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Estimating and Bidding
Estimating Basics I
24
Other
Undergraduate 1
02/17/2015

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Term
What is Cost Management?
Definition

The management of costs of a project using;

  • Cost Estimating
  • Cost Trending
    • Expenditures that are trending realtive to physical accomplishments
  • Cost Forecasting
    • Predicting an estimate of future conditions and events
  • Life-cycle Costing
    • Evaluating the initial investment, replacements, operations and maintenance/repair of a investment decision
Term
Define Cost Estimating?
Definition
It is a prediction of quantities, costs and/or price of resources required by the scope of an investment option, activity or project. Predicts future costs based on historical data, includes both an expected cost and a probabilistic cost distribution.
Term
Why is an estimate necessary from owners and contractors view?
Definition

Owners view the cost estimate as a tool to determine project scope or whether the project should proceed. Contractors use the cost estimate to determine construction bid or whether the company will be bid on project.

Term
What are the phases of estimates.
Definition
  1. Program - prepare conceptual estimate
  2. Schematic - establish budget for each element of project
  3. Design Development - estimate is firmed up as more information is available (Baseline Budget)
  4. Contract Document - final pre-bid to anticipate contractors bid amount
  5. Contractor Selection - prepare bid estimate for contract
  6. Construction - compile quotes for change orders, cost control by contractor
Term
Cost estimate project level uses are?
Definition
  • Cost control (Budget to monitor project costs)
  • Baseline for project productivity tracking and progressing
  • Baseline for construction schedule and planning
  • Inputs for project execution strategies
  • Material and equipment procurement
  • Contractor evaluation (Bidding and Tendering or sub-contracting)
  • Historical information for new cost estimate
  • Input to lessons learned
Term
Should an estimate be 100% accurate?
Definition
No, as there are too many variables that affect costs at any time and place that influences the accuracy and consistency of an estimate.
Term
Can we automate estimating?
Definition
Estimates require more than numbers to comprise a detailed estimate. There has to be expert judgement to analyze all information to determine what factors will affect the cost estimate.
Term
What is estimate classification?
Definition

It is the level of accuracy of a project. Classification enables stage-gating project evolution:

  • Measurement by how well the estimated costs compares to actual costs.
  • Accuracy range should be determined for all estimates.
  • All estimates are based on assumptions and there are risks associated with over-runs and under-runs of a single point value.
  • Estimates should reflect a range of cost outcomes.
Term
What is the definition of Maturity Level of a Project?
Definition
  • "Primary" Characteristic, depends on % of complete definition.
    • This is based on types of Planning, Design and Other input information available.
  • Used in Traditional Delivery methods as well as PPP.
Term
List Estimate Classifications.
Definition

Class 5 - ML 0-2%   Conceptual

Class 4 - ML 1-15% Concept Study

Class 3 - ML 10-40% Design Development

Class 2 - ML 30-75% Bid/Tender

Class 1 - ML 65-100% Controlling Estimate/Change Orders

Term

 

[image]
What does the graph say?
Definition
That the ranges are greater at the start of the project due to scope not being known but as the unknowns are defined the range reduces.
Term
What other factors will impact the estimate class?
Definition
  • Complexity of Project
  • Quality of Cost Estimate Data
  • Quality of Assumptions
  • Skills of Estimator
  • Time and Level of Efforts in Estimating Technique
    • Estimate End Usage
    • Estimate Methodoloy/Type
    • Expect Accuracy Range
    • Estimate Preparation Effort

*ON REFEAT PROJECTS WITH GOOD HISTORICAL DATA-CLASS 5 ESTIMATE MAY HAVE AN ACCURACY OF A CLASS 3 ESTIMATE*

Term
List some Characteristics of a Class 5 Estimate?
Definition
  • Limited information of project.
  • Very little time to produce.
  • 0-2% Definitions
  • Used for strategic decision project screening or capital planning future
  • Methods: Area factors, Historical Unit Prices
  • Accuracy Range: -20 to-30% and +30 to +50%
  • Known as Concept Design Estimate, Rough Order-of-Magnitude, Rule of Thumb
Term
List some Characteristics of a Class 3 Estimate?
Definition
  • Used "Basis of Budget Authorization"
  • Project is 10-40% defined
  • Design information required-Site Plans, Soils Report, Utility Plans, Single Line Diagrams, Floor Layouts
  • Methods - Unit Cost Line Items (Assembly Level)
  • Factoring used for less important items
  • Accuracy Range: -5 to -15% and +10 to +20%(incl. Contingency)
Term
List some characteristics of a Class 2 Estimate.
Definition
  • Detailed Contractor control Baseline
  • Used by Contractors in bid estimate for contract value
  • Drawings are 30-70% Design Complete drawings but may lack detail
  • Methods: Deterministic Estimate, many line items
  • Accuracy Range: -5 to -10% and +5 to +15%
Term
List some characteristics of a Class 1 Estimate.
Definition
  • Prepard for parts of Project
  • Used by Sub-Contractors for bids, also used as bid check by owner
  • Drawings 70-100% Complete
  • Unit cost line items
  • Bottom-Up Estimate with Labour, Material, Equipment and Sub-Contractors, Definitively detailed
  • Accuracy Range: -3 to -5% and +3 to +10%
Term
What is Estimate Accuracy?
Definition
  • Measured by how well the estimated costs compares to actual costs
  • Increases as project becomes more defined
  • No set ranges that can be applied to all estimates so range should be determined on a project by project basis
Term
Are Estimators responsible for determining Accuracy Range of the estimate?
Definition
Estimators do not control all variables in estimate preparation for example "Quality of Drawings", their assumption is the drawings are accurate. Other factors that control costs of an estimate that Estimators are not in control of is the Project Scope, Project Planning and Exection Strategy.
Term
Who uses and when the two types of estimates Bottom-Up and Top-Down?
Definition
  1. Top-Down is used where budget is determined first. Contractor/Designer is asked to perform under the budget constraints. In Design-Build, Contractor will be given the maximum budget and work has to within that budget. So the top components are determined first and the Engineer/Designer will design and specify according to the given budget. 
  2. Bottom-Up estimate the Owner will use to come up with probable cost of the Project. When primary components have been decided on, the Estimator can use the Bottom-Up estimate to confirm the cost of that component for the given specifications

Accuracy in both methods can be fairly accurate.

Term

List some descriptions of Preliminary Estimates?

 

Definition
  • Need high-level of precision
  • Typically Class 5 or 4 Estimate
  • Accuracy depends on
    • Project definitions
    • Quality of historical data
    • Skills of the Estimator
  • Used in repeat projects
Term
List some methods of preliminary estimates and some examples.
Definition
  • Single Rate
    1. Price Per Unit (Hospital beds, per unit cost in an apartment building)
    2. Price Per Unit Area: SQF/SQM
    3. Price Per Unit Volume: F3/M3(Warehouses)
  • Multi-Rate Methods
    1. Price per Typical bay (including all components Mechnical/Electrical) Muliply by # of bays and exterior wall)
    2. Assembly Estimate
  • Capacity Factor Method
    • formula drived from new facility (X) from a cost of similar facility (A) of known but different capacity.
      • e = is the exponent or proportion factor or correlation exponent
      • e = typically between 0.5 and 0.85
        • represents the slope curve to reflect the change in price. Know as "six-tenth" method as 'e' is taken as 0.6n absence of any information
  • Ratio or Factor Method
    • cost of facility can be derived from cost of major components
    • assumes that "ratio" exists between major components and other costs
    • use in process industry where cost is driven by the major equipment (aka equipment factor)
    • apply to costs within battery limit
    • very complex method to calculate the ratio factor
    • does not incl. OH, indirect field costs, outside battery limit costs
Term
What are the examples of Parametric Methods of estimating?
Definition
Ratio Method and Factor Method, these methods are a mathematical relationship between the various parameters. By modelling these relationships (between dependent and independent variables) one can estimate the 'Dependent' variables given the information about the dependent variable.
Term
Single-Rate, Multi-Rate, Capacity Factor and Ratio or Factor Methods all represent conceptual estimates. What are some of the deficinices of these estimate methods?
Definition
  1. Project location
  2. Common utilities (power, water, gas)
  3. Project site dimensions
  4. Physical dimensions between site major components (condensed or spread out)
  5. Geographical market conditions (Contractor availability, Labour supply and demand)
  6. Extreme weather conditions
  7. Difference between direct and indirect costs
  8. Indirect costs have to isolated
Term
When should Parametric Modeling be used?
Definition
  • When processes are reliable and repeatable
  • Where there is sufficient historical data to draw parametric relationships
  • Sufficient industry data exists to draw a parametric relationship
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