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Project Management
Spring 2007 Lecture 6 Estimating

Dr. SangHyun Lee
lsh@mit.edu
Department of Civil and Environmental Engineering Massachusetts Institute of Technology

Project Management Phase

FEASIBILITY

DESIGN PLANNING

DEVELOPMENT CLOSEOUT

OPERATIONS

Fin.&Eval. Risk

Organization

Estimating
Planning

Estimation Levels - Introduction

Different types of estimates are required as a project evolves

Conceptual & Preliminary Estimates

Prepared early in the project prior to engineering design completion (e.g., to tell Owner whether the contemplated project scope is feasible) Incorporate new information from design to obtain an updated estimate of the project Prepared from completed plans and specifications

Detailed Estimates

Definitive Estimates

Forecast the project cost within allowable limits from a combination of conceptual and detailed information often including partial contract and other procurement awards

Source: Barrie & Paulson, 1992

Design & Estimating Process Feasibility Conceptual design Detailed design Pre-bid Construction Conceptual & Preliminary Estimates Definitive Estimates Detailed Estimates .

Outline Conceptual & Preliminary Estimates  Cost indices  Cost capacity factor  Parameter Cost  Detailed Estimates  Estimates  Cost classification  Calculation .

Conceptual and Preliminary Estimates   Decide Feasibility Great Variability According to Type  Categories:  Complexity Accuracy Time-referenced Cost Indices   Cost-capacity Factors Parameter Costs .

Outline  Conceptual & Preliminary Estimates Cost indices  Cost capacity factor  Parameter Cost  Detailed Estimates  Estimates  Cost classification  Calculation .

com/features/conEco/ .Cost Indices  Show changes of costs over time by upgrading the cost of similar facilities from the past to the present Cost indices show the changes of a certain facility’s costs over time Year 1913 = 100. Source: http://www.enr. I can assume my ‘wish’ facility’s value at 2007. …Year 2007 = 4432 If Facility A is similar to my ‘wish’ facility and I know the value of Facility A at 1913.

and Structural Ironworkers)    Source: http://www.com/features/conEco/ .088 Board Feet of Lumber (2x4.Cost Indices  Show changes of costs over time by upgrading the cost of similar facilities from the past to the present Used to determine the general construction costs of structures Published periodically by Engineering News Record (ENR) and other publications ENR‟s Building Cost Index (BCI): Changes of facility‟s costs over time     Facility‟s components are:  1.g.38 Hours of Skilled Labor (20-City Average of Bricklayers.128 Tons of Portland Cement (Bulk.10 ft long contains [(2×4)×10] × 12] = 960 in3 → 6. Fabricated after 1996) 1. 20-city Average)  1 Board Feet = 1‟ x 1‟ x 1” = 144 in3 (e. 2×4 . 20-city Average) 66. Carpenters. Base Mill Price before 1996.67 board feet) 2500 Pounds of Structural-Steel Shapes (20-city Average..enr.

3546 3605 3648 3712 4027 4209 SEPT.Building Cost Index Data (1990–Date) JAN. 3539 3574 3623 3694 3984 4203 MARCH APRIL 3536 3541 3597 3649 3859 4127 4330 3534 3541 3583 3652 3908 4167 4335 2007 4432 Source: http://www.com/features/conEco/ . 2730 2785 2857 3009 3116 3109 3246 3378 3414 3504 SEPT. 2728 2786 2867 3016 3116 3117 3284 3372 3423 3505 OCT. 2668 2716 2775 2886 3106 3111 3131 3333 3372 3417 FEB. 2702 2751 2834 2996 3111 3111 3203 3364 3391 3456 ANNUAL AVG. 2716 2792 2854 3014 3109 3121 3223 3385 3391 3474 AUG. 2730 2791 2873 3029 3109 3131 3304 3350 3424 3498 NOV.enr. 3523 3536 3581 3655 3802 4116 4338 MARCH APRIL 2673 2715 2799 2915 3116 3103 3135 3323 3368 3411 2676 2709 2809 2976 3127 3100 3148 3364 3375 3421 MAY 2691 2723 2828 3071 3125 3096 3161 3377 3374 3422 MAY 3558 3547 3612 3660 3955 4188 4332 JUNE 2715 2733 2838 3066 3115 3095 3178 3396 3379 3433 JUNE 3553 3572 3624 3677 3996 4194 4340 Base: 1913=100 JULY 2716 2757 2845 3038 3107 3114 3190 3392 3382 3460 JULY 3545 3625 3652 3684 4013 4196 AUG. 3541 3596 3654 3766 4128 4312 DEC. 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2664 2720 2784 2886 3071 3112 3127 3332 3363 3425 JAN. 3539 3597 3655 3717 4103 4218 OCT. 2000 2001 2002 2003 2004 2005 2006 3503 3545 3581 3648 3767 4112 4333 FEB. 3547 3602 3651 3745 4129 4265 NOV. 2720 2784 2875 3046 3110 3128 3311 3370 3419 3497 DEC. 3548 3577 3640 3758 4123 4329 ANNUAL AVG.

enr.com/features/conEco/ .Building Cost Index Data (Prior to 1990) Source: http://www.

of 2007. relative to the base date of 1913.Cost Indices Time Conversion  Example:  Warehouse Estimate: Assume you have an estimate to a similar warehouse located nearby and completed in 1993 for a cost of \$4. 2007 is 4432%. The Building Cost Index from ENR for 1993. We are planning to build a new warehouse in Feb.200.000. 1992 . What is the estimated project cost if you establish the estimate using Building Cost Index from ENR? Adapted from: Barrie & Paulson. was 2996% and Building Cost Index from ENR for Feb.

Cost Indices Time Conversion  What Information Do We Need?    Current Building Cost Index (Feb.000 = 4432 : \$X  \$X = (4432/2996) * \$4.084 Adapted from: Barrie & Paulson.213.000 = \$6. 2007) = 4432 Building Cost Index for Year 1993 = 2996 Similar Facility‟s Cost at Year 1993 = \$4.200.000  We Convert From One Base Period to Another  2996 : \$4.200. 1992 .200.

asp .com/features/conEco/ costIndexes/constIndexHist. 20-city Average) 200 Hours of Common Labor (20-city Average)  Source: http://www.enr. 20-city Average)  1 Board Feet = 1‟ x 1‟ x 1” = 144 in3  2. Base Mill Price Before 1996.088 Board Feet of Lumber (2x4. Fabricated after 1996)  1.500 Pounds of Structural-Steel Shapes (20-city Average.128 Tons of Portland Cement (Bulk.Cost Indices Component Calculations  ENR‟s Construction Cost Index:   Used when labor costs are a high proportion of total cost Components:  1.

Cost Indices Use and Accuracy  Accuracies Within 20% to 30% of Actual Costs  Negligible Time and Effort  Valuable for Preliminary Planning .

g.Cost Indices .Limitations  Problems could arise if the proportions of the input components (e. lumber) in a building type cost index do not reflect the resources used on the project in question  E. changes in technology.. and competitiveness of contractors  Adapted from: Barrie & Paulson.. 1992 .g. about 40 % of the costs in a petrochemical project is in piping (pipe and pipe fitters)  Problems could arise if the project on which the Index is based has very little in common with the project under consideration Some types of indices do not consider factors such as: productivity.

Outline  Conceptual & Preliminary Estimates Cost indices Cost capacity factor  Parameter Cost  Detailed Estimates  Estimates  Cost classification  Calculation .

learning curves) C2 = C1 (Q2/Q1) x    Where  C2 = estimated cost of the new facility w/capacity Q2   C1 = known cost of facility of capacity Q1 x = the cost-capacity factor for this type of work . scope. or capacity of projects of similar types Reflect the nonlinear increase in cost with size (economies of scale.Cost-Capacity Factor  Apply to changes in size.

gross floor area for a warehouse)  X is an empirically derived factor based on well-documented historical records for a variety of different types of projects Source: Barrie & Paulson. tons of steel per day produced by a steel mill..g.Cost-Capacity Factor  Q is a parameter that reasonably reflects the size of the facility (e. barrels per day produced by a refinery. 1992 .

The ENR index for 1993.000 square feet .200. relative to the base date of 1913.000 square feet The prospective owner for the new warehouse wants a structure with a usable area of 150. was 2996% and the ENR index for 2007 is 4432%.Cost-Capacity Factor Example  Example Revisit:  Warehouse Estimate: Assume you have an estimate to a similar warehouse located nearby and completed in 1993 for a cost of \$4.8 for a warehouse. We are planning to build a new warehouse in Feb.000.    Consider the cost-capacity factor x = 0. The above warehouse has a usable area of 120. of 2007.

Cost-Capacity Factor Example What Information Do We Need?    Q2/Q1 = 150.25)0.25 Cost-capacity factor x = 0.8  Known cost = \$4.8 = \$5.000/120.200.000 * (1.020.000 = 1.000   C2 = \$4.200.851 A 25% more capacity implies only 20% more costs .

1992 . Ia = Index number at that time Source: Barrie & Paulson.Combining Cost Indices & CostCapacity Factor  Combine Cost Indices & Cost Capacity Factors to take into account changes in both time & capacity  C2 = C1 (Ib / Ia) (Q2 / Q1)x  Where   Ib = Index number “Now” or present time.

200.000. The above warehouse has a usable area of 120.Cost Indices & Cost-Capacity Factor Example  Example Revisit:  Warehouse Estimate: Assume you have an estimate to a similar warehouse located nearby and completed in 1993 for a cost of \$4. The ENR index for 1993. of 2007. was 2996% and the ENR index for 2007 is 4432%. We are planning to build a new warehouse in Feb.000 square feet The prospective owner for the new warehouse wants a structure with a usable area of 150. relative to the base date of 1913.8 for a warehouse.000 square feet .    Consider the cost-capacity factor x = 0.

000)0.000 * (4432/2996) * (150.8 = \$7.731 .200.188.Cost Indices & Cost-Capacity Factor Example  C2 = 4.000/120.

Outline  Conceptual Estimates Cost indices Cost capacity factor Parameter Cost  Detailed Estimates  Estimates  Cost classification  Calculation .

Means “Means Square Foot Costs” Source: RS Means.Parameter Costs Source Data    Commonly used in building construction ENR “Quarterly Cost Roundup” R. 2006 .S. Square Foot Costs Data.

the “Parameter” would be “Gross Enclosed Floor Area”  all costs represented by X (\$/S.F) → total cost = X (\$/S.Parameter Costs Characteristics  Relates all costs of a project to just a few physical measures. or “Parameters”. parameter costing can give reasonable levels of accuracy for preliminary estimates Source: Barrie & Paulson.F.) × the project‟s gross enclosed floor area (S. warehouse .)  With good historical records on comparable structures.F.. that reflect the size or scope of the project  E.g. 1992 .

2006 .000 S. Square Foot Costs Data.Means Square Foot Cost   Costs per Square Foot Type of Facility (total 23.F apartment with 3 stories) Story Height = 10‟ and No Basement Source: RS Means.

F. 2006 .000 S. of Floor Area 23.F Source: RS Means.Means Square Foot Cost  Costs per S. Square Foot Costs Data.

F. of Floor Area 23.000 S.F Source: RS Means. Square Foot Costs Data. 2006 .Means Square Foot Cost  Costs per S.

Square Foot Costs Data. of Floor Area Exterior wall variation Source: RS Means. 2006 .Means Square Foot Cost  Costs per S.F.

of Floor Area Exterior wall variation Base Cost = 129. Square Foot Costs Data.F.F Source: RS Means.65 \$/S. 2006 .Means Square Foot Cost  Costs per S.

Means Square Foot Cost  Costs per S. Square Foot Costs Data. of Floor Area Perimeter & Height Adjustment Source: RS Means.F. 2006 .

F. of Floor Area Perimeter & Height Adjustment Source: RS Means. 2006 . Square Foot Costs Data.Means Square Foot Cost  Costs per S.

F. of Floor Area Basement Source: RS Means. 2006 . Square Foot Costs Data.Means Square Foot Cost  Costs per S.

Means Square Foot Cost  Costs per S. Square Foot Costs Data. of Floor Area Additives Source: RS Means.F. 2006 .

2006 .Means Square Foot Cost  Costs per S.F. of Floor Area Source: RS Means. Square Foot Costs Data.

Square Foot Costs Data. 2006 .Means Square Foot Cost  Information: Detail Specs for the Cost Source: RS Means.

Means Square Foot Cost

Information: Sub-total, Fees, and Total

Source: RS Means, Square Foot Costs Data, 2006

Parameter Cost Example

What is the Cost for an apartment building (7 Story) if the perimeter of the building is 502 L.F. and the story height is 11‟-4”? Assume that the apartment building has decorative concrete block on the east, west & south walls. The north walls external finish is brick with concrete block backup. The area of each floor of the apartment building 11,460 S.F. The basement floor area s 4,200 S.F. Please use the Means Square Foot Cost to obtain an estimate. The building frame is steel. The apartment building is located in Atlantic City, New Jersey, Zip Code 07410.

Source: RS Means, Square Foot Costs Data, 2006

Parameter Cost Example

60’ × 191’

Source: RS Means, Square Foot Costs Data, 2006

Perimeter 7 Floors Exterior Walls:   North wall: Face brick w/ concrete block backup East. 4-7 Story type (Refer to RS Means (2006) .Square Foot Costs. page 80) Source: RS Means.460 S. Zip Code 07410  Coefficients are determined from Model Number M. West & South walls: Decorative Concrete Block     Story Height: 11‟-4” Basement Area: 4. 2006 .F Steel Frame Located in Atlantic City.Parameter Cost Example  Characteristics of the Apartment Building     60‟ x 191‟ = 11.020 for Apartment. New Jersey.200 S.F.F./Floor 2 * [191‟ + 60‟] = 502 L. Square Foot Costs Data.

2006 . Page 80 Source: RS Means. Square Foot Costs Data.Parameter Cost Example Choose type RS Means (2006) – Square Foot Costs.

Area = 11.F.F. Square Foot Costs Data. Page 80 S.460 * 7 = 80220 L. 2006 . Perimeter = 502 Source: RS Means.Parameter Cost Example RS Means (2006) – Square Foot Costs.

Square Foot Costs Data.Parameter Cost Example  What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?  Exterior Wall Variation Perimeter Adjustment Story Height Adjustment Basement Addition Location Modifier     Source: RS Means. 2006 .

Square Foot Costs Data.Parameter Cost Example Basic SF Costs for 80.F apartment building with Face Brick w/ Concrete Block Backup Basic SF Costs for 80. 2006 .000 S.F apartment building with Decorative Concrete Block Source: RS Means.000 S.

Square Foot Costs Data.25/SF when exterior walls are Decorative Concrete Block (East. south) N Source: RS Means.35/SF when exterior walls are Brick w/ Concrete Block Backup (North) \$122. 2006 .F Area=80000.Parameter Cost Example  Basic SF Cost in R.S.F Perimeter = 530. Means for S. West. Story Height = 10‟ & No Basement   \$128. L.

04 % of total building perimeter  East. West & South walls make up:  [(191‟+2x60‟)/502‟] x 100 = 61.S.96%] = \$124. Source: RS Means. West. south)  North wall makes up:  [191‟/502‟] x 100 = 38.25/SF when exterior walls are Decorative Concrete Block (East. Story Height = 10‟ & No Basement   \$128.35/SF when exterior walls are Brick w/ Concrete Block Backup (North) \$122. Means for S.6/S. 2006 .Parameter Cost Example  Basic SF Cost in R. Square Foot Costs Data. L.F Area=80000.35 * 38.96 % of total building perimeter  Exterior Wall Variation  [\$128.F.25 * 61.F Perimeter = 530.04%] + [\$122.

Parameter Cost Example  What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?  Exterior Wall Variation Perimeter Adjustment Story Height Adjustment Basement Addition Location Modifier     Source: RS Means. 2006 . Square Foot Costs Data.

2006 . Square Foot Costs Data.Parameter Cost Example RS Means (2006) – Square Foot Costs. Page 80 Perimeter & Height Adjustment Factors Source: RS Means.

25 * 61.20 per ft  \$123.04%] + [\$122.5 * 80.F (530 -502) less than the M.220 S.3 = \$125.F  Height Adjustment:   Apartment building story height is 1‟ 4” (11‟ 4‟‟-10‟) more than the M.65 per 100 L. 2006 .  Perimeter Adjustment:    Apartment building perimeter is 28 L.96%] = \$124.067.F. Square Foot Costs Data.F * 28 L.F ) = \$123.9/S.20 * 1.020 model building in RS Means Height adjustment factor: \$1.020 model building in RS Means Perimeter adjustment factor: \$2.6 – ( \$2.F \$124.Parameter Cost Example  Exterior Wall Variation :  [\$128.F.610 Source: RS Means.65/100 L.9 + \$1.5/S.  Apartment Building initial total cost: \$125.35 * 38.6/S.F = \$10.

2006 . Square Foot Costs Data.Parameter Cost Example  What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?  Exterior Wall Variation Perimeter Adjustment Story Height Adjustment Basement Addition Location Modifier     Source: RS Means.

Page 80 Basement Addition Factor Source: RS Means.Parameter Cost Example RS Means (2006) – Square Foot Costs. 2006 . Square Foot Costs Data.

Parameter Cost Example   Apartment Building initial total cost: \$125.067.067.F = \$10.F = \$10. 2006 .200 S.F of basement area Basement added cost : \$10.F basement Basement Addition Factor: \$27.220 S.200 S.182.610 + \$27.30 * 4.610 Basement Addition:    Apartment building has 4.5 * 80.270 Source: RS Means.30 per S. Square Foot Costs Data.

Square Foot Costs Data.Parameter Cost Example  What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?  Exterior Wall Variation Perimeter Adjustment Story Height Adjustment Basement Addition Location Modifier     Source: RS Means. 2006 .

2006 .Parameter Cost Example RS Means (2006) – Square Foot Costs. Page 455 Location Modifier Source: RS Means. Square Foot Costs Data.

2006 .13 = \$ 11.182. Square Foot Costs Data.Parameter Cost Example  Basement Addition:  \$10.505.13 (Refer to RS Means (2006) Square Foot Costs.270  Location Modifier for Residential Bldg: 1. page 455)  Apartment building modified total cost: \$10.182.270 * 1.965 Source: RS Means.

Parameter Cost Example  What is the Cost for an apartment building (7 Story) if the perimeter of the building is 502 L. west & south walls. 2006 .F.F.200 S. The building frame is steel with an observed age of 20 years. The basement floor area s 4.F. New Jersey. Please use the Means Square Foot Cost to obtain an estimate. The apartment building is located in Atlantic City. Source: RS Means. The area of each floor of the apartment building 11. Zip Code 07410. Square Foot Costs Data. The north walls external finish is brick with concrete block backup. and the story height is 11‟-4”? Assume that the apartment building has decorative concrete block on the east.460 S.

Square Foot Costs Data.Parameter Cost Example  What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?  Exterior Wall Variation Perimeter Adjustment Story Height Adjustment Basement Addition Location Modifier Depreciation Adjustment      Source: RS Means. 2006 .

Parameter Cost Example RS Means (2006) – Square Foot Costs. Square Foot Costs Data. Page 228 Depreciation Adjustment Factor Source: RS Means. 2006 .

204.505.193 = \$9.965  Depreciation Adjustment for steel frame building with 20 year observed age: 20 % (Refer to RS Means (2006) .Square Foot Costs.965 = \$ 2.772 Source: RS Means.2 * \$ 11.505. page 228)  Depreciation Amount: 0. 2006 .505.301.301.965 .193  Total Existing Building Cost: \$ 11. Square Foot Costs Data.Parameter Cost Example  Location Modifier for Residential Building  \$ 11.\$ 2.

Outline Conceptual Estimates Cost indices Cost capacity factor Parameter Cost Detailed Estimates Estimates  Cost classification  Calculation .

Estimation Levels .Revisit  Different types of estimates are required as a project evolves  Conceptual & Preliminary Estimates  Prepared early in the project prior to engineering design completion (to tell Owner whether the contemplated project scope is feasible) Incorporate new information from design to obtain an updated estimate of the project Prepared from completed plans and specifications   Detailed Estimates   Definitive Estimates  Forecast the project cost within allowable limits from a combination of conceptual and detailed information often including partial contract and other procurement awards Source: Barrie & Paulson. 1992 .

Design & Estimating Process Feasibility Conceptual design Detailed design Pre-bid Construction Conceptual & Preliminary Estimates Definitive Estimates Detailed Estimates .

)  Always consider:    What are assumptions behind the estimate? What factors are being ignored? How might these factors change the estimate? . etc.Important General Lesson  Precision in detailed estimates does not mean accuracy!  More an art than a science   Detailed quantitative estimates possible – but ignore important qualitative factors Have differing ranges of uncertainties  Actual costs depend on systemic complexity  Two types of complexity at issue   Detail complexity (myriad components required) System complexity (dynamic interactions.

approximate estimates are refined using detailed estimates   Engineer‟s Detailed Estimates Bid Detailed Estimates .Detailed Estimates  After most or all of the detail design work is complete.

Design & Estimating Process Feasibility Conceptual design Detailed design Pre-bid Construction Conceptual & Preliminary Estimates Definitive Estimates Detailed Estimates Engineer’s .

CM. or design-build team Use unit prices databases    Estimate = Σ [Quantity] × [Unit Prices] RS Means or other sources Unit prices as result of average industry standards .owner.Engineer’s Detailed Estimates  Part of actual bid documents   Who? . consultant.

+ Lab. + Overhead + Profit Source: RS Means. Page 84 Unit price (RS Means) = Mat.Engineer’s Detailed Estimates RS Means (2006) – Building Construction Cost Data. + Equip. 2006 . Building Construction Cost Data.

consultant.Engineer’s Detailed Estimates  Part of actual bid documents   Who? – owner. mark-up: not detailed) .g. or CM Use unit prices databases    Estimate = Σ[Quantity] × [Unit Prices] RS Means or other sources Unit prices as result of average industry standards   No lump-sum subcontract quotations May be simplified number of line items (e..

Example  Building  Foundations   Piles Concrete foundations  Steel erection  Structural steel   Columns Beams    Detail steel Concrete decks Stairs .Engineer’s Breakdown .

Design & Estimating Process Feasibility Conceptual design Detailed design Pre-bid Construction Conceptual & Preliminary Estimates Definitive Estimates Detailed Estimates Engineer’s Bid .

Bid Detailed Estimates  Contractor‟s estimate low enough to obtain the work.subcontractors from 30% to 80% of the project . yet high enough to make profit Who? – contractor More detail depending upon the contractor‟s own procedures Overall unit prices (past) → detailed categories (present)     Often relies on     Historical productivity data for company Intuition on speed of movement Quantity takeoff for most important items Subcontractor bids  Sometimes less detailed than engineer‟s estimates .

Bid Breakdown – Example  Building (Engineer‟s estimates)  Foundations    Building (Bid estimates)    Piles Concrete foundations Piles (material take-off) Concrete subcontract (lump-sum) Steel erection subcontract (lump-sum)  Steel erection  Structural steel   Columns Beams    Detail steel Concrete decks Stairs .

Bid Detailed Estimates  Is estimating a streamlined process? A look at bids received for a typical project in a competitive area will sometimes show more than 50% difference between the low and the high bidders .

1992 .Revisit  Different types of estimates are required as a project evolves  Conceptual & Preliminary Estimates  Prepared early in the project prior to engineering design completion (to tell Owner whether the contemplated project scope is feasible) Incorporate new information from design to obtain an updated estimate of the project Prepared from completed plans and specifications   Detailed Estimates   Definitive Estimates  Forecast the project cost within allowable limits from a combination of conceptual and detailed information often including partial contract and other procurement awards Source: Barrie & Paulson.Estimation Levels .

Design & Estimating Process Feasibility Conceptual design Detailed design Pre-bid Construction Conceptual & Preliminary Estimates Definitive Estimates Detailed Estimates .

For example:     Traditional Unit-price Professional CM Design-Build .Definitive Estimates  There comes a time when a definitive estimate can be prepared that will forecast the final project cost with little margin for error… This error can be minimized through the proper addition of an evaluated contingency Engineer‟s estimates can complete this process    The proper time to classify an estimate as „definitive‟ will vary according to the characteristics of the project.

Definitive Estimates: Traditional & Unit Price  DBB definitive estimate Start Preliminary design Detailed design Contract  Unit Price definitive estimate Start Preliminary design Detailed design Contract .

Definitive Estimates: CM & Design-Build  CM definitive estimate Start Preliminary design Detailed design Contract  Design-Build definitive estimate Start Preliminary design Contract Detailed design .

Outline Conceptual Estimates Cost indices Cost capacity factor Parameter Cost  Detailed Estimates Estimates Cost classification  Calculation .

Job Overhead)   Markup    .e... 1994  Indirect Cost (i.Cost Classification  Direct Cost  Labor Cost  Direct Labor Indirect Labor    Material Cost Equipment Cost  Subcontractor Price Project Overhead General Overhead Profit Contingency Source: Shtub et al.

tax.  Equipment Cost  Costs Includes: ownership. insurance. Barrie & Paulson.Cost Classification .. 2005..g. fringe benefits) Substantial in amount: add 25 to 50 percent to direct labor costs Commonly used approach adds indirect labor costs as a percentage to the total direct labor costs or for each major work category  Indirect Labor Cost     Material Cost  All materials that are utilized in the finished structure. and operating costs  Subcontractor Price   Includes quotations from all subcontractors working on the project Quotations submitted by the subcontractor usually require extensive review by the general contractor‟s estimator to determine what they include & do not include Source: Clough et al.Direct Cost  Labor Cost  Direct Labor Cost   Difficult to evaluate precisely but all effort is done to get an accurate estimate as possible Greatest amount of uncertainty in project estimation Costs that are additional to the basic hourly rates (e. 1992 . lease or rental expenses.

Job Overhead)     Costs that do not pertain directly to any given construction work Generally constitutes 5-15 percent of the total project cost Costs computed by listing & evaluating each item of overhead individually Examples of typical items included:  Job Mobilization. Field Office Supplies. Protection of Adjoining Property. Computer Equipment & Software. Builder‟s Risk Insurance. Storage Area Rental. Heat. Security Clearances. Permits & Fees. Surveys. Parking Areas. General Superintendent. Engineering Services.. Special Insurance. 2005 .Cost Classification – Indirect Cost  Project Overhead (i. Job Telephone. Small Tools. Storage Buildings. Computer Networking & Internet Connectivity.e.. Utilities. Nonworking Foremen. Legal Expenses. Field Offices. Project Manager. Source: Clough et al. Material & Load Tests.

difficulties inherent in the work. association dues. identities of the owner & architect/engineer Include allowance for:  General Overhead or Office Overhead    Includes costs that are incurred to support the overall company construction program Normally included in the bid as a percentage of the total estimated job cost Examples of general business expenses include: office rent. and the salaries of executives & office employees   Profit Contingency Source: Clough et al. heat.. advertising. travel. office supplies. furniture. office insurance. electricity. 2005 . legal expenses. donations. provisions of the contract documents. telephone & internet.Cost Classification – Markup  Markup      Added at the close of the estimating process Varies between 5 to 20 percent of the job cost Reflects the contractor‟s appraisal of the probability of being the lowest bidder for the project & the chances of making a reasonable profit Factors considered when deciding on a job markup include: project size & complexity.

. 2005 .Cost Classification (Example) Bid Estimates = Direct Cost + Overhead + Markup (including Firm Overhead) Source: Clough et al.

. 2005 .24 Bid Estimates = Direct Cost + Overhead + Markup (including Firm Overhead) Source: Clough et al.Cost Classification (Example) × 1.

Outline Conceptual Estimates Cost indices Cost capacity factor Parameter Cost  Detailed Estimates Estimates Cost classification Calculation .

300 0.Detailed Estimates .780 .60 \$ 3.Methodology  Stage 1: Quantity takeoff  Decomposition into items. measurement of quantities  Challenges: tremendous detail complexity  Stage 2: Direct Cost contribution   Σ[Quantity] × [Unit Price] Challenge: determination unit price (based on historical data)  Example: Item unit quantity Unit price price Reinforced steel lb 6.

Labor Costs   Categorized Bid Estimate (not overall unit prices) Basic Unit Labor Cost = P / LP (\$/unit)   P = Price of all money elements (\$/hours) LP = Labor Productivity (units/hour)  Total Labor Cost = Q * P/LP  Q = Total quantity of work  Estimation of labor costs particularly tricky   Prices: In United States. highly detail intensive Productivity: Many qualitative components .

seniority.g. …) Insurance (varies w/contractor record. hazardous work) .. shift-work differentials. work type) Social security benefits Fringe benefits (health…) Wage premiums (e.Labor Cost .Prices Related  Components      Wages (varies by area. overtime.

Productivity  Difficult but critical  High importance of qualitative factors (environment.Labor Cost . learning. professional organizations. state governments . morale. fatigue. etc)  The primary means by which to control labor costs = P / LP (\$/unit)  Historical data available  Firm updated database  Department of Labor.

Productivity Considerations  Considerations        Location of jobsite (local skill base. jurisdiction rules – hiring & firing) Learning curves Work schedule (overtime.g.. noise. incentive) Worksite rules . shift work) Weather Environment  Location on jobsite. proximity to materials Management style (e.

Learning Curves

Particularly useful for repetitive works

Productivity Effects of Overtime

Concluding Remarks

Functions of Estimating

Could Assess cost of construction from the conceptual design phase (Owner, Designer & Sometimes Contractor ). Feedback to
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Conceptual Design for Alternative Architecture Feasibility of the Project Project / Company Alignment of Objectives, Constraints, Strategic Goals and Policies

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Provide the basis for bidding & contracting (Contractor)

Provide a baseline for cost control and post project evaluation (Owner & Contractor)

Consider:  The organization and categorization of costs suitable for preparing an estimate are often not compatible with realistic field cost control (e.g.. might be convenient for the owner) Estimates necessarily deal in averages.Concluding Remarks  In Converting an Estimate to a Control Budget. whereas tighter standards are sometimes desirable for control purposes  .