1. Subcommittee on Design New Strategies for Cost Estimating Research on Cost Estimating and Management NCHRP Project 8-49 Annual Meeting Orlando, Florida June 16, 2006

2. NCHRP Project 8-49 Procedures for Cost Estimation and Management for Highway Projects During Planning, Programming, and Preconstruction Stuart Anderson, PhD, PE Keith Molenaar, PhD Cliff Schexnayder, PhD, PE

4. What are Ten Key Principles that Ensure Consistent and Accurate Estimates? Make estimating a priority Set a project baseline cost estimate Create cost containment mechanisms Create estimate transparency Protect estimators Complete every step in the estimate process Document estimate basis Identify project risks and uncertainties Anticipate external cost influences Perform estimate reviews

5. State Highway Agencies face a major challenge is controlling project budgets over the time span between the initiation of a project and the completion of construction. Problem

6. Research Objective To develop a guidebook on highway cost estimating management and cost estimating procedures aimed at achieving greater consistency and accuracy between long-range transportation planning, priority programming, and preconstruction estimates.

7.  Difficulty in describing scope solutions for all issues early in project development  Scope  Difficulty in evaluating the quality and completeness of early project cost estimates  Review Issues

8.  Difficulty in identifying major areas of variability and uncertainty in project scope and costs  Risk  Difficulty in tracking the cost impact of design development that occurs between major cost estimates  Control Issues

9. Interaction between strategies, methods, & tools, project development phase, & complexity Strategies, Methods. & Tools Complexity Project Development Phase

10. The first phase focused on state of practice  an extensive review of the literature supported by interviews of transportation agencies. Major factors causing project cost escalation and strategies, methods, and tools were identified during this first phase. Two Phases

11. Over 23 SHAs provided input

12. Remember!

13. Two Phases The second phase focused on developing the Guidebook based on the Strategies, Methods, and Tools identified in Phase I. The draft Guidebook was presented to and critiqued by 10 SHAs including Peer Exchange sponsored by the Minnesota DOT.

14. Management – Manage estimate process through all stages of project development Scope/Schedule – Formulate definitive processes for controlling project scope and schedule changes Off-prism – Use proactive methods for engaging external participants and assessing the macro-environmental conditions that can influence project costs Strategies

15. Risk – Identify risks, quantify cost, and take actions to mitigate impact as the project scope is developed Project Delivery/Procurement – Apply appropriate delivery methods, delivery influences both risk and cost Document Quality – Promote estimate accuracy and consistency through quality documents Strategies

16. Estimate Quality – Use qualified personnel and uniform approaches Integrity – Ensure checks and balances are in place to maintain estimate accuracy and minimize the impact of outside pressures Strategies

17. To consistently achieve accurate cost estimates and to effectively manage project cost SHAs must adopt strategic approaches that address the interdependence of cost estimating and cost estimating management problems.

18. Guidebook The Guidebook is intended to assist in creating a strategic change in agency estimating approaches. It aligns strategies with identified problem areas and can be used to create organizational structures for achieving accurate cost estimates.

19. Guidebook The Guidebook links the eight strategies to over 30 implementation methods that are supported by over 90 tool applications. Strategies, methods, and tools are identified in relation to four generic project development phases.

20. Strategy 1 Method 1 Method 2 Tool 1 Tool 2 Tool 3 Strategy 2 Method 3 Tool 4 Project Development Phases Planning Programming Preliminary Design Final Design

21. Determine Estimate Basis Prepare Base Estimate Determine Risk & Set Contingency Review Total Estimate Programming and Preliminary Design Phase

22. Methods and Tools Guidance is provided through a common descriptive structure for each proposed method and tool.

23. Method Structure Why use the method? What step is the method used? How is the method impacted by project complexity? What makes the use of the method successful? How is the method applied?

24. Tool Appendix  What is the tool?  What is the tool used for and why is the tool used?  What does the tool do or create?  When should the tool be used?  Examples or applications of the tool?

25. Tool Appendix  Tips that will lead to successful use of the tool?  Where can the user find more information about the tool?

26. Challenges SHA management must demand adherence to a strategic approach and require that all steps in the cost estimating and cost estimating management processes be performed.

27. Challenges Approach implementation from a systems perspective, that is, not only must cost estimating and cost estimating management be integrated but these processes must be integrated with the SHA project development process

28. Challenges Full implementation of the Guidebook requires time. The implementation effort will require time to determine how the Guidebook strategies, methods, and tools are best incorporated into current SHA practice

29. Conclusion Ten Key Principles

30. 1.Make estimating a priority by allocating time and staff resources. 2.Set a project baseline cost estimate early in preliminary design and manage to it throughout project development. Cost Estimate Management

31. 3.Create cost containment mechanisms for timely decision making that indicates when projects deviate from the baseline. 4.Create estimate transparency with disciplined communication of the estimate uncertainty & importance.

32. Cost Estimate Management 5.Protect estimators from internal and external pressures to provide low cost estimates.

33. Cost Estimating Practice 1.Complete every step in the estimate process during all phases of project development. 2.Document estimate basis, assumptions, and back-up calculations thoroughly.

34. Cost Estimating Practice 3.Identify project risks and uncertainties early and use these identified risks to establish appropriate contingencies. 4.Anticipate external cost influences and incorporate them into the estimate.

35. Cost Estimating Practice 5.Perform estimate reviews to confirm the estimate is accurate and fully reflects project scope.

36. Thank You!