it ma become n ay necessary to c consider the e differe ential price changes over and above the general inflation rate For examp during t c r e...e.. re re espectively. less than 10%. Let At be the cost in yea t expressed in base-ye dollars an At' e ar ear nd be the cost in year t expres e ssed in then-current doll lars. Then: (5..16) Conversely C (5. the . ple. Let jt be th price cha i the ange rate in y t+1 ove the year er price in year t.2.17 ) ices of certain key items affecting th estimates of future ben s he osts ected If the pri nefits and co are expe to escalate faste than the ge e er eneral price levels. it is c he vely i n convenient to select a sin ngle price in ndex to meas sure the infla ationary con nditions in co onstruction a thus to d only wit a and deal th single se of price ch et hange rates in forecasting. If th base year is denoted as year 0 (t= then the price chang rates at years n he r a =0).. When th inflation rate is relativ small. Since construction costs vary in different regions of th United St n he tates and in a parts of th all he world locational indices show d.Figure 5.. ge 1.jt.j2. wing the con nstruction co at a speci location relative to th ost ific he nation trend are useful for co estimatio ENR pub nal ost on..
the assu umption for estimating c costs over ma years wo any ould have be different. With hin han ral ndsight in 19 983. For the purp pose of forec casting. . it was customary to assume tha fuel costs would escal 73 1 o at late faster th the gener price levels. it is often sufficient to proje the trend of ect future prices by using a consta rate j for price change in each ye over a pe ant p es ear eriod of t yea ars. a Table 5-1 e o h sts 92 and 10 shows the change of residential building costs from 197 to 1990. or ems be . and ot ther factors. the rate of cost t o l 70 In increase was substan ntially above the rate of inflation in t decade o the 1970s. This uncertai r f T inty arises fr rom technolo ogical chang changes in ges. Indeed. I each case. Future forecasts of costs will be uncertain the actual e e b n: expenses ma be much l ay lower or mu uch higher than those forecasted. inac e ccurate forec casts of unde erlying socio oeconomic conditions.period between 197 through 1979.21) s d g p re ases More sophisticated forecasting models to predict futur cost increa include corrections for items such as economic cycles and t a technology c changes. Example 5-1 Changes in highway and build E 12: s y ding costs Figure 5-9 shows the change of standard highway cos from 199 to 2002. the real e i the of e cost in ncrease betw ween 1970 an 1980 was in excess o three perce per year in both case nd s of ent es. an nalytical errors. Because of the uncerta een f ainty in the fu future.19) Estimation of the future rate in ncrease j is not at all stra n aightforward A simple e d. then (5..18) and (5.20) nger term per rspective mi ight use the average incr a rease over a horizon of n past period ds: A lon (5. the us of se diff ferential infla ation rates fo special ite should b judicious. expedient is to assume th future inf hat flation will continue at th rate of the previous p c he e period: (5. s relative prices.
TABL 5-10 Com LE mparison of Residential B R Building Co osts.4% % +1. real cost decreases to place in the period from l970 to l990. a m. ase andard highw way. . Figu 5-9 Prod ure ducer Prices of Highway and Street Construction (Producer Price Index: s y n Highways and Streets-mon nthly data). co omparable in ndices of outputs are not being com o mpiled on a nationwide b n basis for other types of c construction. Back to top . GNP de eflator is use for the pri deflator ed ice index. Unfor ook f rtunately. 1970-19 990 Standa ard residence cost e (1972=1 100) 77 203 287 Price deflator (1972=100 0) 92 179 247 S Standard res sidence real cost (1972=100) 74 99 116 Percenta age change e per yea ar year 1970 1980 1990 +3.7% % Source: Statistical Ab S bstract of the United Sta e ates.Howeve these data also show some cause for optimism For the ca of the sta er.
Example 5-13: Screening estimate for a refinery The total construction cost of a refinery with a production capacity of 200. California. Exclude special local conditions in historical data 2. Indiana. Adjust for local index of construction costs 5. whereas others may require field investigation and considerable professional judgment to reflect differences between a given project and standard projects performed in the past. plant.5. the estimate for the new project may be obtained as follows: .000 bbl/day be built in Los Angeles. These indices are deemed to be appropriate for adjusting the costs between these two cities. with m = 0. Adjust for different regulatory constraints 6. The contingency cost due to inclement weather delay will be reduced by the amount of 1% of total construction cost because of the favorable climate in LA (compared to Gary). In the total construction cost for the Gary. there was an item of $5 million for site preparation which is not typical for other plants. Equation (5. The inflation rate is expected to be 8% per year from 1999 to 2003. 1. the cost of a power plant is a function of electricity generating capacity expressed in megawatts. The location index was 0. The variation of sizes of the refineries can be approximated by the exponential rule. for completion in 2003. 3. a single parameter is often used to describe a cost function. 4. On the basis of the above conditions.14 for Los Angeles in 1999.6.9 Applications of Cost Indices to Estimating In the screening estimate of a new facility. Determine new facility cost on basis of specified size or capacity (using the methods described in Sections 5. The general conditions for the application of the single parameter cost function for screening estimates are: 1. For the additional information given below. Adjust for local factors for the new facility Some of these adjustments may be done using compiled indices. 5. 6. Indiana.6) 3.3 to 5. For example. make an order of magnitude estimate of the cost of the proposed plant.4). or the cost of a sewage treatment plant as a function of waste flow expressed in million gallons per day. Indiana and 1.000 bbl/day in Gary. New air pollution equipment for the LA plant costs $7 million in 2003 dollars (not required in the Gary plant). Adjust for inflation index 4. It is proposed that a similar refinery with a production capacity of 300. completed in 2001 was $100 million. 2.92 for Gary.
the order of magnitude estimate for the new project is $209. Example 5-14: Conceptual estimate for a chemical processing plant In making a preliminary estimate of a chemical processing plant. The standard costs for the major equipment types for two plants with different daily production capacities are as shown in Table 5-11.$5 million = $ 95 million 2.000 10.6 + $7 = $211.000 bbl Furnace Tower Drum Pump.92) = $204.000)0.000/200.6 million 4. Adjustment for new pollution equipment at the LA plant gives $204.2 million 3. IN is $100 million .000 40% 45% 50% 60% 30% 35% 40% 50% .000 bbl 100.6)(1-0.2)(1.6 = (95)(1.1.500 1.6 million 6.6)(1. The cost of piping and other ancillary items for each type of equipment can often be expressed as a percentage of that type of equipment for a given capacity.5 million.08)4 = $164.14/0. TABLE 5-11 Cost Data for Equipment and Ancillary Items Cost of ancillary items Equipment Equipment Cost ($1000) as % of equipment cost ($1000) type 100. Adjustment for capacity based on the exponential law yields ($95)(300. etc.000 4.000 bbl 400.000 bbl 400.000 5. Reduction in contingency cost yields ($211.000 1. Typical cost excluding special item at Gary.000 bbl and 400.6 million 5.000 bbl can best be estimated by using linear interpolation of the standard data. It has been established that the installation cost of all equipment for a plant with daily production capacity between 100.000 6. Adjustment for inflation leads to the cost in 2003 dollars as ($121. several major types of equipment are the most significant parameters in affecting the installation cost.01) = $209.5)0. 3.5 million Since there is no adjustment for the cost of construction financing.6 = $121.000 2. Adjustment for location index gives ($164.
37) + ($3.000) + $500 0. The total cost of the project after adjustment f location is p for (0.4 + ($2. 1. We expect infla ur e ation in the f four years to be similar to th period 19 e he 990-1994 and we will us the GNP D d se Deflator inde ex.667)(1.000) = $3. $1 mps.8 800. TN in four years. TN.42) +( ($2.000 47) 0)(1.000-$1.8 as: 8) 3. own e TABLE 5-12 Resul of Linear Interpolatio for an Esti lts on imation Exa ample Eq quipment Equipment Co E ost Percentage for type (in $1.000) = $5. in comparison s . The location index for equipment in e nstallation is 0.00 60% . 2. Hence.95 for Memphis. The corresp ponding cost in thousand of four ye in the fut ds ear ture dollars u using Equati ion (5.( 00 (1/3)(60%-50 = 57% 0%) 2. the to project cost in thousands of curr dollars is given by E H otal c rent Equation (5.10 00)(105/94) = $21.000 bbl for ith ty 0 can be esti imated by lin interpolation of the data in Tab 5-11 and the results a near e ble are sho in Table 5-12.16) and Table 5-9 is: e ($19.000 was required fo the local c s or conditions in Memphis.A ne chemical processing plant with a daily produc ew p ction capacit of 200.000 920 0 0 4.( 67 (1/3)(50%-40 = 47% 0%) Pum etc.000-$3 3.33 45% .000 Back to top 5. Determine th total prel he liminary cost estimate of the t f plant in ncluding the building and the equipm on the f d ment following ba asis: 1. An addition cost of $5 nal 500.66 50% .000) ) ancillary ite ems Fur rnace Tower Dru um $3 3.3 40% . with the standar cost.10 Estim mate Ba ased on Enginee List of Qua er's t antities .3 333)(1.57) = = $2.140 = $ 19.733 + $3. The costs of the equipme and ancil T ent llary items fo a plant wi a capacit of 200.307 + $4.( 333 (1/3)(40%-30 = 37% 0%) $2 2.000 + (1/3) )($4. The solu ution of this problem can be carried out accordin to the step as outline in the prob n o ng ps ed blem statement: 1.500) = $2.000) = $2.000 $20.000 + (1/3) )($10.9 + $3.500 + (1/3) )($5.000 + (1/3) )($6.000-$2. and adjusted for inflatio for the int d on tervening fou years. ($5. h rd 3.000-$1.( 33 (1/3)(45%-35 = 42% 5%) $1 1.9 95)($21.333)(1 1.00 bbl is to be ty 00 construc in Mem cted mphis. T n TN.335. The installa ation cost for equipment was based o linear inte r on erpolation fr rom Table 5-11.335 5.
precast Flatwork.207.00 5. the progress payments to the contractor are based on the units of work completed and the corresponding unit prices of the work items on the list.00 100 150 3.000 118.400 1. berm Finish subgrade Surface ditches Excavation structures Base course.The engineer's estimate is based on a list of items and the associated quantities from which the total construction cost is derived.600 3. pavement.800 74.200 820. Example 5-15: Bid estimate based on engineer's list of quantities Using the unit prices in the bid of contractor 1 for the quantitites specified by the engineer in Table 5-2 (Example 5-3).000 1. 4'' thick PCC.680 32 Unit price 115.100 8. 10'' thick Concrete.050 21. This same list is also made available to the bidders if unit prices of the items on the list are also solicited from the bidders.010 1 50 7.542. ci AA (AE) Small structure Barrier. right-of-way.00 3. we can compute the total bid price of contractor 1 for the roadway project.020 1.00 40.629. 4'' thick 10'' thick Slope protection Metal.500 525 7.00 20.100 84.241 2. 3/4'' Lean concrete. 15'' 18'' Post.00 25. the itemized costs submitted by the winning contractor may be used as the starting point for budget control.700 1.10 10.280 .750 1. the estimate based on the engineers' list of quanitities for various work items essentially defines the level of detail to which subsequent measures of progress for the project will be made.000 1.50 3.000 8. Thus.50 2.020 603.900 2.000 500 15.000 25.00 10. untreated. modification Salvage and relay pipe Loose riprap Unit ls lf sy lf cy ton sy sy ls cy lf sy sy sy ea ea lf lf cy 1 Quantity 8.310 76.695.900 450 14.000 362.00 Item cost 115. end section.00 0.410 4.509 200.00 4. The itemized costs for various work items as well as the total bid price are shown in Table 5-13.920 7. TABLE 5-13: Bid Price of Contractor 1 in a Highway Project Items Mobilization Removal.961 7.104 39 3 4.90 200.820 52. Hence. In general.
metal pipe.232.450 1.10 90.100 5.000 84.00 10.470 300 200 .00 15.400 2.600 15. type I type II Constructive signs fixed Barricades.00 50.55 5.330 140 52.300 122. method A Excelsior blanket Corrugated.000 274 722 20.25 12.000 3.00 15.600 29.400 15.00 20.600 88.300 475 740 985 342 260 103 500 580 2.650 17.740 72.000 11.00 90.241 1 16 98 3 2 Unit price 100 12. 18'' Polyethylene pipe.500 6. covering type C-2 wood post 24'' 30'' Unit ea lb ea sf lf day gal gal gal ea cy acr sy lf lf ea hr cy lf hr ea ea lb lb ls sf sf ea ea Quantity 54 1.60 0. contractor furnished Seedling.00 15. 2'x6'' Flagging Prestressed concrete member type IV.260 5.780 67.000 7 6 6.750 66.10 0.000 0.900 630 42.00 0. epoxy material Black Yellow White Plowable. 12'' Catch basin grate and frame Equal opportunity training Granular backfill borrow Drill caisson.200 165.000 66. one-way white Topsoil.100 2.TABLE 5-13: Bid Price of Contractor 1 in a Highway Project Items Braced posts Delineators.000 11.250 14.000 10.00 150 2. type III Warning lights Pavement marking.000 160 1. 141'x4'' 132'x4'' Reinforced steel Epoxy coated Structural steel Sign.250 35 18.600 33.20 0.00 350 0.55 5.750 12.00 90.80 10.960 2.00 100 8.00 100 100 Item cost 5.
129. More accurate estimates may be accomplished once the project is scheduled as described in Chapter 10.00 40.00 Item cost 2.797.035 2.800 18.800 1. This method has the obvious drawback in assuming that the amount of money spent has been used efficiently for production.00 500 15. it is important to examine the percentage of work expected to be completed at various time periods to which the costs would be charged. A more reliable method is based on the concept of value of work completed which is defined as the product of the budgeted labor hours per unit of production and the actual . 48''x42'' Wood post.025 64.500 10.400 2. but some rough estimate of the cash flow may be required prior to this time. concrete Barricade.TABLE 5-13: Bid Price of Contractor 1 in a Highway Project Items 48'' Auxiliary Steel post. 48''x60'' type 3.55 Back to top 5. One common method of estimating percentage of completion is based on the amount of money spent relative to the total amount budgeted for the entire project.00 100 100 150 150 200 15. wood post 24'' 30'' 36'' 42''x60'' 48'' Auxiliary Steel post 12''x36'' Foundation.000 $14. especially for large projects with long durations. it is often necessary to determine the amounts to be spent in various periods to derive the cash flow profile.000 3.11 Allocation of Construction Costs Over Time Since construction costs are incurred over the entire construction phase of a project. road closed Total Unit ea sf ea sf ea ea ea ea ea sf sf ea ea ea lf Quantity 11 61 11 669 23 1 12 8 7 135 1. Consequently.300 100 1.200 915 5. Consider the basic problem in determining the percentage of work completed during construction.610 28 60 40 100 Unit price 200 15.000 4.00 100 300 100 30.400 2.200 1.
T effects of rapid mobi y ed" The f ilization and slow d mobiliz zation are ind dicated by th positions of curves B and C relati to curve A. . The solid line A represents th case in wh s r he hich the rate of work is z e zero at time t = 0 and inc creases linea to 12. then the work slo down gr ows radually and finally stop at the time of d ps e completion. Th dash line C represents the case of slow mobili he ization by reaching 12. r . Then. B or C). ate o rom 12.5% at t = 8 to 0% at t = 10. and is expresse in budgete labor hou for the wo d ed ed urs ork compl leted. while the ra begins to decrease fr arly % c . In genera the work on a constru al. R ed nd b d ire Regardless o the of meth of measu hod urement.5% of project cost at t = 2.5% a t = 7 to 0% at t at % = 10. In each case (A. The dotted line B repre sents the cas of rapid m % 0 se mobilization by reaching 12. Figure 5-10 Rate of Work Progres over Proje Time 0: W ss ect The val of work completed at a given tim (expresse as a cumu lue a me ed ulative percen ntage of proj ject cost is shown schematically in Figure 5-11. the percenta of compl age letion at any stage is the ratio of the value of wo y e ork complete to date an the value of work to be completed for the enti project. respectiv he ive vely. it is informative to understa the trend of work pro s e and d ogress durin ng construction for evaluation and control. the va of work t) y 5 h alue k complete can be rep ed presented by an "S-shape curve.5% of pr roject cost at t = 1 while beginning t decrease f t to from 12.numbe of production units com er mpleted.5% of project cost % t at t = 3 while beginn w ning to decre ease from 12 2. uction projec progresses gradually f ct s from the time of mobiliz zation until it reaches a pl t lateau. The rat of work do during various time periods (exp te one v pressed in th percentag of he ge project cost per unit time) is sho schemat c own tically in Fig gure 5-10 in which ten ti periods h ime have been assumed.5% at t = 9 to 0% at t = 10.
may ed shorten the overall duration of a project suc as overlap n ch pping design and constru n uction activi ities (as descr ribed in Cha apter 2) or in ncreasing the peak amoun of labor and equipme working on a e nts ent site. anoth er important considerati is the ove t ion erall duration of a projec and the am n ct mount of reso ources applie Various strategies m be applie to ed. of wor progress may be chang quite dra rk m ged astically wit thin a single period. manageri and techn ial nical factors will typicall place a m ly minimum limi on it oject duratio or cause costs to escal with sho on c late orter duration ns. m ay t on material and equipment. adju er 1. the pro Ex xample 5-16 Calculation of Value of Work C 6: e Completed . spatial. In addition to the sp peed of resou mobiliz urce zation. the effect on the value of wor completed over time will diminish in signific rk d w cance as indicated by the e cumula ative percent tages for late periods in Figure 5-11 Thus. they d do suggest the latitude for adjusting the schedu for vario activities in a project While the rate g ules ous s t. How wever. such as the chan h nge from rap mobilizat pid tion to a slow mobilizati in period 1. 2 and 3 in Figure 5w ion ds -10. and any del lay cause by such ad ed djustments for individua activities i not likely to cause pro f al is oblems for th he eventual pr rogress towa the comp ard pletion of a p project. ustment of th scheduling of he g some activities ma improve the utilizatio of labor.Fi igure 5-11: Value of Work Comple W eted over Pro oject Time While the curves shown in Fi e igures 5-10 and 5-11 rep a present highl idealized c ly cases.
0 Case B 0 6. equipment rental or material prices.9 93. These range in sophistication from simple spreadsheet calculation software to integrated systems involving design and price negotiation over the Internet.1% 12.0 37.1% 8.8 56.2% 18.3 43. In particular. cost estimates may be prepared more rapidly and with less effort.2 68. These databases can be used for any cost estimate required.7 81.0 62.9 100. While this software involves costs for purchase.8 81.8 31.From the area of work progress in Figure 5-10. • Import utilities from computer aided design software for automatic quantity-take-off of components.0 Case C 0 2.3 68.5 25. equiptment and construction processes.7 97. special user interfaces may exist to enter geometric descriptions of components to allow automatic quantity-take-off. Alternatively. • . TABLE 5-14 Calculation of Value of Work Completed Time 0 1 2 3 4 5 6 7 8 9 10 Case A 0 3.12 Computer Aided Cost Estimation Numerous computer aided cost estimation software systems are now available. Some of the common features of computer aided cost estimation software include: Databases for unit cost items such as worker wage rates.3 18.5 96. maintenance. some significant efficiencies often result. cost estimates can be rapidly re-computed after the databases are updated. • Databases of expected productivity for different components types.0 87. training and computer hardware. the value of work completed at any point in Figure 5-11 can be derived by noting the area under the curve up to that point in Figure 5-10.8 100.5 75.2 43. The result for t = 0 through t = 10 is shown in Table 5-14 and plotted in Figure 5-11.7 56.7 31. If these rates change.0 Back to top 5.5 50.2 91.9 100.
If a similar design has already been estimated or exists in the company archive. • Provisions for manual review. The stream of operating costs over the life of the facility depends upon subsequent maintenance policies and facility use. 4. the value of the cost exponent may influence the decision whether extra capacity should be built to accommodate future growth. As the rehabilitation work becomes extensive. thereby saving time. it becomes a capital project with . • Archives of past projects to allow rapid cost-estimate updating or modification for similar designs. However. Similarly. the economy of scale may also influence the decision on rehabilitation at a given time. A typical process for developing a cost estimate using one of these systems would include: 1. it is the interaction of the operating and capital costs which deserve special attention. If a similar project exists. The cost estimation is summarized and reviewed for any errors. Thus. As suggested earlier in the discussion of the exponential rule for estimating. over-ride and editing of any cost element resulting from the cost estimation system • Flexible reporting formats. material and equipment costs. the magnitude of routine maintenance costs will be reduced if the facility undergoes periodic repairs and rehabilitation at periodic intervals.13 Estimation of Operating Costs In order to analyze the life cycle costs of a proposed facility. The techniques of estimating life cycle costs are similar to those used for estimating capital costs. including provisions for electronic reporting rather than simply printing cost estimates on paper. the latest price information is used for the cost estimate. A cost engineer modifies. but as a part of the larger parcel of life cycle cost at the planning and design stage. 2. the operating cost is viewed not as a separate entity. This is very helpful to begin the management of costs during construction. many of the components may have few or no updates. A cost estimate is calculated using the unit cost method of estimation. Back to top • 5. it is necessary to estimate the operation and maintenance costs over time after the start up of the facility. 3. add or deletes components in the project information set. Productivities and unit prices are retrieved from the system databases. • Version control to allow simulation of different construction processes or design changes for the purpose of tracking changes in expected costs. including empirical cost functions and the unit cost method of estimating the labor.Export utilities to send estimates to cost control and scheduling software. the old project information is retreived. Since the tradeoff between the capital cost and the operating cost is an essential part of the economic evaluation of a facility. In particular.
so that a heavy truck is represented as equivalent to many automobiles). . In addition. Consequently. as reflected in the variable V. As the pavement continues to age. routine maintenance costs will increase each year as the pavement service deteriorates. a time stream of costs and resurfacing projects for one pavement section is shown in Figure 5-11. ESAL.0019)(500.7 A where C is the annual cost of routine maintenance per lane-mile (in 1967 dollars). As an example. V is the volume of traffic on the roadway (measured in equivalent standard axle loads. While deferring the discussion of the economic evaluation of constructed facilities to Chapter 6. Example 5-17: Maintenance cost on a roadway  Maintenance costs for constructed roadways tend to increase with both age and use of the facility.7)(5) = 596 + 950.5 = 1.300 ESAL and A = 5 years. an optimal schedule for rehabilitation can be developed. the time stream of costs can be estimated. the routine maintenance costs increase as the pavement ages.300) + (21. the cost estimation of a rehabilitation project may also involve capital and operating costs. As described in the previous example. For example.5 + 108. maintenance costs increase with additional pavement stress due to increased traffic or to heavier axle loads.655 (in 1967 dollars) Example 5-18: Time stream of costs over the life of a roadway  The time stream of costs over the life of a roadway depends upon the intervals at which rehabilitation is carried out. Using a life cycle model which predicts the economic life of highway pavement on the basis of the effects of traffic and other factors. for V = 500. but decline after each new resurfacing. For example.0019 V + 21.all the implications of its own life cycle. the following empirical model was estimated for maintenance expenditures on sections of the Ohio Turnpike: C = 596 + 0. and A is the age of the pavement in years since the last resurfacing. the annual cost of routine maintenance per lane-mile is estimated to be: C = 596 + (0. According to this model. it is sufficient to point out that the stream of operating costs over time represents a series of costs at different time periods which have different values with respect to the present. If the rehabilitation strategy and the traffic are known. resurfacing becomes more frequent until the roadway is completely reconstructed at the end of 35 years. Hence. the cost data at different time periods must be converted to a common base line if meaningful comparison is desired.
M.B. pp 435-446.N and W. New York. Vo 109. r. 2nd Ed. A. Ahuja.D." ASCE E Journal of Construction Engineerin and Mana ng agement. obabilistic Es stimating: M Mathematics a Applica and ations. New 983. Structural Concrete Cos Estimating McGraw-Hill. New York. 10 1980. 2.E. and A.. Maevis. 3. 3. 1983 pp. (ed. 06. F. Hendri nd ickson.. Englewood C E Cliffs.J... Clark. 6. C E From Concep to Comple pt etion.R. Humphreys." ournal of the e Constr ruction Divis sion.Figure 5-11: Time Stream of Co over the Life of a Hi S osts ighway Pave ement Back to top 5. "Pro 4 n. an C. N York. 1984. Vol. 19 C st g. NJ. 197 78. "Cons struction Cost Control by the Owner ASCE Jo y rs.) Project and Cost Engine H P eers' Handbo (sponsor by Amer ook red rican Associat tion of Cost Engineers). p. Estimating: F N.C.. J. Lorenzoni.K. Back to top . PrenticeHall. pplied Cost E Engineering Marcel De g.. N New York. 5. Inc. Clark. Ap . 1984. 7. Inc. J John Wiley & Sons. 19 987. Inc.. K. H. Campbell. Ma arcel Dekker Inc. ekker. Diekmann J.. Tran nsportation I Investment a Pricing P and Principles. 08. Wohl. 297-30 ol..14 References R 1. 4.
67 for an aerated lagoon basin of a water treatment plant in Table 5-4 (Example 5-6). To avoid submerging part of U. an empirical formula based on data of a similar buildings completed before 1987 was proposed: C = (16.000 batteries.000 (in 1968 dollars) and m = 0.000 cu. material and equipment) for various elements of a construction project are given as follows: .15 Problems 1. Springville. Find the percentage of each of these bidders below the engineer's cost estimate. 1987.5 and 5.545.S. The voids in the soil layer are between 25% to 35%. Assume that the excavated material will be loaded onto trucks for disposal. October 8. Montana $26. Route 40 south and east of Salt Lake City due to the construction of the Jardinal Dam and Reservoir.018 3) Gilbert Western Corporation.5 cu.701. Salt Lake city.yd.. 1989. 2. find the screening estimate of the building in 1987 dollars.5 feet thickness. Utah $30. The basic costs (labor. p. The grout line is expected to be between 4. (See ENR. 22 miles of highway were relocated to the west around the site of the future reservoir.203 3.W. 1987 and the completion date of the project under the contract was August 15.000)(Q + 50. Using the same unit cost data (in 1978 dollars).896. find the estimated cost of a proposed new plant with a similar treatment process having a capacity of 480 million gallons (in 1968 dollars). find the range of costs in a screening estimate for the grouting project. The three lowest bids were: 1) W. 5. of bulk material using a backhoe of 1. If another new plant was estimated to cost $160. Using the cost data in Figure 5-5 (Example 5-11).yd. The bids were submitted on July 21. capacity for a detailed estimate. 4. what would be the proposed capacity of that plant? 6.384. In making a screening estimate of an industrial plant for the production of batteries. Three separate contracts were let. Great Falls. find the total cost including overhead and profit of excavating 90.000 by using the same exponential rule. Utah $21. 7. 34). Suppose that the grouting method described in Example 5-2 is used to provide a grouting seal beneath another landfill of 12 acres. Clyde & Co.919 2) Sletten Construction company.000)1/2 where Q is the daily production capacity of batteries and C is the cost of the building in 1987 dollars. including one covering 10 miles of the work which had an engineer's estimate of $34.095.5. If a similar plant is planned for a daily production capacity of 200. For the cost factor K = $46.
500 1.54 0.000 4.000 0. estimate the cost of the new plant. A new chemical processing plant with a daily production capacity of 400. For the additional information given below.000 8. Venezuela plant.42 10.000 bbl 600. The total construction cost of a refinery with a production capacity of 100.000 2. Assuming that all other factors remain the same.24 0.000 6.400. make a screening estimate of the cost of the proposed plant. Equipment type Furnace Tower Drum Pumps. there was an item of $2 million for site preparation and travel which is not typical for similar plants.Excavation $240.36 0. etc.42 0. The cost of piping and other ancillary items for each type of equipment can often be expressed as a percentage of that type of equipment for a given capacity.32 0. Assuming that field supervision cost is 10% of the basic cost. 9.6. several major types of equipment are the most significant components in affecting the installation cost. general office overhead costs and total costs for the various elements of the project. It has been established that the installation cost of all equipment for a plant with daily production capacity between 150.000 Concrete pavement $640.000 5.000 bbl can best be estimated by using liner interpolation of the standard data. find the prorated field supervision costs. 1.000 bbl and 600.000 Subgrade $100. The standard costs for the major equipment types for two plants with different daily production capacities are as shown in Table 5-15. In the total construction cost for the Caracus.000) Factor for ancillary items 150. .000 bbl $3.42 0. Table 5-15 Equipment cost ($1.000 bbl 150. The variation of sizes of the refineries can be approximated by the exponential law with m = 0.000 $10. LA for completion in 1980.000 Total $1. It was proposed that a similar refinery with a production capacity of $160. completed in 1977 was $40 million.32 0.000 bbl is being planned.000 1. In making a preliminary estimate of a chemical processing plant.000 bbl/day in Caracas. and the general office overhead is 5% of the direct costs (sum of the basic costs and field supervision cost).000 bbl 600.000 bbl/day be built in New Orleans. Venezuela. 2.000 Base course $420.
4. The site condition at New Orleans required special piling foundation which cost $2 million in 1980 dollars. LA plant cost $4 million in 1980 dollars (not required for the Caracas plant). Calculate the value of work completed in cumulative percentage for periods 1 through 13 for each of the cases A. For additional information given below.95 and 1. The installation of a special equipment to satisfy the new environmental standard cost an extra $200. an item of $300. An adjustment factor of 1. In the total construction cost in Colorado. The site condition in New Jersey required special foundation which cost $500. . LA. 6. 6.5. The inflation rate was approximately 5% per year from 1981 to 1985. 4. 5. respectively. 1.S.00 in 1985 dollars. make a screening estimate of the cost of the proposed plant. compute the total bid price of contractor 2 for the roadway project including the expenditure on each item of work.000 in 1985 dollar for the New Jersey plant. Using the unit prices in the bid of contractor 2 for the quantitites specified by the engineer in Table 5-2 (Example 5-3). B and C represent the normal mobilization time. The inflation rate in U.10. 3. 5. The total cost of a sewage treatment plant with a capacity of 50 million gallons per day completed 1981 for a new town in Colorado was $4.5 million. Using the ENR building cost index.3.000 for site preparation is not typical for similar plants. including the most likely estimate and the range of possible cost. respectively. 12. The cases A. The rate of work progress in percent of completion per period of a construction project is shown in Figure 5-13 in which 13 time periods have been assumed. New air pollution equipment for the New Orleans. Also plot the volume of work completed versus time for these cases. rapid mobilization and slow mobilization for the project. dollars was approximately 9% per year from 1977 to 1980.00. estimate the 1985 cost of the grouting seal on a landfill described in Example 5-2. The locational indices of Colorado and New Jersey areas are 0. 2. 14. It was proposed that a similar treatment plant with a capacity of 80 million gallons per day be built in another town in New Jersey for completion in 1985. The variation of sizes for this type of treatment plants can be approximated by the exponential law with m = 0.40 was suggested for the project to account for the increase of labor cost from Caracas. 11. against the national average of 1. 13. B and C. Venezuela to New Orleans.
Als plot the vo t fo he so olume of wo ork completed versus time for these cas v ses. Figure 5-1 14 16. respe p ectively. Cal lculate the va of work completed in cumulativ percentag for alue k ve ge periods 1 through 10 for each of th cases A. The rate of work progres in percent of completio per perio of a constr T w ss od ruction proje is ect sh hown in Figu 5-14 in which 10 tim periods ha been ass ure w me ave sumed. Suppose tha the empiri model fo estimating annual cos of routine maintenance in at ical or g st e Example 5-1 is applica to sectio of the Pe nnsylvania T E 17 able ons Turnpike in 1985 if the E ENR . The cases A. B and C. B a C and represent the rapid mobil r e lization time normal mo e.13 Figure 5-1 on 15. obilization a slow mob and bilization fo the or project.
a quantitite are assume to all es ed be known except A whi is to be determined. r 1981. the a t ars . "Forec casting Indus Resourc stry ces. Then. of n . 17 The initial construction cost for a electric rowe line is kno to be a f 7. In des ( ned signing the p power line.R. Crosby at th Institution of Chemic Engineer in London November 4. Back to top 5.16 Footnot tes 1. b ectional area A in terms o the known quantities. If the owner wants to m e ich d r minimize the life cycle co find the best cross-se ost. E 67 Estimate the annual cost of maintenance per lane-mile of the tun m nrpike for wh hich the traff volume o the roadw is fic on way 750. Le C2 et be the unit operating cost (in dolla per kwh).000 ES SAL and the age of the pavement is 4 years in 19 985." presen by A. (Back) . be ost construction (in dollars per cm3). n e er own function of t the cross-section area A (in cm2) and th length L ( kilometer Let C1 b the unit co of nal n he (in rs). R is th resistivity in ohm-cen he y ntimeters. nted he n cal rs n. by r The power lo S (in kwh is known to be T oss h) where J is th electric cu w he urrent in amp peres. The the initia constructio cost P (in dollars) is g c p en.building co index is applied to in ost a nflate the 196 dollars. This example wa adapted with permission from a pa as w aper. annual opera ating cost U ( (in do ollars) is giv by ven Suppose th the power line is expe hat r ected to last n years and the life cycl cost T of t le the pow line is eq wer qual to: T=P+U UK where K is a discount fa actor depend ding on the u useful life cy n and the discount ra i ycle ate (to be explain in Chapter 6). al on n given by P = C1AL(1 5) 10 The annual op T perating cos of the pow line is ass st wer sumed to be measured b the power loss.
Thesis.S. Boston. 11.H. p. Johnson and R. Harvard Business School Press. Carnegie-Mellon University. Vol.(Back) 4. Pittsburgh. 1982. 44. 39. See "Utah Interstate Forges On. Ohio.2. Environmental Protection Agency. (Back) .L. (Back) 5. 1987. 846. 1978. (Back) 6. November 1972. pp.M. See H. S." Journal of the Water Pollution Control Federation. This and the next example have been adapted from P. W.W. This example is adapted from S. M. Emrich. 2111-2118. 185. This example is adapted from McNeil. (Back) 3. Beck and G. p. Tolman. Relevance Lost: The Rise and Fall of Management Accounting. "Evaluating Economy of Scale. Berthouex. PA. Ballestero." Transportation Research Record No." ENR. U.T. This example is adapted from a cost estimate in A. 7176. Hendrickson. Kaplan. McNeil.P. Cincinatti. Municipal Environmental Research Laboratory. 1981.S. July 2. pp. (Back) 7. Three Statistical Models of Road Management Based on Turnpike Data. MA 1987. "A Statistical Model of Pavement Maintenance Expenditure. No. Guidance Manual for Minimizing Pollution from Waste Disposal Sites.S. and C. A.
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