1.040/1.401 1.040/1.401 Project Management Project Management Spring 2007 Spring 2007 Estimating Estimating Dr. SangHyun Lee Department of Civil and Environmental Engineering Department of Civil and Environmental Engineering Massachusetts Institute of Technology Massachusetts Institute of Technology
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Department of Civil and Environmental EngineeringDepartment of Civil and Environmental EngineeringMassachusetts Institute of Technology Massachusetts Institute of Technology
Different types of estimates are required as a project evolvesDifferent types of estimates are required as a project evolvesConceptual & Preliminary EstimatesConceptual & Preliminary Estimates
Prepared early in the project prior to engineering design complePrepared early in the project prior to engineering design completion (e.g., to tion (e.g., to tell Owner whether the contemplated project scope is feasible)tell Owner whether the contemplated project scope is feasible)
Incorporate new information from design to obtain an updated estIncorporate new information from design to obtain an updated estimate of imate of the projectthe project
Detailed EstimatesDetailed EstimatesPrepared from completed plans and specificationsPrepared from completed plans and specifications
Definitive EstimatesDefinitive EstimatesForecast the project cost within allowable limits from a combinaForecast the project cost within allowable limits from a combination of tion of conceptual and detailed information often including partial contconceptual and detailed information often including partial contract and ract and other procurement awardsother procurement awards
Show changes of costs over time by upgrading the cost of similarShow changes of costs over time by upgrading the cost of similar facilities facilities from the past to the presentfrom the past to the present
Cost indices show the changes of a certain facility’s costs over timeYear 1913 = 100, …Year 2007 = 4432
If Facility A is similar to my ‘wish’ facility and I know the value of Facility A at 1913,I can assume my ‘wish’ facility’s value at 2007.
Sketch of building and surroundings removed due to copyright restrictions.
Cost IndicesCost Indices
Source: http://www.enr.com/features/conEco/
Show changes of costs over time by upgrading the cost of similarShow changes of costs over time by upgrading the cost of similar facilities facilities from the past to the presentfrom the past to the present
Used to determine the general construction costs of structuresUsed to determine the general construction costs of structures
Published periodically by Engineering News Record (ENR) and othePublished periodically by Engineering News Record (ENR) and other r publicationspublications
ENRENR’’ss Building Cost Index (BCI): Changes of facilityBuilding Cost Index (BCI): Changes of facility’’s costs over times costs over timeFacilityFacility’’s components are:s components are:
1,088 Board Feet of Lumber (2x4, 201,088 Board Feet of Lumber (2x4, 20--city Average)city Average)1 Board Feet = 11 Board Feet = 1’’ x 1x 1’’ x 1x 1”” = 144 in= 144 in33
(e.g., 2(e.g., 2××4 4 -- 10 ft long contains [(210 ft long contains [(2××4)4)××10] 10] ×× 12] = 960 in12] = 960 in3 3 →→ 6.67 board feet)6.67 board feet)
2500 Pounds of Structural2500 Pounds of Structural--Steel Shapes (20Steel Shapes (20--city Average, Base Mill Price before 1996, city Average, Base Mill Price before 1996, Fabricated after 1996)Fabricated after 1996)
1.128 Tons of Portland Cement (Bulk, 201.128 Tons of Portland Cement (Bulk, 20--city Average)city Average)
66.38 Hours of Skilled Labor (2066.38 Hours of Skilled Labor (20--City Average of Bricklayers, Carpenters, and Structural City Average of Bricklayers, Carpenters, and Structural Ironworkers)Ironworkers)
Building Cost Index Data (1990Building Cost Index Data (1990––Date)Date)
Source: http://www.enr.com/features/conEco/
JAN. FEB. MARCH APRIL MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. ANNUAL AVG.
Cost Indices Component CalculationsCost Indices Component Calculations
ENRENR’’s Construction Cost Index:s Construction Cost Index:
Used when labor costs are a high proportion of total costUsed when labor costs are a high proportion of total cost
Components:Components:
1,088 Board Feet of Lumber (2x4, 201,088 Board Feet of Lumber (2x4, 20--city Average)city Average)
1 Board Feet = 11 Board Feet = 1’’ x 1x 1’’ x 1x 1”” = 144 in= 144 in33
2,500 Pounds of Structural2,500 Pounds of Structural--Steel Shapes (20Steel Shapes (20--city Average, Base Mill Price Before city Average, Base Mill Price Before 1996, Fabricated after 1996)1996, Fabricated after 1996)
1.128 Tons of Portland Cement (Bulk, 201.128 Tons of Portland Cement (Bulk, 20--city Average)city Average)
200 Hours of Common Labor (20200 Hours of Common Labor (20--city Average)city Average)
Cost Indices Use and AccuracyCost Indices Use and Accuracy
Accuracies Within 20% to 30% of Actual CostsAccuracies Within 20% to 30% of Actual Costs
Negligible Time and EffortNegligible Time and Effort
Valuable for Preliminary PlanningValuable for Preliminary Planning
Cost Indices Cost Indices -- LimitationsLimitations
Adapted from: Barrie & Paulson, 1992
Problems could arise if the proportions of the input components (e.g., lumber) in a building type cost index do not reflect the resources used on the project in question
E.g., about 40 % of the costs in a petrochemical project is in pE.g., about 40 % of the costs in a petrochemical project is in piping (pipe and pipe iping (pipe and pipe fitters)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, changes in technology, and competitiveness of contractors
Apply to changes in size, scope, or capacity of projects of similar types
Reflect the nonlinear increase in cost with size (economies of scale, learning curves)
C2 = C1 (Q2/Q1) x
Where Where CC2 2 = estimated cost of the new facility w/capacity Q= estimated cost of the new facility w/capacity Q22
CC11 = known cost of facility of capacity Q= known cost of facility of capacity Q11
x = the costx = the cost--capacity factor for this type of work capacity factor for this type of work
CostCost--Capacity Factor Capacity Factor
Source: Barrie & Paulson, 1992
Q is a parameter that reasonably reflects the size of the faciliQ is a parameter that reasonably reflects the size of the facility ty (e.g., barrels per day produced by a refinery, tons of steel per(e.g., barrels per day produced by a refinery, tons of steel per day day produced by a steel mill, gross floor area for a warehouse)produced by a steel mill, gross floor area for a warehouse)
X is an empirically derived factor based on wellX is an empirically derived factor based on well--documented documented historical records for a variety of different types of projectshistorical records for a variety of different types of projects
CostCost--Capacity Factor ExampleCapacity Factor Example
Example Revisit:Example Revisit:
Warehouse Estimate: Assume you have an estimate to a similar warWarehouse Estimate: Assume you have an estimate to a similar warehouse ehouse
located nearby and completed in 1993 for a cost of $4,200,000. Wlocated nearby and completed in 1993 for a cost of $4,200,000. We are e are
planning to build a new warehouse in Feb. of 2007. The ENR indexplanning to build a new warehouse in Feb. of 2007. The ENR index for for
1993, relative to the base date of 1913, was 2996% and the ENR i1993, relative to the base date of 1913, was 2996% and the ENR index for ndex for
2007 is 4432%.2007 is 4432%.
Consider the costConsider the cost--capacity factor x = 0.8 for a warehouse. capacity factor x = 0.8 for a warehouse.
The above warehouse has a usable area of 120,000 square feetThe above warehouse has a usable area of 120,000 square feetThe prospective owner for the new warehouse wants a structure with a usable area of 150,000 square feet
CostCost--Capacity Factor ExampleCapacity Factor Example
What Information Do We Need?What Information Do We Need?
A 25% more capacity implies only 20% more costsA 25% more capacity implies only 20% more costs
Combining Cost Indices & CostCombining Cost Indices & Cost--Capacity FactorCapacity Factor
Combine Cost Indices & Cost Capacity Factors to take into Combine Cost Indices & Cost Capacity Factors to take into account changes in both time & capacityaccount changes in both time & capacity
C2 = C1 (Ib / Ia) (Q2 / Q1)x
Where Where IIbb = Index number = Index number ““NowNow”” or present time.or present time.IIaa = Index number at that time = Index number at that time
Source: Barrie & Paulson, 1992
Cost Indices & CostCost Indices & Cost--Capacity Factor Capacity Factor ExampleExample
Example Revisit:Example Revisit:
Warehouse Estimate: Assume you have an estimate to a similar warWarehouse Estimate: Assume you have an estimate to a similar warehouse ehouse
located nearby and completed in 1993 for a cost of $4,200,000. Wlocated nearby and completed in 1993 for a cost of $4,200,000. We are e are
planning to build a new warehouse in Feb. of 2007. The ENR indexplanning to build a new warehouse in Feb. of 2007. The ENR index for for
1993, relative to the base date of 1913, was 2996% and the ENR i1993, relative to the base date of 1913, was 2996% and the ENR index for ndex for
2007 is 4432%.2007 is 4432%.
Consider the costConsider the cost--capacity factor x = 0.8 for a warehouse. capacity factor x = 0.8 for a warehouse.
The above warehouse has a usable area of 120,000 square feetThe above warehouse has a usable area of 120,000 square feetThe prospective owner for the new warehouse wants a structure with a usable area of 150,000 square feet
Parameter Costs Source DataParameter Costs Source Data
Commonly used in building constructionCommonly used in building constructionENR ENR ““Quarterly Cost RoundupQuarterly Cost Roundup””R.S. Means R.S. Means ““Means Square Foot CostsMeans Square Foot Costs””
Relates all costs of a project to just a few physical measures, Relates all costs of a project to just a few physical measures, or or ““ParametersParameters””, that reflect the size or scope of the project, that reflect the size or scope of the project
E.g., warehouse E.g., warehouse -- the the ““ParameterParameter”” would be would be ““Gross Enclosed Floor Gross Enclosed Floor AreaArea””
all costs represented by X ($/S.F) all costs represented by X ($/S.F) →→ total cost = X ($/S.F.) total cost = X ($/S.F.) ×× the the projectproject’’s gross enclosed floor area (S.F.)s gross enclosed floor area (S.F.)
With good historical records on comparable structures, With good historical records on comparable structures, parameter costing can give reasonable levels of accuracy for parameter costing can give reasonable levels of accuracy for preliminary estimatespreliminary estimates
Means Square Foot CostMeans Square Foot CostCosts per Square FootCosts per Square FootType of Facility (total 23,000 S.F apartment with 3 stories)Type of Facility (total 23,000 S.F apartment with 3 stories)
Source: RS Means, Square Foot Costs Data, 2006
Story Height = 10Story Height = 10’’ and No Basementand No Basement
Commercial/Industrial/Institutional1. M.010 2. Apartment, 1-3 Story
Figure by MIT OCW.
Parameter Cost ExampleParameter Cost Example
Source: RS Means, Square Foot Costs Data, 2006
What is the Cost for an apartment building (7 Story) if the 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 perimeter of the building is 502 L.F. and the story height is 1111’’--44””? Assume that the apartment building has decorative ? Assume that the apartment building has decorative concrete block on the east, west & south walls. The north concrete block on the east, west & south walls. The north walls external finish is brick with concrete block backup. walls external finish is brick with concrete block backup. The area of each floor of the apartment building 11,460 S.F. 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 The basement floor area s 4,200 S.F. Please use the Means Square Foot Cost to obtain an estimate. The building frame Square Foot Cost to obtain an estimate. The building frame is steel. The apartment building is located in Atlantic City, is steel. The apartment building is located in Atlantic City, New Jersey, Zip Code 07410.New Jersey, Zip Code 07410.
Characteristics of the Apartment BuildingCharacteristics of the Apartment Building6060’’ x 191x 191’’ = 11,460 S.F./Floor= 11,460 S.F./Floor2 * [1912 * [191’’ + 60+ 60’’] = 502 L.F. Perimeter] = 502 L.F. Perimeter7 Floors7 FloorsExterior Walls: Exterior Walls:
North wall: Face brick w/ concrete block backupNorth wall: Face brick w/ concrete block backupEast, West & South walls: Decorative Concrete BlockEast, West & South walls: Decorative Concrete Block
Story Height: 11Story Height: 11’’--44””Basement Area: 4,200 S.FBasement Area: 4,200 S.FSteel FrameSteel FrameLocated in Atlantic City, New Jersey, Zip Code 07410Located in Atlantic City, New Jersey, Zip Code 07410
Coefficients are determined from Model Number M.020 for ApartmenCoefficients are determined from Model Number M.020 for Apartment, t, 44--7 Story type (Refer to RS Means (2006) 7 Story type (Refer to RS Means (2006) -- Square Foot Costs, page 80) Square Foot Costs, page 80)
For Basement, add $ 27.30 per square foot of basement area
The above costs were calculated using the basic specifications shown on the facing page. These costs should be adjusted where necessary for design alternatives and owner's requirements. Reported completed project costs, for this type of structure, range from $ 54.35 to $ 157.75 per S.F.
Commercial/Industrial/InstitutionalM.020 Apartment, 4-7 Story
For Basement, add $ 27.30 per square foot of basement area
The above costs were calculated using the basic specifications shown on the facing page. These costs should be adjusted where necessary for design alternatives and owner's requirements. Reported completed project costs, for this type of structure, range from $ 54.35 to $ 157.75 per S.F.
Commercial/Industrial/InstitutionalM.020 Apartment, 4-7 Story
RS Means (2006) – Square Foot Costs, Page 80
Figure by MIT OCW.
Source: RS Means, Square Foot Costs Data, 2006
What should be adjusted when the cost is to be established What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?by using the Means Square Foot Cost Method?
For Basement, add $ 27.30 per square foot of basement area
The above costs were calculated using the basic specifications shown on the facing page. These costs should be adjusted where necessary for design alternatives and owner's requirements. Reported completed project costs, for this type of structure, range from $ 54.35 to $ 157.75 per S.F.
Commercial/Industrial/InstitutionalM.020 Apartment, 4-7 Story
Basic SF Costs for 80,000 S.F apartment building with Face Brick w/ Concrete Block Backup
Basic SF Costs for 80,000 S.F apartment building with Decorative Concrete Block
Figure by MIT OCW.
Basic SF Cost in R.S. Means for S.F Area=80000, L.F Perimeter = Basic SF Cost in R.S. Means for S.F Area=80000, L.F Perimeter = 530, Story 530, Story Height = 10Height = 10’’ & No Basement& No Basement
$128.35/SF when exterior walls are Brick w/ Concrete Block Backu$128.35/SF when exterior walls are Brick w/ Concrete Block Backup (North)p (North)
$122.25/SF when exterior walls are Decorative Concrete Block (Ea$122.25/SF when exterior walls are Decorative Concrete Block (East, West, south)st, West, south)
North wall makes up:North wall makes up:
[191[191’’/502/502’’] x 100 = 38.04 % of total building perimeter] x 100 = 38.04 % of total building perimeter
East, West & South walls make up:East, West & South walls make up:
[(191[(191’’+2x60+2x60’’)/502)/502’’] x 100 = 61.96 % of total building perimeter] x 100 = 61.96 % of total building perimeter
What should be adjusted when the cost is to be established What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?by using the Means Square Foot Cost Method?
For Basement, add $ 27.30 per square foot of basement area
The above costs were calculated using the basic specifications shown on the facing page. These costs should be adjusted where necessary for design alternatives and owner's requirements. Reported completed project costs, for this type of structure, range from $ 54.35 to $ 157.75 per S.F.
Commercial/Industrial/InstitutionalM.020 Apartment, 4-7 Story
Apartment building perimeter is 28 L.F (530 Apartment building perimeter is 28 L.F (530 --502) less than the M.020 model building in RS Means502) less than the M.020 model building in RS Means
Perimeter adjustment factor: $2.65 per 100 L.F Perimeter adjustment factor: $2.65 per 100 L.F
Apartment building story height is 1Apartment building story height is 1’’ 44”” (11(11’’ 44’’’’--1010’’) more than the M.020 model building in RS Means) more than the M.020 model building in RS Means
Height adjustment factor: $1.20 per ft Height adjustment factor: $1.20 per ft
Apartment Building initial total cost: $125.5 * 80,220 S.F = $10Apartment Building initial total cost: $125.5 * 80,220 S.F = $10,067,610,067,610
Source: RS Means, Square Foot Costs Data, 2006
Parameter Cost ExampleParameter Cost Example
Source: RS Means, Square Foot Costs Data, 2006
What should be adjusted when the cost is to be established What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?by using the Means Square Foot Cost Method?
For Basement, add $ 27.30 per square foot of basement area
The above costs were calculated using the basic specifications shown on the facing page. These costs should be adjusted where necessary for design alternatives and owner's requirements. Reported completed project costs, for this type of structure, range from $ 54.35 to $ 157.75 per S.F.
Commercial/Industrial/InstitutionalM.020 Apartment, 4-7 Story
RS Means (2006) – Square Foot Costs, Page 80
Basement Addition FactorFigure by MIT OCW.
Apartment Building initial total cost: $125.5 * 80,220 S.F = $10Apartment Building initial total cost: $125.5 * 80,220 S.F = $10,067,610,067,610
Basement Addition:Basement Addition:
Apartment building has 4,200 S.F basementApartment building has 4,200 S.F basement
Basement Addition Factor: $27.30 per S.F of basement areaBasement Addition Factor: $27.30 per S.F of basement area
What should be adjusted when the cost is to be established What should be adjusted when the cost is to be established by using the Means Square Foot Cost Method?by using the Means Square Foot Cost Method?
Location Modifier for Residential Bldg: 1.13 (Refer to RS Means Location Modifier for Residential Bldg: 1.13 (Refer to RS Means (2006) (2006) --Square Foot Costs, page 455) Square Foot Costs, page 455)
Apartment building modified total cost: $10,182,270 * 1.13 = $ Apartment building modified total cost: $10,182,270 * 1.13 = $ 11,505,96511,505,965
Source: RS Means, Square Foot Costs Data, 2006
Parameter Cost ExampleParameter Cost Example
Parameter Cost ExampleParameter Cost Example
Source: RS Means, Square Foot Costs Data, 2006
What is the Cost for an apartment building (7 Story) if the 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 perimeter of the building is 502 L.F. and the story height is 1111’’--44””? Assume that the apartment building has decorative ? Assume that the apartment building has decorative concrete block on the east, west & south walls. The north concrete block on the east, west & south walls. The north walls external finish is brick with concrete block backup. walls external finish is brick with concrete block backup. The area of each floor of the apartment building 11,460 S.F. 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 The basement floor area s 4,200 S.F. Please use the Means Square Foot Cost to obtain an estimate. The building frame Square Foot Cost to obtain an estimate. The building frame is steel is steel with an observed age of 20 years. with an observed age of 20 years. The apartment The apartment building is located in Atlantic City, New Jersey, Zip Code building is located in Atlantic City, New Jersey, Zip Code 07410.07410.
Source: RS Means, Square Foot Costs Data, 2006
What should be adjusted when the cost is to be established by usWhat should be adjusted when the cost is to be established by using the ing the Means Square Foot Cost Method?Means Square Foot Cost Method?
Location Modifier for Residential BuildingLocation Modifier for Residential Building
$ 11,505,965$ 11,505,965
Depreciation Adjustment for steel frame building with 20 year obDepreciation Adjustment for steel frame building with 20 year observed served age: 20 % (Refer to RS Means (2006) age: 20 % (Refer to RS Means (2006) -- Square Foot Costs, page 228)Square Foot Costs, page 228)
Different types of estimates are required as a project evolvesDifferent types of estimates are required as a project evolvesConceptual & Preliminary EstimatesConceptual & Preliminary Estimates
Prepared early in the project prior to engineering design complePrepared early in the project prior to engineering design completion (to tell tion (to tell Owner whether the contemplated project scope is feasible)Owner whether the contemplated project scope is feasible)
Incorporate new information from design to obtain an updated estIncorporate new information from design to obtain an updated estimate of imate of the projectthe project
Detailed EstimatesDetailed Estimates
Prepared from completed plans and specificationsPrepared from completed plans and specifications
Definitive EstimatesDefinitive EstimatesForecast the project cost within allowable limits from a combinaForecast the project cost within allowable limits from a combination of tion of conceptual and detailed information often including partial contconceptual and detailed information often including partial contract and ract and other procurement awardsother procurement awards
Design & Estimating ProcessDesign & Estimating Process
Important General LessonImportant General Lesson
Precision in detailed estimates does not mean accuracy!Precision in detailed estimates does not mean accuracy!More an art than a scienceMore an art than a science
Detailed quantitative estimates possible Detailed quantitative estimates possible –– but ignore important qualitative factorsbut ignore important qualitative factors
Have differing ranges of uncertaintiesHave differing ranges of uncertainties
Actual costs depend on systemic complexityActual costs depend on systemic complexityTwo types of complexity at issueTwo types of complexity at issue
System complexity (dynamic interactions, etc.)System complexity (dynamic interactions, etc.)
Always consider:Always consider:What are assumptions behind the estimate?What are assumptions behind the estimate?
What factors are being ignored?What factors are being ignored?
How might these factors change the estimate?How might these factors change the estimate?
Detailed EstimatesDetailed Estimates
After most or all of the detail design work is complete, After most or all of the detail design work is complete, approximate estimates are refined using detailed estimatesapproximate estimates are refined using detailed estimates
Design & Estimating ProcessDesign & Estimating Process
Engineer’s Bid
Bid Detailed EstimatesBid Detailed Estimates
ContractorContractor’’s estimate low enough to obtain the work, yet high enough to maks estimate low enough to obtain the work, yet high enough to make e profitprofit
Who? Who? –– contractorcontractor
More detail depending upon the contractorMore detail depending upon the contractor’’s own procedures s own procedures
Overall unit prices (past) Overall unit prices (past) →→ detailed categories (present)detailed categories (present)
Often relies on Often relies on Historical productivity data for companyHistorical productivity data for company
Intuition on speed of movementIntuition on speed of movement
Quantity takeoff for most important itemsQuantity takeoff for most important items
Subcontractor bidsSubcontractor bidsSometimes less detailed than engineerSometimes less detailed than engineer’’s estimates s estimates -- subcontractors from 30% to 80% of subcontractors from 30% to 80% of the projectthe project
Building (EngineerBuilding (Engineer’’s estimates)s estimates)
FoundationsFoundations
PilesPiles
Concrete Concrete foundationsfoundations
Steel Steel erectionerection
StructuralStructural steelsteel
ColumnsColumns
BeamsBeams
DetailDetail steelsteel
Concrete Concrete decksdecks
StairsStairs
Bid Detailed EstimatesBid Detailed Estimates
Is estimating a streamlined process? Is estimating a streamlined process? A look at bids received for a typical project in a competitive aA look at bids received for a typical project in a competitive area will rea will sometimes show more than 50% difference between the low and the sometimes show more than 50% difference between the low and the high high biddersbidders
Different types of estimates are required as a project evolvesDifferent types of estimates are required as a project evolvesConceptual & Preliminary EstimatesConceptual & Preliminary Estimates
Prepared early in the project prior to engineering design complePrepared early in the project prior to engineering design completion (to tell tion (to tell Owner whether the contemplated project scope is feasible)Owner whether the contemplated project scope is feasible)
Incorporate new information from design to obtain an updated estIncorporate new information from design to obtain an updated estimate of imate of the projectthe project
Detailed EstimatesDetailed EstimatesPrepared from completed plans and specificationsPrepared from completed plans and specifications
Definitive EstimatesDefinitive Estimates
Forecast the project cost within allowable limits from a combinaForecast the project cost within allowable limits from a combination tion of conceptual and detailed information often including partial of conceptual and detailed information often including partial contract and other procurement awardscontract and other procurement awards
Design & Estimating ProcessDesign & Estimating Process
Definitive EstimatesDefinitive Estimates
There comes a time when a definitive estimate can be prepared thThere comes a time when a definitive estimate can be prepared that will forecast at will forecast the final project cost with little margin for errorthe final project cost with little margin for error……
This error can be minimized through the proper addition of an evThis error can be minimized through the proper addition of an evaluated aluated contingencycontingency
EngineerEngineer’’s estimates can complete this processs estimates can complete this process
The proper time to classify an estimate as The proper time to classify an estimate as ‘‘definitivedefinitive’’ will vary according to the will vary according to the characteristics of the project. For example:characteristics of the project. For example:
Traditional Traditional
UnitUnit--price price
Professional CMProfessional CM
DesignDesign--BuildBuild
Definitive Estimates:Definitive Estimates:Traditional & Unit PriceTraditional & Unit Price
Start ContractDetailed design Preliminary design
Start ContractDetailed design Preliminary design
DBB definitive estimateDBB definitive estimate
Unit Price definitive estimateUnit Price definitive estimate
Cost Classification Cost Classification -- Direct CostDirect CostLabor CostLabor Cost
Direct Labor CostDirect Labor CostDifficult to evaluate precisely but all effort is done to get anDifficult to evaluate precisely but all effort is done to get an accurate estimate as possibleaccurate estimate as possible
Greatest amount of uncertainty in project estimationGreatest amount of uncertainty in project estimation
Indirect Labor CostIndirect Labor CostCosts that are additional to the basic hourly rates (e.g., tax, Costs that are additional to the basic hourly rates (e.g., tax, insurance, fringe benefits)insurance, fringe benefits)
Substantial in amount: add 25 to 50 percent to direct labor costSubstantial in amount: add 25 to 50 percent to direct labor costss
Commonly used approach adds indirect labor costs as a percentageCommonly used approach adds indirect labor costs as a percentage to the total direct labor costs or for to the total direct labor costs or for each major work categoryeach major work category
Material CostMaterial Cost
All materials that are utilized in the finished structure.All materials that are utilized in the finished structure.
Equipment CostEquipment Cost
Costs Includes: ownership, lease or rental expenses, and operatCosts Includes: ownership, lease or rental expenses, and operating costsing costs
Subcontractor PriceSubcontractor Price
Includes quotations from all subcontractors working on the projeIncludes quotations from all subcontractors working on the projectct
Quotations submitted by the subcontractor usually require extensQuotations submitted by the subcontractor usually require extensive review by the general ive review by the general contractorcontractor’’s estimator to determine what they include & do not includes estimator to determine what they include & do not include
Source: Clough et al., 2005; Barrie & Paulson, 1992
Markup Markup Added at the close of the estimating processAdded at the close of the estimating processVaries between 5 to 20 percent of the job costVaries between 5 to 20 percent of the job costReflects the contractorReflects the contractor’’s appraisal of the probability of being the lowest s appraisal of the probability of being the lowest bidder for the project & the chances of making a reasonable profbidder for the project & the chances of making a reasonable profititFactors considered when deciding on a job markup include: projecFactors considered when deciding on a job markup include: project size & t size & complexity, provisions of the contract documents, difficulties icomplexity, provisions of the contract documents, difficulties inherent in nherent in the work, identities of the owner & architect/engineerthe work, identities of the owner & architect/engineerInclude allowance for:Include allowance for:
General Overhead or Office OverheadGeneral Overhead or Office OverheadIncludes costs that are incurred to support the overall company Includes costs that are incurred to support the overall company construction program construction program Normally included in the bid as a percentage of the total estimaNormally included in the bid as a percentage of the total estimated job cost ted job cost Examples of general business expenses include: office rent, offiExamples of general business expenses include: office rent, office insurance, heat, electricity, ce insurance, heat, electricity, office supplies, furniture, telephone & internet, legal expensesoffice supplies, furniture, telephone & internet, legal expenses, donations, advertising, travel, , donations, advertising, travel, association dues, and the salaries of executives & office employassociation dues, and the salaries of executives & office employeesees
Location on jobsite, noise, proximity to materialsLocation on jobsite, noise, proximity to materialsManagement style (e.g., incentive)Management style (e.g., incentive)Worksite rulesWorksite rules
Learning CurvesLearning Curves
Particularly useful for repetitive works
Ave
rage
man
-hou
rs p
er u
nit
Number of units Number of unitsn
Figure by MIT OCW.
Productivity Effects of OvertimeProductivity Effects of Overtime
0
2.5
2.0
1.5
1.01 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Week
Cos
t inc
reas
e fa
ctor
(40-
hour
wee
k =
1.0)
50-hour week
60-hour week
Cumulative cost of overtime(including productivity & premium losses)
00.5
0.8
0.9
1.0
0.6
0.7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Week
Prod
uctiv
ity r
elat
ive
to40
-hou
r w
eek
50-hour week
60-hour week
Points of no return
Cumulative effect of overtime on productivity
Figure by MIT OCW.
Concluding RemarksConcluding Remarks
Functions of EstimatingFunctions of Estimating
Could Assess cost of construction from the conceptual design phaCould Assess cost of construction from the conceptual design phase se (Owner, Designer & Sometimes Contractor ). Feedback to(Owner, Designer & Sometimes Contractor ). Feedback to
Conceptual Design for Alternative ArchitectureConceptual Design for Alternative Architecture
Feasibility of the Project Feasibility of the Project
Project / Company Alignment of Objectives, Constraints, StrategiProject / Company Alignment of Objectives, Constraints, Strategic Goals c Goals and Policiesand Policies
Provide the basis for bidding & contracting (Contractor) Provide the basis for bidding & contracting (Contractor)
Provide a baseline for cost control and post project evaluation Provide a baseline for cost control and post project evaluation (Owner & Contractor)(Owner & Contractor)
Concluding RemarksConcluding Remarks
In Converting an Estimate to a Control Budget, Consider:In Converting an Estimate to a Control Budget, Consider:
The organization and categorization of costs suitable for preparThe organization and categorization of costs suitable for preparing an ing an estimate are often not compatible with realistic field cost contestimate are often not compatible with realistic field cost control (e.g., rol (e.g., might be convenient for the owner)might be convenient for the owner)
Estimates necessarily deal in averages, whereas tighter standardEstimates necessarily deal in averages, whereas tighter standards are s are sometimes desirable for control purposessometimes desirable for control purposes