CON 2001/CVE 4070 Construction Engineering Construction Estimating Prof. Ralph V. Locurcio, PE

Registration info for Spring CVE 4074/5074-Leading Construction Ops Syllabus: Part 1 - Personal Leadership- your style Part 2 - Organizational Leadership- corporate style Part 3 - Team Leadership- leading a team 3 Tests + Notebook Book report: oral & written

Cost Estimating Is Serious Business!

So pay close attention!

Estimating defined… 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.

Components of an estimate… Systematic analysis of: Project materials & components Construction methods & labor Equipment needed Temporary work items Support activities Externalities

Qualifications of an estimator… 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

Estimating Process Decision to bid Form the estimating team Estimate work plan Type of estimate Procedures Documentation Risk & contingency analysis Review & check the estimate Finalize the estimate

Estimating & Bidding Yes No

CSI Master Format-1

CSI Master Format-2

Engineering Estimates Design cost estimate or design budget Engineering cost to design the project Sometimes called design fee Sum of task duration in WBS x salary of engr. Engineer’s estimate of probable cost Made at phase points: 15%, 50%, etc. A detailed estimate of probable const cost Based on 100% plans Quantity of all materials x cost of materials & labor to install…

Design Cost Estimate Design Estimate Who When P-Hr A-Hr Sal Plan $ Act $ % John 8/22/15 5 4 $100 $500 $400 100 Jane 8/28/15 8 6 $100 $800 $600 50 Proj Mgt Sub-task a Sub-task b Site Civil Trans Structures

Engineering Estimate Format

Construction Estimates Detailed estimate of all costs to build the project…. as designed. Also called the contractor’s bid Based on “take-off” of all materials from plans x cost of materials Add labor to install Add all taxes & fees Add overhead & profit

Typical WBS for Senior Project Who When Pln Hr Act Hr Plan $ Act $ %Com John 8/22/10 5 4 $500 $400 100 Jane 8/28/10 8 6 $800 $600 50 Gen Cond. Sub-task a Sub-task b Clearing Foundation Walls Add: Taxes on materials & labor Overhead Profit

Two broad types of estimates… Conceptual Used for early decisions & feasibility No plans available yet Rough estimate using minimal data Relies heavily on past data Level of accuracy about 70% Detailed Based on actual plans, specs @ contract docs Used for contract bids & budgets Level of accuracy up to 95% Fixes final price of project

Conceptual Const Estimates-1 Based on historical data Sometimes called “parametric” estimates Accuracy = +30% Used for planning purposes when no design Feasibility estimates Appropriations estimates Used for 5% & 15% of Senior Design

Conceptual Const Estimates-2 Adjust for Time & location Also to check validity of detailed estimate Based on prior experience: Cost per SF or CF... volume Cost of equipment vs. structure Cost-capacity factor- ratio of Q/$ Comparative cost of structure – $/unit

Comparative cost method… 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. estimate of school A$/pupil = A Cost/A#pupils = $1,000,000/100 = $10k/pupil Apply to new construction: B Cost = B# pupils x A$/pupil B Cost = 200 x $10k = $2,000,000

Examples: Schools: $/pupil Bridges: $/feet of span Stadium: $/seat Hospital: $/beds Offices: $/ft2 Warehouses: $/ft3

Variations of comparative cost… Floor area… cost/ft2 … but Total horizontal area… all floors equal Finished floor area… $ based on type finish Cubic foot of volume… floor height varies Plant volume… Q = plant output 100mgd WTP = $5,000,000 125mgd WTP = $6,250,000

Cost of equipment method… Assumes cost of equipment (ET) is dominant Estimate based on % of cost allocated to equipment relative to total cost of facility(TPC) Estimated cost is proportional to known cost Must adjust for time & location Where ET= $$$ equip total = $500,000 Equip = 70% building cost So TPC = ET/ % ET TPC = $$$ equip/(70%) = $500,000/.70 = $714,285

Plant Cost Ratio Method Other Methods: Admin vs Production area… $/SF Bay… hist data on “typical” bays.. $/SF Volume… comparative cost of $/CF

Time & Location adjustments… Cost indexing Based on similar “group” of key items Compare “group” over time & location Final cost based on ratio x calculated cost:

Time & Location adjustments… Time Adj = T2/T1 = Inflation factor Est. Cost = Inflation x Est. Cost If inflation = 4% per year Est cost = $500,000 1st year Adj = $500,000 x 1.04 or $520,000 For multiple years… inflation is compounded So for 2nd year Adj = $520,000 x 1.04 = $540,800 Not: $500,000 x 1.08 = $540,000 !

Time & Location adjustments… Loc Adj = L2/L1 = Location factor Est. Cost = Location factor x Est. Cost If Location 1 (MLB)/Location 2 (MIA) = 1.00/1.25 $540,800 = 1.00/1.25 x $540,800 = $432,640 Or…. If Location 1 (NYC)/Location 2 (MLB) = 1.25/1.00 $540,800 = 1.25/1.00 x $540,800 = $676,000

Cost forecasting… “The future ain’t what it used to be”… Yogi Berra Need to project costs to mid-point of the construction year for budgeting w/inflation Generally average past 2-5 years cost data & project forward @ 3-5% per year 1…… 2…… 3…… 4……. 5……. 6…….7

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

A. Scope factors… 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

B. Constructability factors… Construction quality – skill required Allowable tolerances – productivity Complexity of design – learning curve Flexibility of methods – special terms

C. Risk factors… 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

Estimating process… 1. Determine project characteristics: Scope, Constructability, Risk 2. Read the construction documents 3. Examine the project design & site 4. Structure the estimate 5. Determine elements of cost 6.. Calculate estimate

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

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

Determine elements of cost… 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,

Calculate the estimate… Material take-off from plans Quantities of all construction materials Compare with specifications Labor cost for construction or installation Effective labor rates Team composition & duration Construction equipment needed On hand vs. lease or purchase Time on job Summarize all costs Add taxes on materials & labor Add OH&P

Calculate the Estimate $15/LF $8/LF $4/LF $6/LF

Typical WBS for Senior Project Who When Pln Hr Act Hr Plan $ Act $ %Com John 8/22/10 5 4 $500 $400 100 Jane 8/28/10 8 6 $800 $600 50 Gen Cond. Sub-task a Sub-task b Clearing Foundation Walls Add: Taxes on materials & labor Overhead Profit

And this is what happens.... if you get the estimate wrong...

Pyramid Estimate- due Nov 15 Estimate the cost of the pyramid Read notes carefully Spread sheet format in Excel One price = what is your bid amount? Include labor, materials & support costs Graded exercise Questions?