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F ACTORS THAT D ETERMINE V ARIATION IN E STIMATIES

F ACTORS THAT D ETERMINE V ARIATION IN E STIMATIES. Purpose of An Estimate. To know in advance the expected cost in varying degree of accuracy, at different phases of the project. Owner's Purpose of Estimate. 1. Making investment decision in the conceptual stage.

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F ACTORS THAT D ETERMINE V ARIATION IN E STIMATIES

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  1. FACTORS THAT DETERMINE VARIATION IN ESTIMATIES Prof Awad S. Hanna

  2. Purpose of An Estimate To know in advance the expected cost in varying degree of accuracy, at different phases of the project. Prof Awad S. Hanna

  3. Owner's Purpose of Estimate 1. Making investment decision in the conceptual stage. 2. Negotiate and finalize the contract at the implementation phase. 3. To implement cost control measures. Prof Awad S. Hanna

  4. Contractors Purpose of Estimate 1. Determine project cost and profit. 2. To Implement cost control measure. 3. To develop data base for that can be used for future project. Prof Awad S. Hanna

  5. Engineers Purpose of Estimate 1. Provide the owner with probable estimate. 2. Evaluate alternatives. Prof Awad S. Hanna

  6. Contractor’s Estimator Determines actual cost of project for bidding purposes. Has detailed company cost data for labor and equipment. Knows which construction methods are to be used. Has knowledge of actual materials suppliers to be used and quantity discount prices. Engineer’s Estimator Determines expected cost. Does not know who will receive award, therefore does not know contractor’s exact resource costs. Does not know actual labor rates. Must assume probable construction methods to be used. Does not know who project supplier will be. Must use local list prices. Comparison ofContractors and Engineers Estimator Prof Awad S. Hanna

  7. TYPES OF ESTIMATES 2 Million dollars building Accuracy within 20% Preliminary 1. Preliminary 2. Unit price 3. Assembly or Conceptual Cost 4. Detailed estimate Each phase of a project life cycle requires a different type of estimate--each estimate requires different types of information. 15% Unit Price 10% Assembly 5% Detailed Time 5min 1hour 1day 3 weeks Prof Awad S. Hanna

  8. 1. Preliminary Estimate“Order of Magnitude” A cost prediction based solely on size and/or capacity of a proposed project. Before any engineering or design is completed. Rely on broad data from already executed similar project relate cost in dollar to the main capacity/size parameter number of beds in hospital square feet of office space number of students in school Prof Awad S. Hanna

  9. Preliminary Estimate (cont) • Advantageous • Allows a quick determination of the feasibility of a project • A quick screening on alternatives, etc. (e.g., should it be a concrete building or a steel building !). • Purpose: 1. Ranking alternatives 2. Evaluate economics and financial feasibility 3. As a check on more detailed estimates Prof Awad S. Hanna

  10. Example of Preliminary Estimates • Parking Garage $15.0/sq. ft or $4500/parking space • High School $80 to 110/sq. ft or $40,000/ student seat • Medical Centers $90 to 130/sq. ft Prof Awad S. Hanna

  11. 2. Unit Price Estimate Unit prices are obtained from data on projects already performed. Cost of labor, material, and equipment for all units of work are added together and divided by the number of units involved. Prof Awad S. Hanna

  12. Example of Unit Price Estimating Technique for Heavy Construction ____________________________________________________________ Work Item Estimated Quantity Unit Price Total ____________________________________________________________ Site Preparation 50,000 sq. yd $ 7 $ 350,000 Earth Excavation 100,000 cu.yd. $ 12 $ 1,200,000 Paving 50,000 sq.yd. $ 8 $ 400,000 Total bid price $ 1,950,000 ____________________________________________________________ Prof Awad S. Hanna

  13. 3. Assembly or Conceptual Estimate Performed when conceptual design decisions are being made. Work package concept can be used to determine the element or assembly to be studied We need a breakdown of cost of a completed project into its functional elements to: 1. Find the relationship between element cost and project cost 2. Distribution of cost between constituent elements (sq. feet of _____) Prof Awad S. Hanna

  14. Elemental Estimate Analysis Gross floor Area = 250,000 ft2 Prof Awad S. Hanna

  15. 4. Detailed (Definitive )Estimate Prepared after drawings and specification are completed. Requires a complete quantity takeoff based on drawing and the complete set of contract documents Need information on labor rate "productivity", material cost, cost of renting or purchasing equipment Prof Awad S. Hanna

  16. Variation Factors in Estimating 1. Time We base our estimate on the cost of existing projects that were built in the past Price-level changes over time We need to project costs of future projects Many organizations publish construction cost data on regular basis: US Department of Commerce US Department of Labor ENR Turner Construction Company Handy-Whitman Utilities Prof Awad S. Hanna

  17. 1. Time (Cont.) Cost Indices Published by R.S. Means and ENR Used to update old cost information Uses 1. To update known historical costs for new estimates 2. To estimate replacement cost for specific assets 3. To provide for contract escalation Limitations 1.They represent composite data, average of many projects. 2. They fail to recognize technological changes. 3. There is a reporting time log. Prof Awad S. Hanna

  18. new cost index old cost index To update old cost information to current date cost of new facility = cost of old facility x To predict future cost F = P (1 + i) F = future cost P = present cost i = predicted rate of cost escalation per period n = number of periods (years) n Prof Awad S. Hanna

  19. 2. Location Some factors affecting cost in different locations are: 1. Transport cost 2. Taxes 3. Labor supply and local productivity 4. Codes and local inspection Construction costs also vary in different regions of the USA. ENR and Means publishes periodically the indices of local construction costs in the major cities. Prof Awad S. Hanna

  20. 2. Location (Cont.) ENR Regional Index CityCost Index Boston 1120 Chicago 1400 New York 1700 Prof Awad S. Hanna

  21. 3. Size • As the quantity built increases, the unit cost decreases, Size Factor = • UCM = Unit Cost Multiplier UCM = SF Proposed Size Comparison Size E - 1 Prof Awad S. Hanna

  22. Table forUnit and Total Cost Multipliers Prof Awad S. Hanna

  23. Chart to Convert Unit Prices Prof Awad S. Hanna

  24. Chart to Convert Total Project Cost Prof Awad S. Hanna

  25. 4. Shape 40’ 50’ Bldg A Area = 15ooft2 Perimeter = 160ft Wall height = $10 x 160 x 10 = $16,000 = $10.00 of floor area Bldg. A Wall cost = $10 x 160 x 10 = $16,000 = $10.00 of floor area Bldg B Wall cost = $10 x 180 x 10 = $18,000 = $11.25 of floor area Bldg B Area =1500ft2 Perimeter = 150ft 30’ 40’ 10’ 15’ 15’ Prof Awad S. Hanna

  26. 5. "Learning Effect" • Increased productivity by doing repeated work. • Detailed analysis will be discussed later. Prof Awad S. Hanna

  27. 6. Other Factors • Hard to quantify but should be evaluated • Quality • Soil condition • Weather Condition • Competition • Productivity Prof Awad S. Hanna

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