COST PLANNING AND

COST ESTIMATING

By: Engr. NELSON S. TAPSIRUL

BSCE, MBA, MSCM

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COST PLANNING AND COST ESTIMATING

WHAT IS COST PLANNING?

 

Cost planning tells a project owner how much a proposed project will cost.
Additionally, cost planning will tell when the expected expenses will most likely
occur.

This information is critical for obtaining project financing and for determining
whether a project can be profitable. Without cost planning, project owners could
enter blindly into construction projects and possibly into insolvency.

Cost plans are generally prepared by cost consultants, usually by quantity

surveyors.

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COST PLANNING AND COST ESTIMATING

SIGNIFICANCE OF COST PLANNING?

 

After the owner has set a maximum cost, cost planning will determine
whether that cost cap can be met. If not, the project is not feasible in its
current state and should be reworked to reduce costs.

Additionally, cost planning is used to structure financing for a project.

Cost planning informs the owner exactly when finance installments will be
needed, so the owner can keep current with billings.

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COST PLANNING AND COST ESTIMATING

FEATURES OF COST PLANNING?

 

The first is an overall budget for the project. This is the total amount
that the project is expected to cost. This amount is based on the current
project scope and design and can be determined through various types of
estimates.

The second feature of cost planning is the allocation of costs over

time. This involves predicting when along the project schedule costs will
actually be incurred and paid.

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COST PLANNING AND COST ESTIMATING

BENEFITS OF COST PLANNING?

 

A central benefit of cost planning is that the owner is aware of financial

expectations. This allows an owner to secure the proper financing and
business plan. Without cost planning, owners would not know if a project is
expected to be profitable.

Additionally, cost planning allows an owner to properly structure a

construction loan. Instead of borrowing the total project cost upfront, and
beginning to pay interest on the total immediately, cost planning allows an
owner to borrow only what will be spent in a particular period and to avoid
paying interest on the balance until it is received.

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COST PLANNING AND COST ESTIMATING

TIME FRAME OF COST PLANNING?

 

Cost planning should be done three times before the start of construction: once at
the project's initial inception, once after the preliminary design is complete, and
once after the final design is permitted.

Additionally, the cost plan should be regularly updated and tracked during the
course of construction to ensure accuracy, typically after each project milestone.

Warning: Although construction costs can be planned and estimated, they can
significantly change during the course of actual construction. The best way to
meet original cost planning estimates is to limit the amount of design change that
occurs on a project.

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 SAMPLE COST PLAN
CUMULATIVE COST
COST PLAN
ACT ACTIVITY COST WT W E E K
ID NAME (P) (%) 1 2 3 4 5 6 7 8 P
-- 1.00M
01 Site Prep & Excavation 36,000 3.6 3.6
02 Concrete & Steel Works 300,000 30.0 7.5 7.5 7.5 7.5
03 Carpentry 240,000 24.0 -- 0.75M 6 6 6 6
04 Masonry 96,000 9.6 3.2 3.2 3.2
05 Doors & Windows 90,000 9.0 4.5 4.5
-- 0.50M
06 Tile Works 50,000 5.0 5
07 Plumbing 40,000 4.0 2 2
08 Electrical 26,000 2.6 -- 0.25M 1.3 1.3
09 Roofing 90,000 9.0 4.5 4.5
10 Painting & Clearing 32,000 3.2 3.2
TIME
Total = 1,000,000

Weekly Accomplishment (%) 3.6 7.5 15.5 18 21.2 18.7 12.3 3.2
Cumulative Accomplishment (%) 3.6 11.1 26.6 44.6 65.8 84.5 96.8 100
Weekly Cash Flow (Php) 36 000 75 000 155 000 180 000 212 000 187 000 123 000 32 000
Cumulative Cash Flow (Php) 36 000 111 000 266 000 446 000 658 000 845 000 968 000 1 000 000

UP NEXT:
COST ESTIMATING
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COST PLANNING AND COST ESTIMATING

WHAT IS COST ESTIMATING?

 

In construction industry, it is an attempt to predict the likely expenditures

associated with a construction project as accurately as possible. It is used, for
example, to assess the viability or affordability of the project.

The degree of accuracy of estimates will typically increase as the project

progresses, more decisions have been made, and more information is available.
However, their true accuracy only becomes apparent once the project is
complete and the actual costs is incurred.

Estimates usually include contingencies, which are downside risk estimates that
make allowance for unknown risks associated with a project.

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TYPES OF CONSTRUCTION ESTIMATES

There are several kinds of estimating techniques; these can be grouped into two
main categories:

1. Approximate or Rough Estimate. An approximate or rough estimate,

as the name suggests, is an estimate prepared to obtain an
approximate cost in a short time. For certain purposes, the use of such
methods is justified.

2. Detailed Estimate. A detailed estimate of the cost of a project is

prepared by determining the quantities and costs of everything that a
contractor is required to provide and do for the satisfactory completion
of the work. It is the best and most reliable form of estimate.

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ESTIMATING & THE PROJECT DEVELOPMENT
The degree of accuracy of estimates will increase as the project progresses:
STAGE 1 STAGE 2 STAGE 3 STAGE 4 GOAL
Preliminary or Detailed Contract Sum Operational
Rough Estimate Estimate Estimate
USED IN Briefing stage, Bidding or Contract values Actual cost Accurate
feasibility study tendering for client during execution estimate for
approval feedback and
analysis
SOURCE Previous project Accurate Contract values Actual site and
records and ratio quantities based based on bid operational
estimates on working negotiation and information
drawings and type of contract
documents
TYPICAL 25% to 15% 15% to 10% 10% to 5% 5% 5% to 3%
RANGE OF
ACCURACY
ACTION BY Client and top Engineering Client, contractor Contractor Client and top
management division/designer management management

Source: University of the Philippines - National Engineering Center (UP-NEC) 10

THE APPROXIMATE OR ROUGH ESTIMATE

I. Rough Estimate Factor Based on Actual Cost

Building: Factor = Actual Cost / Floor Area

Horizontal Project: Factor = Actual Cost / Length
Land Development: Factor = Actual Cost / Land Area

II. Rough Estimate Factor Based on Estimated Cost

Building: Factor = Estimated Cost / Floor Area

Horizontal Project: Factor = Estimated Cost / Length
Land Development: Factor = Estimated Cost / Land Area

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THE APPROXIMATE OR ROUGH ESTIMATE

III. Rough Estimate Factor Based on Secondary Data

References:
1. Pinoy House Plans Website: www.pinoyhouseplans.com
2. Home Ideas Magazine Available at NBS
3. Provided by Consultants Handbook by Langdon & Seah / Arcadis

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THE DETAILED ESTIMATE

Detailed estimate is a list of detailed particulars of the quantities, rates,

and costs of all the materials required to complete construction project. The
quantities of all materials of work are calculated according to their respective
dimensions on the drawings.

The output of detailed estimate could be a Bill of Quantities (BOQ) or

Bill of Materials (BOM), depending on the intended purpose.

What is BOM?

What is BOQ?

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THE DETAILED ESTIMATE

DATA REQUIRED FOR PREPARING A DETAILED ESTIMATE:

To prepare a detailed estimate the estimator must have the ff data:
1. Architectural and engineering working drawings with drawing notes.
2. Specifications indicating the exact class of materials to be used.
3. The rates at which the different items of work are carried out.

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BILL OF MATERIALS (BOM)

A Bill of Materials (BOM) is a list of the raw materials, sub-assemblies,

intermediate assemblies, sub-components, parts, and the quantities of each
needed to manufacture an end product such as construction project.

A BOM can define products as they are designed (engineering bill of

materials), as they are ordered (sales bill of materials), as they are built
(manufacturing bill of materials), or as they are maintained (service bill of
materials).

Generally, BOM is used for construction.

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BILL OF QUANTITIES (BOQ)

The Bill of Quantities (BOQ) is a document prepared by the cost

consultant, often a quantity surveyor, that provides project specific measured
quantities of the items of work identified by the drawings and specifications in
the tender documentation.

The quantities may be measured in number, length, area, volume,

weight or time. Preparing a bill of quantities requires that the design is
complete and a specification has been prepared.

Generally, BOQ is used for tendering.

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BOM vs BOM

BILL OF QUANTITIES versus BILL OF MATERIALS

FOOTING: FOOTING:
Concrete (cu.m) Cement (bag), Sand (cu.m), Gravel (cu.m)
Rebar (kg) Rebar (pcs)
Tie Wire (kg) Tie Wire (kg)
Used for Tendering Used for Construction

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BOM vs BOM - Examples

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REVIEW OF CONCRETE ESTIMATE

Concrete is a stone-like material compose of variably proportioned

mixture of cement, sand and gravel. For the ratio of the cement, sand and
gravel mixture, see table below on next slide.

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REVIEW OF CONCRETE ESTIMATE
Material Factor for Concrete By: Max Fajardo
CLASS/MIXTURE PROPORTION CEMENT SAND GRAVEL
(Cement:Sand:Gravel) (40 kg) (cu m) (cu m)

Class AA 1 : 1.5 : 3 12.00 0.50 1.00

Class A 1 : 2.0 : 4 9.00 0.50 1.00

Class B 1 : 2.5 : 5 7.50 0.50 1.00

Class
Mixture C cubic meter
of half 1 :sand,
3.0 : 6a cubic meter6.00
of gravel and a0.50
portion mixture 1.00
of cement
depending on the class plus water will yield a little more than one cubic meter of volume.
This will serve as contingency or wastage.
Different companies use different values. Hence, estimators should use their own company
standard in estimating.

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USES AND STRENGTH OF CLASS/MIXTURE

1. CLASS AA - Used for structural members or members which are subjected

to bending. Compressive strength (fc’) is approximately 28MPa or 4000psi.
2. Example: Footing, Column, Beam, Slab, Stair, Etc

2. CLASS A - Same as Class AA, fc’ is approximately 21MPa or 3000psi.

3. CLASS B - Used for non-structural members or members which are not

subjected to bending.
3. Example: Slab-on-grade, Sidewalk, Road pavement, Etc

4. CLASS C - Same as Class B but subjected to lighter load.

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REINFORCED-CONCRETE ESTIMATE

Steel reinforcement is one of the most difficult to estimate. Estimators

must be familiar with the commercial lengths and sizes.
COMMERCIAL LENGTH COMMERCIAL SIZE, Dia in inch = Bar No / 8
LENGTHS BAR Diameter Diameter
(m) NO (inch) (mm)
6.0 2 1/4 8
7.5 3 3/8 10
9.0 4 1/2 12
10.5 5 5/8 16
12.0 6 3/4 20

Shortest L = 6.0 m 8 1 25
Longest L = 12.0 m 10 1-1/4 32
Increment = 1.5 m
12 1-1/2 40
16 2 50
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