Construction Cost Estimating Class #2: Concept Estimating Prof. Ralph V. Locurcio, PE

 A complex process involving the collection of available information on the scope of a project, the expected resource consumption, and future changes in resource costs.  This information is synthesized in a visualization of the construction process and translated into an approximation of the final cost.

 Extensive knowledge of:  Construction processes & methods  Materials & methods  Contracts & work practices  Construction documents & details  Background business factors  Design & code requirements  Verbal & written communications  Good common sense & judgment

Yes No

 Systematic analysis of:  Project components  Equipment needed  Construction methods  Temporary work items  Support activities  Externalities

 Conceptual  Used for early decisions & feasibility  Rough estimate using minimal data  Relies heavily on past data  Level of accuracy about 70%  Detailed  Used for major decisions; i.e. bids & budgets  Based on final design documents  Level of accuracy up to 95%

% Accuracy % Design

 Based on prior experience:  Weight check… weight of equipment  Cost-capacity factor- ratio of Q/$  Comparative cost of structure – $/unit  Feasibility estimates  Appropriations estimates  Time & location adjustments

 Basis is cost per unit based on past experience with similar units.  Compare structures of like construction, (e.g. school: steel, concrete, quality, local labor, weather)  Develop cost per unit, e.g. A$/pupil = A Cost/A pupils  Apply to new construction: B Cost = B pupils x A$/pupil

 Schools: $/pupil  Bridges: $/feet of span  Stadium: $/seat  Hospital: $/beds  Offices: $/ft 2  Warehouses: $/ft 3

 Plant cost ratio… process plant ratio differentiates machine ft 2 from admin ft 2  Floor area… cost/ft 2 … but  Total horizontal area… all floors equal  Finished floor area… $ based on type finish  Cubic foot of volume… floor height varies

 Used for capital budgeting  Expect 80-90% accuracy  Based on historical data base  Methods:  Panel… hist data on “typical” panels  Bay… hist data on “typical” bays  Plant component… equip cost + other TPC = ET/(1-PT) Where ET=tot equip cost/(1-% all other cost items) ET = $$$ equip/(1-70%)

 Cost indexing  Based on similar “group” of key items  Compare “group” over time or location  Final cost based on ratio x calculated cost: Est Cost = T 2 /T 1 x Calc Cost Est Cost = (T 2 /T 1 )(L 2 /L 1 ) x Calc Cost

 “ The future ain’t what it used to be ”… Yogi Berra  Need to project costs to mid-point of the construction year for budgeting  Generally average past 3-5 years cost data & project forward

 Based on three primary factors: A. Scope… quantities B. Constructability… methods C. Risk… externalities

 Technology in project - complexity  Milestone deadlines for work - timing  Material & equipment - availability  Staffing needed – skill & availability  Contract terms – allocation of risk  Amount of competition - markets

 Construction quality – skill required  Allowable tolerances – productivity  Complexity of design – learning curve  Flexibility of methods – special terms

 Unspecified material or workmanship  Differing site conditions  Error in bidding  Changes in cost over time  Subcontractor error or failures  Weather & environmental issues  Strikes & labor issues  Utilities & support issues

1. Determine project characteristics: Scope, constructability, risk 2. Examine the project design & site 3. Structure the estimate 4. Determine elements of cost 5. Calculate estimate

 Technical specifications  Referenced standards  Project drawings  Testing and performance  Special methods or procedures  Physical elements & site characteristics  Errors & omissions

 Structure often follows specification template  Ensure nothing left out  Need a plan for completing the project  Logical flow of resources & materials  Productivity factors

 Labor - craft & skill resources; sub-contractors; union labor; wage rates; training; “effective” labor rates; productivity factors (weather, complexity, experience, management)  Material - price, shipping, availability, storage, relation to specifications  Equipment - purchase vs. lease, single use, down time, cost of maintenance  Capital - interest rates, payment flow, retainage  Time - overhead costs, required completion date,

 Material take-off from plans 1. Quantities of all construction materials 2. Compare with specifications  Labor cost for construction or installation 1. Effective labor rates 2. Team composition & duration  Construction equipment schedule 1. On hand vs. lease or purchase 2. Time on job  Follow elements of cost 1. Ensure all items are covered

 Calculate the estimated cost  Solution in class

 Based on historical data  Accuracy = + 30%  Used for planning purposes when no design exists  Used to check validity of detailed estimate

 Assumes cost of equipment is dominant factor in plant cost  Estimate based on % of cost allocated to equipment relative to total cost of facility  Estimated cost is proportional to known cost  Must adjust for time & location

 Assume that the equipment portion of a chemical processing plant constructed in 2006 cost $1.2M and the total plant cost was $2.5M. Therefore the equipment portion of the total cost was 46%. Estimate the cost of a new plant with the same processes if the equipment for the new plant has been determined to cost $2.7M. Assume time and location factors are negligible in this case.  Solution:

 Assume that the equipment portion of a chemical processing plant constructed in 2006 cost $1.2M and the total plant cost was $2.5M. Therefore the equipment portion of the total cost was 46%. Estimate the cost of a new plant with the same process if the equipment for the new plant has been determined to cost $2.4M. Assume time and location factors are negligible in this case.  Solution: C 2 /E 2 = C 1 /E 1 … solve for C 2 C 2 = [C 1 /E 1 ] x E 2 C 2 = [$2.5M/$1.2M] x $2.4M C 2 = [2.08] x $2.7 = $5,625,000M

 Similar to comparison of $/sf unit measure  Used when facility has differing ceiling heights  Calculate the $/cf of known facility  Determine $/cf of known facility  Calculate total cf of new facility  Using known $/cf calculate cost of new facility  Adjust for time and location

 Determine the cost of a new warehouse which will have 3 distinct storage areas with differing ceiling heights. Area 1 = 12’; Area 2=14’ and Area 3 = 10’. The floor area of all three areas is 4000sf. A similar warehouse was constructed earlier this year for $2.4M. In that building the floor area was 8000sf and the ceiling height was a uniform 14’. Assume time and location factors are negligible in this case.  Solution:

 Determine the cost of a new warehouse which will have 3 distinct storage areas with differing ceiling heights. Area 1 = 12’; Area 2=14’ and Area 3 = 10’. The floor area of each area is 4000sf. A similar warehouse was constructed earlier this year for $2.4M. In that building the floor area was 8000sf and the ceiling height was a uniform 14’. Assume time and location factors are negligible in this case.  Solution: Existing Building A = 8000sf x 14’ = 112,000 cf Cost/cf = $2,400,000 / 112,000 cf = $21.43/cf New Building A1 = 4000sf x 12’ = 48,000 cf A2 = 4000sf x 14’ = 56,000 cf A3 = 4000sf x 10’ = 40,000 cf Total = 144,000 cf Cost = 144,000 cf x $21.43/cf = $3,085,714

 Prices “escalate” over time due to inflation  Must adjust estimated cost to “mid-point” of construction.  Determine period of construction  Determine start date of construction  Determine mid-point of construction = average cost  Determine “escalation rate” = given index  Multiply estimated cost by “escalation rate”  Note: escalation is compounded, ie. increase is cumulative over number of years of escalation

 Prices differ by region of the country  Must consult a reliable index to determine “relative” cost of construction between regions  RS Means Cost Data or Engineering News Record are examples  Adjustment is a simple ratio multiplied times the estimated construction cost.  So… C 2 /C 1 = L 2 /L 1 X Estimated Construction Cost and C 2 = C 1 x L 2 /L 1

 You have been asked to prepare a conceptual cost estimate for the construction of a new university dormitory at Florida Tech to open in You have 2005 RS Means data that provides a cost of $30,000/bed for similar dormitories in the northeast of the US, and a construction period of 2 years. The Means data states that construction costs escalate at 10% per year in the southeast. If the dorm is to house 200 students at Florida Tech and the Means Cost Comparison Index between the northeast and southeast is 0.80, what is the estimated cost for the new library at Florida Tech at the mid-point of construction?  Estimated Florida Tech cost:______________________

1. $30,000 per bed x 200 beds = $6,000,000… in the northeast in In the southeast in 2005… $6,000,000 x 0.80 = $4,800, Construction start is… Occupancy – 2 years = 2010 – 2 = Mid-point of construction is = = Years of escalation… 2009 – 2005 = 4 yrs

6. Escalation: $4,800,000 x 1.10 = $5,280,000 ( ) $5,280,000 x 1.10 = $5,808,000 ( ) $5,808,000 x 1.10 = $6,388,800 ( ) $6,388,800 x 1.10 = $7,027,680 ( )

Therefore… the estimated cost of the new dormitory for Florida Tech at the mid-point of construction in 2009 is: $7,027,680