1 / 13

E STIMATING : G OALS , O BJECTIVES , AND R ISK I SSUES

E STIMATING : G OALS , O BJECTIVES , AND R ISK I SSUES. BY Awad S. Hanna Associate Professor Department of Civil and Environmental Engineering The University of Wisconsin - Madison. What is Estimating?. Estimating is the process of defining the realistic cost of a project

conway
Download Presentation

E STIMATING : G OALS , O BJECTIVES , AND R ISK I SSUES

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. ESTIMATING :GOALS, OBJECTIVES,AND RISK ISSUES BY Awad S. Hanna Associate Professor Department of Civil and Environmental Engineering The University of Wisconsin - Madison

  2. What is Estimating? • Estimating is the process of defining the realistic cost of a project • This process requires a detailed and accurate takeoff with realistic labor hours and current material prices, along with job expense, overhead and markup to arrive at a final price.

  3. Successful Estimating • Contractors are not in business to win bids. • Contractors are in business to make money. • Estimating is the base of a company’s success.

  4. Estimating for Profit • Good estimating minimizes contractor’s risk and facilitates project management and defines the scope of work. • The estimate is the plan that furnishes the field people with all the details in a controlled and prearranged format.

  5. Estimating Requires : • Skills • Effort • Above all, an organized system that will prevent errors and omissions.

  6. Estimating is very expensive; therefore, we must use out time wisely and effectively if we are to be successful.

  7. Profit Should Correlate to Risk • Materials low to medium risk • Labor high risk • Subcontractors low risk • General Expenses low risk

  8. Profit Should Correlate to Risk (cont.) • Job Comparison • Compare two jobs of identical direct cost, yet very diverse in over head and risk factor : Job “A”Job ”B” Material $200,000 $100,000 Labor 20,000 230,000 Subcontractors 100,000 10,000 General Expenses 30,000 10,000 Subtotal 350,000 350,000 Overhead @ 10% 35,000 35,000 Profit@ 10% 38,500 38,500 Selling Price $423,500 $423,500

  9. Checking the Estimate • Review the labor percentage of each division in relation to total labor. • Review the labor percentage of each labor code in relation to total.

  10. Accuracy is Critical for Success • A typical project can be broken down as follows : Materials 40-45% Labor 35-40% Equipment General Expenses 8-10% Overhead 10% Profit 2%

  11. Common Estimating Mistakes • Misread or misinterpreted specifications or drawings. • Takeoff omissions or misplaced. • Extension miscalculations • Missing quotes. • Estimating by unit prices. • Using the percentage method to establish the cost of certain systems. • Prorating indiscriminately. • Crumbling under pressure to procure work.

  12. Common Estimating Mistakes (cont.) • Being overly optimistic. • Cutting prices to meet or beat someone else’s quote. • Underestimating the complexity of a project. • Expecting and excessive amount of favorable changes. • Overemphasizing volume purchasing. • Undertaking a project with incomplete bid documents.

  13. How to Improve your Estimating Procedure • Company labor tables and current material prices should be stored in your database. • Manual estimating is not cost effective and it is subject to more errors and omissions. • Computerized estimating should automate and expedite the manual estimating process. • Establish the company labor units and labor factoring tables. • Maintain current material pricing. • Establish an estimate review procedure.

More Related