Cost Estimating For Infrastructure and Place Projects DMS-ST-173

Cost Estimating for Infrastructure
and Place Projects

DMS-ST-173
Standard – Applicable to Infrastructure and Place (IP)
Interchange
Status: Live
Version: 3.1
Branch: Program Management Office
Section: Project Controls
Business unit: Cost Estimating
Date of issue: 06 August 2019
Review date: 15 May 2020
Audience: Program Delivery
Asset classes: Heavy Rail; Light Rail; Multi Sites;

Systems; Fleet
Project delivery model: Rail Project
Project type: Low/Major
Project lifecycle: Feasibility; Scoping; Definition;

Construction readiness; Implementation;
Finalisation; Not applicable
Process owner: Director Program Management Group

Cost Estimating for Infrastructure and Place Projects
Program Management Office : Project Controls : Cost Estimating
Document History
Version Date DeskSite Notes
no.
1.0 5 April 2012 1607758_15 Describes the requirements to be applied when developing cost
estimates for all construction projects developed and delivered
by I&S.
2.0 16 Sep 2013 1607758_17 Major review and update addressing identified deficiencies in
the previous version and incorporating new requirements of
TfNSW
3.0 15 May 2019 59772238_3 Reviewed to align DMS PMG & include new software
requirements and calculations
3.1 06 August 1607758_25 Adding DMS Prefix
2019
1607758_26 INTERCHANGE DMS-ST-173

© TfNSW 2019 UNCONTROLLED WHEN PRINTED Page 2 of 43
Table of Contents
1. Purpose ..........................................................................................................................6
2. Scope .............................................................................................................................6
3. Abbreviations and definitions ......................................................................................7
4. Accountabilities .............................................................................................................8
4.1. Project Management Office (PMO) .........................................................................8
4.2. IP Project Branches ................................................................................................8
4.3. IP Stakeholders for Estimating Requests................................................................8
4.4. Further Information .................................................................................................8
5. Estimates to be delivered at various Project Lifecycle Phases ................................. 9
5.1. ‘Order of Magnitude’ (OoM) Estimate and Strategic Business Case (SBC) Cost
Estimate ...............................................................................................................10
5.2. Final Business Case (FBC) Cost Estimate ........................................................... 11
5.3. Pre-Tender (PTE) Cost Estimate .......................................................................... 12
5.3.1. Impact of Procurement Approach on the Pre-Tender Estimates ................ 12
5.4. Cost to Complete Cost Estimate ........................................................................... 14
5.5. Final Account Cost Estimate.................................................................................14
6. Estimating Software Format .......................................................................................15
7. Feedback to Cost Database ........................................................................................15
8. Time Adjustment of Historical Rates Used in Estimates .......................................... 16
9. Defining the Project Scope .........................................................................................17
10. Defining the Program/Project Tier ..............................................................................17
11. TfNSW Cost Estimate Structure .................................................................................18
11.1. Standard Infrastructure and Place Cost Structure Breakdown .............................. 18
11.2. Fleet Program Cost Structure Breakdown ............................................................ 19
11.3. Operational Systems Cost Breakdown ................................................................. 20
11.4. Control Account Structure (Chart of Codes) ......................................................... 21
11.5. Cost and Structure Requirements......................................................................... 22
11.6. Cost Structure Terminology ..................................................................................25
11.6.1. Contractor Direct Costs .............................................................................25
11.6.2. Contractor Indirect Costs........................................................................... 25
11.6.3. Contractor Margin .....................................................................................26
11.6.4. Total Construction Cost (TCC) .................................................................. 26
11.6.5. Client Costs...............................................................................................27
11.6.6. Base Estimate (BE) ...................................................................................28
11.6.7. Contingency ..............................................................................................28
11.6.8. Total Project Cost (TPC) ........................................................................... 28
11.6.9. Escalation .................................................................................................28
11.6.10. IP Divisional OH ...................................................................................28
11.6.11. Total Outturn Cost (TOC) ..................................................................... 28
12. Estimating Methodology and Rates Classifications ................................................. 29

12.1. Estimating Methodology .......................................................................................29

12.1.1. Composite Rates ......................................................................................29
12.1.2. Unit Rates .................................................................................................29
12.1.3. First Principle Rates ..................................................................................30
12.1.4. Contract Rates ..........................................................................................30
13. Contingency.................................................................................................................31
13.1. P50 Contingency Definition ..................................................................................31
13.2. P90 Contingency Definition ..................................................................................31
13.3. Contingency requirements during Project Lifecycle .............................................. 31
13.4. Qualitative (Deterministic) Approach .................................................................... 32
13.5. Quantitative (Probabilistic) Approach.................................................................... 33
13.5.1. Inherent Risks ...........................................................................................33
13.5.2. Contingent Risks .......................................................................................33
13.5.3. Schedule Risks .........................................................................................33
13.5.4. Other Risks ...............................................................................................34
13.5.5. Opportunities.............................................................................................34
13.5.6. Absent Risks .............................................................................................34
14. Escalation ....................................................................................................................35
14.1. Notional Cash-flow Basis ......................................................................................36
14.2. Detailed Forecast Cash-flow Basis ....................................................................... 36
14.3. Escalation Factors Guidance ................................................................................37
15. IP Project Overhead Recovery....................................................................................37
16. Cost Loading Primavera Schedules ........................................................................... 38
17. Rounding of Outturn Cost ..........................................................................................38
18. Future Changes to the Control Account Structure ................................................... 38
19. Whole of Life (WoL) Estimates ...................................................................................39
19.1. Service Impacts and Considerations .................................................................... 39
19.2. OPEX Cost Estimate Structure .............................................................................40
20. Basis of Estimate Report ............................................................................................41
21. Review of Estimates by PMO Cost Estimating Centre .............................................. 41
22. Peer Review by External Independent Consultants .................................................. 42
23. Approval of Estimates .................................................................................................43
24. Confidentiality of Estimates........................................................................................43
25. Related documents and references ........................................................................... 43

Tables and Figures

Table 1: Delivery Estimates - various lifecycles stages and phases....................................... 9
Table 2: Tiers 1-2 - Basis of Pricing ......................................................................................23
Table 3: Tiers 3-5 - Basis of Pricing ......................................................................................24
Table 4: Total Construction Cost ..........................................................................................26
Table 5: Estimate Types v’s Contingency Requirements ......................................................31
Table 6: Base Estimate ........................................................................................................32
Table 7: Escalation Assessment Methodologies ...................................................................35
Table 8: Rounding of Outturn Cost .......................................................................................38
Table 9: Benchmarking Requirements..................................................................................41
Figure 1: DMS Lifecycle ........................................................................................................ 6

Figure 2: Standard IP - High Level Cost Breakdown .............................................................18
Figure 3: Fleet Level - High Level Cost Breakdown ..............................................................19
Figure 4: Escalation..............................................................................................................36
Figure 5: OPEX - High Level Cost Breakdown .....................................................................40

1. Purpose
This Standard describes the requirements to be applied when developing cost estimates for
all infrastructure construction projects developed and delivered by Infrastructure and Place
(IP) that seeks Australian Government funding for road and rail infrastructure projects.
Any submission should be based on the Cost Estimation Guidance Note 2 Mar 2017 issued
by the Australian Government Department of Infrastructure and Regional Development.
This standard addresses the stated guidance note plus other IP requirements which:
• Ensures a degree of rigour for estimates prepared at each stage of the project lifecycle.
• Consistency within estimates across the IP for ease of project comparison
• Transparency in estimates produced throughout the project lifecycle for key project
decisions
• Increasing our ability to benchmark and validate cost estimates produced by external
cost consultants
• Providing easy assessment of all estimates against tender returns for improved decision
making
2. Scope
This Standard applies to construction projects of any magnitude and risk profile, defining
different types of estimates to be delivered from the Initiation Stage 0 Justification, through
Planning & Development Stages 1 and 2, Delivery – Stages 3 to 5 and Finalisation – Stage 6
of the DMS Lifecycle.
Figure 1: DMS Lifecycle

3. Abbreviations and definitions

All terminology in this Standard is taken to mean the generally accepted or dictionary
definition with the exception of the following terms which have a specifically defined meaning:
AEO Authorised Engineering Organisation
BE Base Estimate
CBS Cost Breakdown Structure
CURA TfNSW Risk Management Software
DCF Discounted Cash Flow
DMS Divisional Management System
ETC Estimated Total Cost
FBC Final Business Case
FFC Forecast Final Cost
LCC Life Cycle Costs
IP Infrastructure & Place Division
OH Overhead
PCG Project Controls Group
PMG Program Management Group
PMO Program Management Office
PPP Public Private Partnership
PV Present Value (of series of future spending)
QRA Quantitative Risk Assessment
RFT Request for Tender
RMS Roads and Maritime Services
SBC Strategic Business Case
TAC Tender Assessment Committee
TCC Total Construction Cost
TPC Total Project Cost
TfNSW Transport for NSW
TOC Total Outturn Cost
WBS Work Breakdown Structure

4. Accountabilities
4.1. Project Management Office (PMO)
The Estimating Team within IP Division Project Controls Group (PCG) which are part of the
Project Management Office (PMO) branch create and revise this document accordingly.
The Director of Project Controls Group (PCG) is accountable for this guide including
authorising the document, monitoring its effectiveness and performing a formal document
review.
All guidance, assurance and endorsements requested from PMO in relation to any Cost
Estimate should be provided from the Estimating Team with final approval from the Director
of PCG. Endorsement will require the Project to adhere to the standards set within the
following document for the relative Project Lifecycle Phase.
Any tools established internally or used from External Sources to create Cost Estimates for
IP needs to be endorsed by the PMO Estimating Team.
4.2. IP Project Branches

IP Project Directors may delegate their responsibilities for implementing the requirements of
this standard. The Project Director will typically delegate to the Project Manager or Project
Controls Manager.
Project Managers or Project Controls Managers are responsible for ensuring any cost
consultants or internal contractors comply with the requirements of this document.
In addition it is the responsibility of the Project to engage with PMO to achieve endorsement
from any funding approval. The PMO Estimating Team should be engaged at kick off of any
Estimate development and should be provided reasonable time to review any Estimate
created.
4.3. IP Stakeholders for Estimating Requests

All cost estimate requests come from the individual IP branch from where the program and or
project resides. It is the Cost Consultants and or Internal Estimator responsibility to liaise
directly with these stakeholders for design, SoW and technical details relating to the program
and or projects.
4.4. Further Information

Please contact the PCG Estimating Team if there are any queries or suggestions that you
may have.
Estimating Manager:
Douglas.Britton@transport.nsw.gov.au
Estimating Specialist:
Peter.Riordan2@transport.nsw.gov.au

5. Estimates to be delivered at various Project Lifecycle

Phases
The types of estimates and estimating methodologies described in this Standard provide the
necessary cost input to support the gateway reviews to be undertaken at various lifecycle
stages and phases of heavy and light rail infrastructure investment.
The table below shows the types of estimates that must be delivered at various project
lifecycle stages and phases.
Project Lifecycle
Project Lifecycle Phase Type of Estimate
Stage
Stage 0 - Initiation
(Develop and assess options to meet the ‘Order of Magnitude’ (OoM)

Initiation Product Brief, and confirm if the project will Cost Estimate
provide benefits at an acceptable cost and
risk to the government)
Stage 1 – Strategic Assessment

Strategic Business Case Cost
(Identify the preferred project scope, assess Estimate(s) (SBC) for short
benefits and cost, and confirm the case to listed option(s)
Planning &
proceed to full environmental assessment)
Development
Stage 2 – Final Business Case
(Validate the business case, and eliminate Final Business Case (FBC)
enough project uncertainty to allow a Cost Estimate
decision to proceed with the Delivery Stage)
Stage 3 – Pre-Tender Pre-Tender (PTE) Cost

(Plan/Design/Procure) Estimate
Delivery
Stages 4 and 5
Cost to Complete Estimate
(Detailed design/ Construction/Commission)
Stage 6 – Post-Implementation
Finalisation Final Account Estimate
(Hand-over/ Vesting/Project close-out)
Table 1: Delivery Estimates - various lifecycles stages and phases

5.1. ‘Order of Magnitude’ (OoM) Estimate and Strategic Business

Case (SBC) Cost Estimate
An ‘Order of Magnitude’ Estimate facilitates comparison of options by establishing the likely
cost of each option being considered at the feasibility phase. Strategic cost estimates are
prepared by costing the ‘feasibility designs’ of the various options being considered.
A Strategic Business Case Cost Estimate is derived by further detailing the ‘Order of
Magnitude’ Estimate based on the improved information available in ‘scoping designs’. Cost
Estimates are produced only for short-listed option(s). Rates and costs included in this
estimate take into account improved design information on the ‘scoping designs’ prepared for
shortlisted option(s).
Where the level of available project information and knowledge of project risks appear to
warrant application of contingency percentages differently to the above, PMO Cost
Estimating Centre must be consulted and agreement must be sought for such change.
If there are significant differences in the risk exposure of different options being considered,
with potentially significant cost differences that may influence option selection, a probabilistic
(preferred) or item based deterministic risk assessment of each option should be undertaken
(Refer to Chapter 13 for more information).
An ‘Order of Magnitude’ Estimate is to support a rapid economic appraisal and short-listing of
option(s). Therefore it should only be used for the purpose of comparing the magnitude of
cost of various options being considered.
Strategic Business Case Cost Estimate(s) are prepared to support an outline economic
appraisal of the shortlisted options that leads to the final selection of the preferred option and
preparation of the Final Business Case.
These Cost Estimates are not intended to be used for establishing a budget for the selected
option(s) but for phase funding only to allow the project to proceed to Final Business Case if
approved.
Also both are prepared using high-level Composite and Unit Rates for Direct Costs. Refer to
Chapter 12 for the definition of Composite and Unit Rates.
For guidance to the estimate summary sheet format for presentation to TfNSW Senior /
Executive Management, please refer to the TfNSW Cost Summary Sheet (XLS) FT-541.
Note: If the level of information available at the time of the estimate warrants, adopting
detailed cost breakdown further than specified in the Chart of Codes it is encouraged. All
pricing at detailed levels must be aggregated and presented at Level 2 – (Corporate Reports)
as defined in the Chart of Codes for ‘Order of Magnitude’ Estimates and Level 3 – Stage 1
(Concept Est) for Strategic Business Case Estimates.

5.2. Final Business Case (FBC) Cost Estimate

This estimate shall become the Baseline for cost for the project throughout the
delivery/finalisation phase and will assist to determine the total funding for the life of the
project including costs for Operations and Maintenance.
A clear definition of the scope should be recognised within the estimate to establish a robust
view of the cost to achieve an overall investment decision.
The Final Business Case Cost Estimate will support an outline economic appraisal of the
preferred option that leads to the final approval of the overall project.
A Final Business Case Cost Estimate is a ‘unit rate estimate’ based on robust information in
‘concept designs’ of the selected option. Refer to Chapter 12 for the definition of Unit Rates.
Executive Management please refer to the TfNSW Cost Summary Sheet (XLS) DMS-FT-
541.
In addition a review of the cost development from SBC to FBC should be conducted and
highlighted within the Basis of Estimate Report tracking key changes with detailed
explanations.
further detailed cost breakdown than specified in the Chart of Codes is encouraged. All
pricing at detailed levels must be aggregated and presented at Level 4 – Stage 2 (FBC
Level) defined in the Chart of Codes.

5.3. Pre-Tender (PTE) Cost Estimate

When the Final Business Case is approved, commitment to invest is confirmed and the
concept designs are developed for the project as part of Project Delivery Stage, Construction
Readiness Phase (Refer Project Management Methodology DMS-ST-101).
This estimate is prepared to ensure that the current scope does not exceed the funding
approval that is derived from the FBC Estimate possibly due to additional scope or unknown
latent conditions which were recognised post-FBC.
Also it should form the basis of the Payment Tender Schedule for the contractor(s) so that a
robust tender analysis can be conducted and true cost comparisons can also be conducted
throughout the project lifecycle.
The Estimate is a ‘first principle’s estimate’ based on well-defined information in ‘definition
designs’ of the selected option. Refer to Chapter 12 for the definition of First Principal Rates.
All Pre-Tender Cost Estimates must be presented in the form of a priced detailed bill of
quantities.
541.
In addition a review of the cost development from FBC to PTE should be conducted and
highlighted within the Basis of Estimate Report tracking key changes with detailed
explanations.
further detailed cost breakdown than specified in the Chart of Codes is encouraged. All
pricing at detailed levels must be aggregated and presented at Level 5 – Stage 3 (Pre-
Tender) defined in the Chart of Codes.
5.3.1. Impact of Procurement Approach on the Pre-Tender Estimates

5.3.1.1. Design and Construct
In a design and construct contract, the reference designs form part of the design and
construct tender package and the corresponding Cost Estimate is considered to be the Pre-
Tender Estimate. Therefore, Pre-Tender Cost Estimate must be completed and approved
before the design and construct tender opening to ensure the approved funding is sufficient
to cover the works
5.3.1.2. Construct Only
In construct only contracts, the Reference Designs are further developed and detailed by the
‘Client’. Such detailed designs form part of the construct only tender package. All design
costs must be collected under ‘Client Cost’ in Estimate Structure.
Similarly, Pre-Tender Cost Estimate must be completed and approved before the construct
only contract tender opening.

5.3.1.3. Alliances
Alliance partners can be engaged during or prior to producing the reference designs. At
various phases of the alliance contract the alliance partners are to produce total outturn cost
estimates (TOC). All TOC estimates must have the appropriate level of cost breakdown as
defined in the Chart of Codes
5.3.1.4. Management Contract
Depending on the timing of managing contractor engagement, the types of estimates
appropriate for the project lifecycle phase must be undertaken. All estimates produced by the
managing contractor must have the appropriate level of cost breakdown as defined in the
Chart of Codes
5.3.1.5. Other Procurement Approaches
Where other procurement arrangements that are not described in this standard are involved,
advice must be sought from and; agreement must be reached with PMO with regard to types
of estimates required at various lifecycle stages of the project. All estimates developed must
have the appropriate level of cost breakdown as defined in the Chart of Codes
Note: The Pre-tender estimate forms the basis of assessing and validating commercial bids
received and helps in post-tender negotiations. Significant differences between the Pre-tender
Estimate and the preferred bid must be explained in the Tender Assessment Committee
recommendation (TAC Report). Therefore, alignment between the Pre-Tender CBS and
Tender Schedule is vital.

5.4. Cost to Complete Cost Estimate

Following contract award, Cost to Complete Estimates may need to be periodical created
throughout the delivery phase to ensure that all changes have been captured and to ensure
that a robust forecasting and estimated total cost (ETC) for cost comparison to the approved
funding.
This Estimate is a ‘contract rate estimate’ based on contractual awarded tenders of the
selected option. Refer to Chapter 12 for the definition of Contract Rates.
541.
Note: Ensure Account Cost Codes are aligned to the Estimate and Tender Schedule for Cost
Management purposes
5.5. Final Account Cost Estimate

Once the project is complete, a Final Account Estimate should be conducted to capture all
actual costs that have been incurred to the project.
This is beneficial so that comparison can be conducted to the initial Final Business Case
estimate to ensure that robust rates are used going forward and that any unknown scope is
captured. Overall this is a vital Lessons Learned process and the information captured shall
become the basis for new composite rates for future ‘Order of Magnitude’ Estimates to
improve the accuracy of estimating TfNSW funding requirements in the future.
This Estimate is an ‘actual cost estimate’ based on final costs incurred for the project.
541.

6. Estimating Software Format

Note: This should be read in conjunction with Cost X Implementation Framework and
Guidelines document. Please refer to Interchange.
The IP Cost Estimating Database will hold all project cost information, which has been
developed for TfNSW IP Division, for the purpose of reconciliation to cost baselines, tender
assessment and creation/review of future project estimates.
Therefore, it is mandatory that all Strategic Business Cases, Final Business Cases and Pre-
Tender Estimates, are established in Cost X and issued an ‘.exf’ file extension for transition
into PMO Cost X data base, to ensure that no cost information is lost.
Any background information such as drawings etc should be provided with links intact, with
live dimensions.
If password has been used then it must be provided to TfNSW.
7. Feedback to Cost Database

In order to ensure effective data capturing and maintenance, the following process must be
adhered to:
• Strategic, FBC and Pre-Tender cost estimates plus reports should be submitted to PMO
Estimating Department
• Upon awarding contracts, the final negotiated and approved commercial bid along with
links to the DeskSite location of the drawings and specifications must be submitted to the
PMO Cost Estimating Centre
• Upon final completion of the project, the final account estimate along with links to the
DeskSite location of “As-built” drawings must submitted to the PMO Cost Estimating
Centre.
Submission of all cost estimates and the related information to PMO Cost Estimating Centre
is a responsibility of the relevant Project Manager and the relevant Project Director.
The PMO Cost Estimating Centre is responsible for cost analysis as necessary and
uploading cost data onto the cost database.

8. Time Adjustment of Historical Rates Used in

Estimates
The rates used in all estimates must be current as of the date of the estimate.
All historical data with different historical base dates must be converted to present value as
of the date of the current estimate.
The mid-point of the date of construction commencement and the date of construction
completion of the project must be considered as the base date for all historical TOC data
obtained from the PMO Cost Estimating Centre’s cost database.
If the data is obtained at Project Estimate level or Base Estimate Level (before escalation
allowances), then the date of the original estimate must be considered as the base date of
the data obtained from PMO Cost Estimating Centre’s cost database.
The conversion of historical data to present value as of the date of the current estimate is
done by applying appropriate escalation factors.
Note: The PMO Cost Estimating Centre should be consulted regarding escalation rates to be
used in all estimates.

9. Defining the Project Scope

To achieve the degree of reliability and accuracy needed and the ability to monitor and
control costs during subsequent phases of the project, an adequately defined project scope
must be associated with each estimate. Project scope definition must be documented prior to
commencing the estimate and updated as the estimate progresses.
Project Definition should consist of the factors that influence an estimate, that include:
• Project objectives
• Performance requirements
• Context, constraints and Programme
• Physical scope
• A statement on market performance
• List of assumptions made, including assumptions related to other stakeholders e.g.

coordination and interface with Sydney Trains
• List of exclusions
• Anticipated method of procurement and delivery
• Anticipated construction commencement and completion dates
• Environmental issues e.g. contaminated land
• Heritage issues
• List of documents (including indication of the version/date) that formed the basis of the
estimate
• Other assumptions on cost drivers such as possessions, closedowns, nightshifts, staging

of work and access limitations
10. Defining the Program/Project Tier

This estimating standard has many requirements that are based on not only the lifecycle
stage but the Tier classification of the Program/Project. Therefore it shall need to be
determined prior to any estimating.
For guidance please speak to the PMG Portfolio and Integration team.

11. TfNSW Cost Estimate Structure

A consistent, pre-defined and approved cost breakdown must be used in all estimates to
ensure:
• Consistency of estimates undertaken at various project phases and across the project
portfolio to enable a robust benchmarking and identify key project trends
• The ability to monitor movements of estimated costs as the project progresses to

recognise areas of improvement in terms of project delivery
11.1. Standard Infrastructure and Place Cost Structure Breakdown

All Infrastructure and Place Estimates at each stage should have the following component
parts that are to be reflected in the cost breakdown.
Figure 2: Standard IP - High Level Cost Breakdown

11.2. Fleet Program Cost Structure Breakdown

Typically Fleet Programs have a combination of Fleet procurement plus an element of
modification to the existing network to accommodate the new vehicles, vessels and rolling
stock in terms of additional stabling and maintenance yards plus works to existing platforms,
tunnels and stations.
Fleet Procurement and Infrastructure Works have very different delivery requirements in
terms of contractor project team size, design, clients costs, and contingency therefore the
cost structure needs to reflect this, so that the estimate can be benchmarked against similar
projects and cost managed effectively throughout its project life.
All Fleet Program Estimates at each stage should have the following component parts that
are to be reflected in the cost breakdown.
Figure 3: Fleet Level - High Level Cost Breakdown

11.3. Operational Systems Cost Breakdown

All Operational Systems Program/Project Estimates at each stage should have the following
component parts that are to be reflected in the cost breakdown.
Figure 4: Op Systems Level - High Level Cost Breakdown

11.4. Control Account Structure (Chart of Codes)

In order to monitor movements of estimated costs as the project progresses and across the
IP program, a consistent, pre-defined and approved cost breakdown must be used in all
estimates.
The standardised Control Accounts described in this document is called the Chart of Codes.
The structure can be fine-tuned to suit particular circumstances of each project. However,
standardised terminology, cost elements and their definitions, hierarchical levels and
relationships must be maintained.
The latest version of the Control Accounts Structure is available on DeskSite (#4213351).
Note: The proposed cost breakdowns for estimates to be undertaken need to be agreed
upon with PMO, IP.
As a minimum, Work Packages as defined in the Control Account Structure must be aligned
to WBS of the P6 Schedule. Where possible, cost / schedule alignment at more detailed
levels is encouraged.
Considering the level of information available at various stages and phases of the lifecycle of
the projects, and the level of detail of the estimates achievable, the following minimum
requirements stated in Table 2 and 3 Basis of Pricing for Chart of Codes shall apply.
Note: In order to ensure transparency and the ability to compare tender returns with the
estimates, a cost breakdown at Work Package Level must be incorporated in all Requests for
Tenders (RFT) and Request for Proposals (RFP). Therefore, commercial bids should comply
with the cost breakdown proposed, enabling comparison of commercial bids of tenders on a
like for like basis as well as comparison with the Pre-tender Estimate.

11.5. Cost and Structure Requirements

Considering the level of information available at various stages and phases of the lifecycle of
the projects there are different levels of detail that should be achievable.
Two (2) tables have been produced to reflect the different requirements based on Tier status.
Refer to Chapter 10 for the definition of Project Tiers.
This is to ensure consistency and robustness across IP portfolio of projects, the table should
be followed correctly if areas of detail cannot be reached then it should be stated why within
the Estimate Report.
Also these are minimum standards if the information received allows addition degree of detail
to be added then it should be conducted.
Note: Contractor Direct Costs should be sub grouped and totalled as per delivery strategy
i.e. Main Contractor to be captured separate to Sydney Trains if both are working on a
Project.
External Cost Consultants/Estimators should consult with the TfNSW project team to confirm
how the project is to be delivered.

TIER 1 & 2 PROJECTS - BASIS OF PRICING (MIN LEVEL)

Type of Chart of Contractor Contractor Contractor IP Project
Margin Client Costs Contingency Escalation
Estimate Codes Direct Costs Indirect Costs OH
‘Order of % of Direct % of Total Qualitative % per annum
Composite % of Direct Cost % of Total
Magnitude’ Level 3 & Indirect Construction (Deterministic) (Notional Cash
Rates (DC) Overall Cost
Estimate Costs Cost (TCC) Approach Flow Basis)
Strategic
% of Direct % of Total Qualitative % per annum
Business Composite / Unit % of Direct Cost % of Total
Level 3 & Indirect Construction (Deterministic) (Notional Cash
Case Rates (DC) Overall Cost
Costs Cost (TCC) Approach Flow Basis)
Estimate
Final % of Total
% of Direct Quantitative % per annum
Business Unit / First Unit / First Construction % of Total
Level 4 & Indirect (Probabilistic ) (Detailed Cash
Case Principle Rates Principle Rates Cost (TCC)/Unit Overall Cost
Costs Approach Flow Basis)
Estimate Rates
% of Direct Quantitative % per annum
Pre-Tender Unit / First Unit / First Unit / First % of Total
Level 5 & Indirect (Probabilistic ) (Detailed Cash
Estimate Principle Rates Principle Rates Principle Rates Overall Cost
Split within
Cost to % of Direct Quantitative
Contract/Unit Contract/Unit Contract/Unit Contractor, Client % of Total
Complete Level 5 & Indirect (Probabilistic )
Rates Rates Rates and Contingency Overall Cost
Estimate Costs Approach
Costs
Final
Actual Costs Actual Costs Actual Costs Actual costs
Account Level 3 N/A N/A N/A
Incurred Incurred Incurred incurred
Estimate
Table 2: Tiers 1-2 - Basis of Pricing

TIER 3 – 5 PROJECTS - BASIS OF PRICING (MIN LEVEL)

Type of Chart of Contractor Contractor Contractor IP Project
Margin Client Costs Contingency Escalation
Estimate Codes Direct Costs Indirect Costs OH
‘Order of % of Direct % of Total Qualitative % per annum
Composite % of Direct Cost % of Total
Magnitude’ Level 3 & Indirect Construction (Deterministic) (Notional Cash
Rates (DC) Overall Cost
Estimate Costs Cost (TCC) Approach Flow Basis)
Strategic
% of Direct % of Total Qualitative % per annum
Business Composite / Unit % of Direct Cost % of Total
Level 3 & Indirect Construction (Deterministic) (Notional Cash
Case Rates (DC) Overall Cost
Costs Cost (TCC) Approach Flow Basis)
Estimate
Final % of Total
% of Direct Cost % of Direct Qualitative % per annum
Business Unit / First Construction % of Total
Level 4 (DC) & Indirect (Deterministic) (Notional Cash
Case Principle Rates Cost (TCC) Overall Cost
Estimate
% of Total
% of Direct Qualitative % per annum
Pre-Tender Unit / First Unit / First Construction % of Total
Level 5 & Indirect (Deterministic) (Detailed Cash
Estimate Principle Rates Principle Rates Cost (TCC)/Unit Overall Cost
Rates
Split within
Cost to % of Direct Qualitative
Contract/Unit Contract/Unit Contract/Unit Contractor, Client % of Total
Complete Level 5 & Indirect (Deterministic)
Rates Rates Rates and Contingency Overall Cost
Estimate Costs Approach
Costs
Final
Actual Costs Actual Costs Actual Costs Actual costs
Account Level 3 N/A N/A N/A
Incurred Incurred Incurred incurred
Estimate
Table 3: Tiers 3-5 - Basis of Pricing
Note: In order to ensure transparency and the ability to compare tender returns with the estimates, a cost breakdown at Work Package Level
must be incorporated in all Requests for Tenders (RFT) and Request for Proposals (RFP). Therefore, commercial bids should comply with the
cost breakdown proposed, enabling comparison of commercial bids of tenders on a like for like basis as well as comparison with the Pre-tender
Estimate.

11.6. Cost Structure Terminology

11.6.1. Contractor Direct Costs
Direct Costs are labour, plant and material costs incurred which are completely attributed to
a specific item of work or services.
Note: Physical works conducted by Sydney Trains, RMS, etc. are classified as Contractor
Costs, as they are acting in a Contractor role
11.6.2. Contractor Indirect Costs

Indirect Costs are costs that are not directly accountable to a specific item of work or
services but are necessary for the overall delivery of the project. Standard breakdown of
costs are stipulated below:
• Site Supervision & Project Management Team including Safety and Environmental Managers
• Indirect Labour
• Indirect Plant & Equipment
• Computer & IT
• Fees & Insurances
• Wet Weather Delays
• Site Building & Offices
• Communications & Community Consultation
• Environmental Protection and Offset
• Traffic Management & Site Security

If your project requires additional line items to collate costs that are unique to your project
please contact PMO Estimating for guidance.
Note: Any Client design pre or post-contract award should be captured with Client Costs

11.6.3. Contractor Margin

Contractor’s margin is made up of the Corporate Overhead which is required to facilitate the
contractor’s business i.e. Head office Building, Executive Management as well as an
allowance for Profit.
The Contractor’s margin is applied as a % uplift of the Direct and In-Direct Costs.
Standard Breakdown is:
• Contractor Contingency/Alliance Risk
• Contractor Overhead & Profit (OH&P)
Note: For Sydney Trains this is classed as the Internal Recovery rate (IRR) and is currently
set at a 13.7% uplift of the Direct and In Direct Costs incurred.
11.6.4. Total Construction Cost (TCC)

This is the total sum of all Contractor’s Direct and Indirect Costs which are required to
complete the specific item of works or services.
If the works or service is to be provided by more than one contractor then the Direct and In
Direct costs should be captured separately. This is so they will align to the Cost Accounts
that are raised for payment to the Contractor and cost assessment can be conducted
throughout the project lifecycle.
An example is shown in the table below:
Construct of 33kv Substation Total Cost ($)
Direct Costs $4m
In-Direct Costs $2m
Total Contractor no 1 $6m
Direct Costs $6m
In-Direct Costs $2m
Total Contractor no 2 $8m
TOTAL CONSTRUCTION COST (TCC) $14M
Table 4: Total Construction Cost

11.6.5. Client Costs

Client costs are activities or services that are organised and incurred directly by TfNSW.
Standard breakdown:
• TfNSW Project Management Development Costs (Up to SBC)
• TfNSW Project Management Development (Up to FBC)
• TfNSW Project Management Delivery Costs (Post FBC)
• Stakeholder Interface Management

– Sydney Trains Management
– RMS Management
– ARTC Management
• Property Acquisition
• Client Design
• Legal
• Project Insurance
• Commercial & Cost Consultants
• Environmental Management Consultants
• Communications & Community Consultants
• Safety Management Consultants
• Possession Costs
If your project requires additional line items to collate costs that are unique to your project
please contact PMO Estimating for guidance.
Note: Any physical works conducted or materials/equipment procured i.e. lifts by Sydney
Trains, RMS etc which is specific to the item of work or service should be captured under
Contractor Costs.
Any managerial works by 3rd parties to ensure delivery, also should be captured within the
Client Costs i.e. design review by RMS

11.6.6. Base Estimate (BE)

Base Estimate is the sum of the Total Construction Cost (TCC) and Client Cost (not including
Contingency, Escalation, or IP Project OH)
11.6.7. Contingency
For more information, please refer to Chapter 13 of this document
11.6.8. Total Project Cost (TPC)

Total Project Cost (TPC) is the sum of the Base Estimate (BE) and Contingency (not
including Escalation and IP Project OH)
Total Project Cost (TPC) should be present and at both P50 and P90 TPC Values within the
estimate.
11.6.9. Escalation
11.6.10. IP Divisional OH
11.6.11. Total Outturn Cost (TOC)

Total Outturn Cost (TOC) is the sum of Total Project Cost (TPC) and Escalation (typically
with IP Project OH)
Total Outturn Cost (TOC) should be presented at both P50 and P90 TOC Values

12. Estimating Methodology and Rates Classifications

12.1. Estimating Methodology
12.1.1. Composite Rates
Order of magnitude cost estimate is a ‘high-level’ cost estimate carried out using cost per
functional unit or other appropriate elemental unit rates. Such rates per functional unit include
a number of cost elements within them. Therefore they are often referred to as “composite
rates”.
E.g. Construction cost of a stabling yard estimated using cost per 8-car train set stabled
The cost per 8-car train set stabled (composite rate) includes all direct costs such as
earthwork, stabling tracks, turnouts, signalling and communication systems, tie-in to main
network, facilities buildings and all services, contractor’s indirect costs and contractor’s
margin.
Those costs outside the construction costs such as delivery owner’s project costs, property
acquisition, contingency allowances for risks, escalation and the like are to be allowed
separately.
12.1.2. Unit Rates

Unit rate cost estimate is a more detailed estimate compared to order of magnitude cost
estimate carried out using detailed unit rates. Unlike composite rate, unit rate is the cost of
unit of work such as cost per track km or cost per turnout.
E.g. Construction cost of a stabling yard estimated using unit rates of work elements involved
in the stabling yard such as ballasted track (per km), turnout (per number), Overhead Wire
(per track km) etc.
All direct costs such as cost of earthwork, ballast, sleepers, rail, accessories and the like
could be included in the unit rate of ballasted track. Similarly, the unit rate of a turnout could
include the cost of the turnout, point machines and accessories.
Cost of items that are not directly attributable to the unit rate (e.g. signalling and
communication systems, tie-in to main network, facilities buildings, services, and contractor’s
indirects) must be added separately. Contractor’s margin could either be included in the unit
rate or added as a separate item.
Those costs outside the construction costs such as owner’s project costs, property
separately.

12.1.3. First Principle Rates

First principle cost estimate is a detailed estimate carried out using detailed rates developed
for the project by first principles considering input costs such as labour, plant and materials.
First principle estimate enables labour plant, material, staff and the like to be analysed and
summarised separately for the project.
Those costs outside the construction costs such as owner’s project costs, property
separately.
12.1.4. Contract Rates

Rates based upon the contractual agreed figures as stipulated within the tender process for
the project.
These can be separate individual rates for labour, plant and materials i.e. OHW Designer $
per hr or a composite rate for items of work i.e. Supply and Install Belize ($ per item), Supply
and Install Auxillary Feeder ($ per m) etc
Note: Due to the contractual nature of the rate, any Inherent Risk within Contract Rates
should be applicable to the quantity of measure only.

13. Contingency
In the development of a project or program cost estimate, there will be some level of
uncertainty of the scope or cost of various items. Risks may exist which given their expected
less than certain likelihood, have not been included in the TOC, contract or other cost
categories.
However, if these risk events were to occur, there is a project cost impact. The allowance for
these risks is known as “Project Contingency”. The contingency amount is commensurate
with risk that could realistically impact the objectives of the project based on additional costs
these risks will impact if they were to occur over the funded base. Contingency is a line-item
amount included in the estimate to cover costs that result from genuine uncertainties should
they eventuate.
For further detail in regard to Cost Contingency please refer to Risk based Cost Contingency
DMS-PR-157.
13.1. P50 Contingency Definition

This is defined that there is 50% chance that the Final Project Value will be under the
estimated P50 TOC. Naturally there is also a 50% chance that will exceed the P50 TOC.
Hence, it is good mid value estimate.
13.2. P90 Contingency Definition

This is defined that there is 90% chance that the Final Project Value will be under the
estimated P90 TOC. Naturally there is also a 10% chance that will exceed the P90 TOC.
Hence, it is an estimated value with high certainty of not being exceeded.
13.3. Contingency requirements during Project Lifecycle

The following tables are for guidance only, please refer to the PMO Risk Team to confirm
requirements.
Type of Estimate Tier 1 and 2 Tier 3 to 5

‘Order of Magnitude’ Estimate
Strategic Business Case Qualitative (Deterministic) Approach

Estimate
Final Business Case Estimate Qualitative

(Deterministic)
Pre-Tender Estimate Approach
Quantitative (Probabilistic) Approach
Cost to Complete Estimate
Final Account Estimate
Table 5: Estimate Types v’s Contingency Requirements
All contingency should be based and reported upon the Base Estimate (BE) costs, not the
Total Outturn Cost (TOC)

BASE ESTIMATE (BE) = TOTAL CONTRACTOR COST (TCC) + CLIENT COST

An example is shown in the table below:
Total % of BE
Estimate Status
Cost
Base Estimate (BE) $10M
P50 TPC $14M 40%
P90 TPC $16M 60%
Table 6: Base Estimate
13.4. Qualitative (Deterministic) Approach

Qualitative is an approach to establishing a P50 and P90 value by determining a set
percentage (%) to apply to the Base Estimate (BE).
Prior experience (incorporating previous projects) determines these percentages.
At ‘Order of Magnitude’ and ‘Strategic Business Case’ Estimate stage, an agreed set of
percentages can be applied if there is insufficient uncertainty in the scope/site information.
Therefore to cover the cost impact of inherent and contingent risks where there is
insignificant project risk information, a 40% to 60% contingency allowance can be added to
the base estimates.
The 40% to 60% contingency allowances are adopted from the indicative contingency
allowance ranges given in the Federal Best Practice Cost Estimation Standard, the British
Department for Transport’s “Procedures for Dealing with Optimism Bias in Transport
Planning – Guidance Document” and other published empirical research data.
It should be noted that the 40% and 60% contingency allowances are expected to provide
confidence levels similar to probabilistic estimating equivalents of P50 and P90. That is 40%
and 60% contingency allowances are expected to respectively provide 50% and 90%
certainty that there will be no cost overrun.
It should be noted that the contingency percentages proposed above are applicable only for
heavy rail and light rail infrastructure construction projects. For other projects, such as Fleet
Procurement, non-construction projects such as technology procurement or lifecycle cost
estimating requirements of any project, contact PMO to agree on an appropriate level of
contingency.

13.5. Quantitative (Probabilistic) Approach

A Quantitative Risk Assessment (QRA) is conducted through identifying and collating all
Inherent and Contingent Risks that are associated with the project, then using Monte Carlo
simulation software (TfNSW uses @RISK) to produce P50 and P90 values.
A QRA workshop should be conducted with all relevant parties (ie. Project Manager, Risk
Manager, Project Controls Manager and any Subject Matter Experts) as required.
All information should be collated on a TfNSW formatted risk register which can be sourced
from the PMO Risk & Assurance Team. The final document should be aligned with the
project’s CURA risk register to ensure no risks are overlooked or any new risks are duly
captured within CURA.
13.5.1. Inherent Risks

The level of accuracy of estimates significantly depends on the level of design and scope
information available at the time of estimating that influences the level of accuracy of
measured items in the estimate. There are situations where even the accurately identified
and measured items in an estimate are variable. The accuracy of estimates also depends on
time and resources available to undertake the estimate. As a result, actual cost could be less
or (quite often) greater than that estimated.
Overall, this represents your confidence of the individual values you have allowed within the
Base Estimate (BE)
Note: Inherent Risks have 100% probability of occurrence but typically there should not be a
consistent min and max % range across the estimate values. This is due to the different
types of work being conducted and their varying complexity plus the different degrees of
information which has been received.
13.5.2. Contingent Risks

These are risks associated with items not captured in the base estimate. Some of these risks
are unidentifiable or only loosely identifiable. These risk items may or may not eventuate.
Even if fully identified, such risks may not be mitigated fully through design or project
management initiatives. If these risks eventuate, cost to the project could be incurred.
In order to address the impact of such residual inherent and contingent risks, adequate
contingency allowance must be included with minimum, mean and maximum values plus a
percentage probability of the item occurring.
13.5.3. Schedule Risks

Even if no contingent risks eventuate there is still a risk that the original estimated time to
complete the works shall exceed longer than forecasted. The program should conduct a
thorough review of the Project Schedule using Schedule Risk Analysis (SRA) and produce
P50 and P90 Schedules also, then capture the additional Construction and Client Cost
associated within the QRA assessment.

13.5.4. Other Risks

Any other key areas of uncertainty within the base cost plan – escalation, foreign exchange,
etc should be captured accordingly.
13.5.5. Opportunities
Any possible opportunities that maybe realised throughout the project must be captured
within the register so that the overall P50 and P90 contingent values are robust and not
overly weighted.
13.5.6. Absent Risks

Risks beyond any control of the program such as acts of god, cyber-attack, loss of corporate
knowledge etc should not be included within your risk register.
Any possible project risks which may occur and have been removed as they would create an
unacceptably high contingency value, should be clearly stated within the estimate exclusions.
Also it must be highlighted that if this risk was to occur then it would be classified as a scope
change and additional funding would have to be sourced separately.

14. Escalation
Escalation allowance takes into account the impact of diminishing buying power of money
resulting in from inflation and many other market factors such as phase of overall
development activity and the like.
All IP estimates must be given in outturn dollars which is the total amount of money that IP
expects to spend on the project.
Accordingly, each estimate should contain an escalation allowance that aligns with the
anticipated project delivery program and cash-flow.
For various types of IP estimates, the escalation assessment methodologies listed in the
following table should be adopted to ascertain the appropriate amount of escalation
allowances.
Type of Estimate Basis of Pricing (Tier 1 & 2) Basis of Pricing (Tier 3 -5)
‘Order of Magnitude’ Escalation % per annum Escalation % per annum

Estimate (Based on Notional Cash-flow) (Based on Notional Cash-flow)
Strategic Business Case Escalation % per annum Escalation % per annum

Estimate (Based on Notional Cash-flow) (Based on Notional Cash-flow)
Final Business Case Detailed escalation analysis Escalation % per annum

Estimate (Based on high-level Cash-flow) (Based on Notional Cash-flow)
Detailed escalation analysis Detailed escalation analysis

Pre-Tender Estimate
(Based on high-level Cash-flow) (Based on high-level Cash-flow)
Cost to Complete Revisit Detailed escalation analysis Revisit Detailed escalation analysis
Estimate (Based on Forecast Cash-flow) (Based on Forecast Cash-flow)
Final Account Estimate N/A N/A
Table 7: Escalation Assessment Methodologies
Note: Post Final Business Case escalation should be captured accordingly to Construction
Cost, Client Cost and Contingency. It is captured separately for review purposes only at SBC
and FBC and should not be held within a separate control account cost code once funding
has been awarded.

14.1. Notional Cash-flow Basis

When there is insufficient information to establish a detailed construction programme and
thus a detailed cash-flow for the project then this method of calculation is chosen.
It is a common practice to apply a set escalation percentage in such circumstances to
assume a uniform spending pattern from anticipated date of construction commencement to
completion.
This essentially means application of escalation for the period from the date of estimate to
the mid-point of anticipated construction commencement and completion.
Date of Construction Construction End of

Estimate Commencement Construction Completion Defects
(Anticipated) Mid-point (Anticipated) Liability
Period
Period for Escalation
Figure 4: Escalation
It is understood that there could be some spending (cash outflows) before the anticipated
date of construction commencement (e.g. costs of tendering and planning, early contractor
involvement) as well as after the construction completion (e.g. defects rectification and
management). It is assumed that the above notional cash-flow basis for escalation
calculation adequately addresses the impact of overall spending (cash outflow) pattern of the
project.
14.2. Detailed Forecast Cash-flow Basis

When there is sufficient information to have a reasonable idea of the potential programme,
an escalation calculation must be based on the forecast high-level cash-flow of the project.
In contract based forecast cost estimates, escalation should be based on approved detailed
program of the project.
Note: The IP PMO Cost Estimating Centre should be consulted regarding the escalation
rates to be used in all estimates.
Where a detailed escalation analysis is to be undertaken as part of an estimate, such
analysis must be appended to the relevant estimate.

14.3. Escalation Factors Guidance

For guidance please refer to
• Escalation Factors for Road and Transport Construction and Operating Costs in NSW
2015
• Road and Rail Construction Cost Indices 2018 Update v1.3.

If escalating factors other than stated above are used within the estimate then this must be
clearly stated within the estimate report with a robust basis of why the project has deviated
and where the new % values have been taken from.
Note: Due to the nature of Property values for any Property Acquisition please contact
TfNSW Property Division for guidance
15. IP Project Overhead Recovery

Divisional overheads only apply to Capital projects, and are charged for functional services
including (but not limited to):
• PMO Branch
• People and Corporate Services Division
• IT
• Rent
• Electricity
Divisional overhead is currently charged at the following rates:
• For all Infrastructure projects - at 3.8% on forecasted P90 TOC value.

When initiating any new project, the PMO should be contacted to determine the percentage
of overhead to be charged. This percentage should be included in estimates.
IP Divisional Overhead is usually charged following the approval of the Final Business Case.
Note: For any Sydney Trains works there is an Internal Recovery rate (IRR) and is currently
set at a 13.7% uplift of the Direct and In Direct Costs incurred.
This should not be included within IP Divisional OH but within Sydney Trains costs itself
similar to Construction Contractor’s OH.

16. Cost Loading Primavera Schedules

Upon awarding a contract the main construction contractor of the project is contractually
bound to submit a detailed construction program for the project in Primavera P6 Software.
This Primavera schedule must be cost loaded at work package level (minimum requirement)
or lower and coded to aggregate and align to the contractor’s tender bid / contract.
The cost-loaded schedule will be used in performance measuring tools such as earned value
calculation and in auditing progress payments.
Refer Earned Value Management using Primavera P6 DMS-WI-005 for methodology and
further details of this requirement.
This requirement must be communicated to the tenderers in the RFTs and RFPs.
17. Rounding of Outturn Cost

The final outturn cost of estimates should be rounded up in accordance with the following
table. Costs must not be rounded at sub-total levels.
Round Up to Next
Range of Estimate ‘Order of Strategic

Final Business Pre-tender
Magnitude’ Business Case
Case Estimate Estimate
Estimate Estimate
$5m - $25m $500K $500K $500K $250K
$25m - $100m $2m $2m $2m $1m
$100m - $500m $10m $10m $10m $5m
$500m - $1000m $25m $25m $25m $10m
$1000m - $5000m $50m $50m $50m $5m
Table 8: Rounding of Outturn Cost
18. Future Changes to the Control Account Structure

The Chart of Codes is consistently updated to suit the project and portfolio requirements.
The most up to date Control Account Structure and Cost Element Definitions are available in
the Chart of Codes (DeskSite# 4213351).

19. Whole of Life (WoL) Estimates

It is important for all projects to consider WoL to understand the most cost efficient way of
developing, building, operating and maintaining. Projects of all sizes and categories are
required to consider WoL. These decisions can be informed and guided by early estimation
of WoL which form part of Options development within the Strategic and Final Business
Case.
WoL includes considerations of the below listed costs to determine what the best
combination/s are for the overall project/asset cost:
• Capital costs (CAPEX)
• Life time operating costs (OPEX)
• Life time operating gains (OPEX)
• Life time maintenance costs (OPEX)
• Disposal costs (OPEX)
• Residual value at end of life (OPEX)

Service Delivery and Performance and Operators should be engaged during this process to
ensure estimates consider current costs and lessons for improvements.
AEOs are required to undertake a WoLC with their designs (under ASA standard: T-MU-AM-
01001-ST).
19.1. Service Impacts and Considerations

WoL estimates should also take into consideration service impacts:
• Enabling services – including elements such as timetables, wayfinding, ticketing,

customer communications and/or change initiatives
• Ongoing services and operations -changes to the way in which services are, or will be
delivered e.g. changes to service contracts, ongoing resource requirements (internal and
external) etc.

19.2. OPEX Cost Estimate Structure

This element of estimating is still within development as it is a recent mandatory requirement.
Overall OPEX (Operational Expenditure) estimating is complex and quite bespoke to each
project.
• New infrastructure in comparison to upgrading existing infrastructure where possibly it

will require both existing and proposed OPEX to review the effect of the works
• Capturing separately periodic and routine maintenance.
• Capturing Operating Costs of Fleet/Buses

Therefore WoL estimating will be expanded in future updates of the Standard and/or possibly
a separate standard shall be raised. Please contract PCG Estimating for guidance in the final
Cost Estimate Structure.
However the core cost structure stipulated below should be maintained to align with the
CAPEX and to provide consistency across the IP Portfolio.
Figure 5: OPEX - High Level Cost Breakdown

20. Basis of Estimate Report

All Strategic and Final Business Case Estimates must accompany a report (herein referred to
as “the Estimate Report”) to provide clarity and confidence to persons reviewing for funding
that a robust estimate has been provided plus to act as vital reference post FBC.
Please refer to Basis of Estimate Report Guide – FT-529 for guidance.
21. Review of Estimates by PMO Cost Estimating Centre

Any estimates undertaken internally by IP must comply with the requirements and templates
specified in this standard. All estimates undertaken internally by IP must be critically
reviewed by PMO Cost Estimating Centre.
All IP estimates carried out by external consultants must also comply with the requirements
and templates specified in this standard. All such estimates prepared by the consultants
must also be critically reviewed by PMO Cost Estimating centre.
As part of the PMO review process, the following benchmarking requirements as a minimum
should be adhered to:
Type of Estimate Min Level of Benchmarking
Source of Review Data
by External Consultants Required
Level 3 as defined in the Chart

‘Order of Magnitude’ Estimate Benchmarking data
of Codes (DeskSite #4213351)
Strategic Business Case Level 3 as defined in the Chart

Benchmarking data
Estimate of Codes (DeskSite #4213351)
Level 4 as defined in the Chart Benchmarking data with cost

Final Business Case Estimate
of Codes (DeskSite #4213351) drivers reviewed
Level 5 as defined in the Chart Benchmarking data with cost

Pre-Tender Estimate
of Codes (DeskSite #4213351) drivers reviewed
Level 5 as defined in the Chart

Cost to Complete Estimate N/A
of Codes (DeskSite #4213351)
Table 9: Benchmarking Requirements

22. Peer Review by External Independent Consultants

In addition to estimate reviews by PMO Cost Estimating Centre that described herein, a peer
review by a third-party external independent cost consultant may be necessary under certain
circumstances.
Type of Estimate
Tier 1 & 2 Project Tier 3 -5 Requirement
by External Consultants
‘Order of Magnitude’ Estimate No Requirement No Requirement
Strategic Business Case

Peer Review required Contact PMO for guidance
Estimate
Final Business Case Estimate Peer Review required Contact PMO for guidance
Pre-Tender Estimate Peer Review required No Requirement
Cost to Complete Estimate No Requirement No Requirement
‘Order of Magnitude’ and Strategic Business Case Estimates are intended to support option
comparison and selection of the preferred option. Therefore, an independent third party
consultant’s peer reviews may not add a considerable value to the estimate thus such third
party reviews may not be necessary for Tier 3-5 projects.
Final Business Case and Pre-Tender Estimates are likely to provide a basis for
establishment of a budget baseline. Therefore, an external independent peer review must be
undertaken for Tier 1 and 2 projects. Also independent external consultants’ peer reviews are
required when the estimate has been developed for a high profile or high risk project.
An estimate, irrespective of its type, if likely to provide a basis for establishing a budget
bottom-line or to become part of ministerial announcements thus published in the public
domain, then an independent third party peer review must be undertaken.

23. Approval of Estimates

All estimates developed by or for IP must be forwarded to the IP Cost Estimating Centre for
review and recommendation for endorsement by the Director PMO.
Estimates must be approved and signed off by the Director PMO, the relevant Project
Manager and/or the Project Director Etc. as per required level of delegation.
Following approval and sign-off of the estimates, therefore establishment of the budgets; the
funding request and approval process can be pursued.
24. Confidentiality of Estimates

All estimates and the underlying project information are strictly commercially confidential
unless and until such time that appropriate authority of the I publishes the same and releases
it to the public domain.
The approval from the Director PCG is required prior to final submission of an estimate to
any external stakeholder.
25. Related documents and references

Related documents and references
Chart of Codes – DeskSite# 4213351

Project Management Methodology DMS-ST-101
Earned Value Management using Primavera P6 DMS-WI-005
Risk-based Cost Contingency DMS-PR-157
INSW_IIAF Project Risk Profile Tool
Escalation Factors for Road and Transport Construction and Operating Costs in NSW.
Policy Number: CP 14043
Road and Rail Construction Cost Escalation Indices 2018 Update
TfNSW Cost Summary Sheet (XLS) DMS-FT-541.
Basis of Estimate Report Guide DMS-FT-529
Cost X Implementation Framework and Guidelines
Guidance Note 2 – Base Cost Estimation (Department of Infrastructure and Regional
Development)
These documents can be found on Desksite or Interchange.


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Cost Estimating for Infrastructure

and Place Projects

Branch: Program Management Office

Section: Project Controls

Business unit: Cost Estimating

Date of issue: 06 August 2019

Review date: 15 May 2020

Audience: Program Delivery

Asset classes: Heavy Rail; Light Rail; Multi Sites;

Project delivery model: Rail Project

Project type: Low/Major

Project lifecycle: Feasibility; Scoping; Definition;

Process owner: Director Program Management Group

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12.1. Estimating Methodology .......................................................................................29

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Tables and Figures

Figure 1: DMS Lifecycle ........................................................................................................ 6

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• Consistency within estimates across the IP for ease of project comparison

Figure 1: DMS Lifecycle

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3. Abbreviations and definitions

CBS Cost Breakdown Structure

CURA TfNSW Risk Management Software

DCF Discounted Cash Flow

DMS Divisional Management System

ETC Estimated Total Cost

FBC Final Business Case

FFC Forecast Final Cost

LCC Life Cycle Costs

IP Infrastructure & Place Division

PCG Project Controls Group

PMG Program Management Group

PMO Program Management Office

PPP Public Private Partnership

PV Present Value (of series of future spending)

QRA Quantitative Risk Assessment

RFT Request for Tender

RMS Roads and Maritime Services

SBC Strategic Business Case

TAC Tender Assessment Committee

TCC Total Construction Cost

TPC Total Project Cost

TfNSW Transport for NSW

TOC Total Outturn Cost

WBS Work Breakdown Structure

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4.2. IP Project Branches

4.3. IP Stakeholders for Estimating Requests

4.4. Further Information

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5. Estimates to be delivered at various Project Lifecycle

(Develop and assess options to meet the ‘Order of Magnitude’ (OoM)

Stage 1 – Strategic Assessment

Stage 3 – Pre-Tender Pre-Tender (PTE) Cost

Table 1: Delivery Estimates - various lifecycles stages and phases

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5.1. ‘Order of Magnitude’ (OoM) Estimate and Strategic Business

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5.2. Final Business Case (FBC) Cost Estimate

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