Transportation Estimators Association Conference October 22, 2010 Baton Rouge, Louisiana

1. Cost Estimation and Cost Management:Research to PracticeStuart Anderson, PhD, PETexas A&M University Transportation Estimators Association Conference October 22, 2010 Baton Rouge, Louisiana

2. Outline • Challenge • Approach • Assessment • Definition • Development • Details • Issues and Gaps Cost Estimation and Cost Management

3. Is Cost Estimating a Science or an Art?

4. Part of the Challenge: Estimating Under Fire Cost Estimation and Cost Management

5. “Theory to Practice” Mn/DOT SCOPING PROCESS • Framework – NCHRP Report 574 and Mn/DOT Scoping Process • Methodology with rigor • Industry involvement – Mn/DOT Professionals • Academics with right industry experience • Know user expectations How? Cost Estimation and Cost Management

6. Approach • Project – Cost Estimating Improvement and Organizational Integration • Four phases • Assessment • Definition • Development • Implementation Cost Estimation and Cost Management

7. AssessmentWhat is State-of-Practice? • Data Collection • Data Analysis • Results Cost Estimation and Cost Management

8. What is State-of-Practice?Themes • Lack of systematic and structured approach • Lack of organizational strategies • Lack of management support • Focus on project delivery Cost Estimation and Cost Management

9. What is State-of-Practice?Organization Issues • Estimators have multiple responsibilities • High workloads • Project Manager role and responsibility not clear • Functional areas drive project scope and scope changes • Lack of understanding of CE/CM processes Cost Estimation and Cost Management

10. What is State-of-Practice?CE and CM Key Issues Limited risk and contingency analysis with unclear definition of contingency Lack of adequate documentation of estimate basis and estimate preparation Lack of structured reviews Lack of timely cost management

11. DefinitionChampion and Vision Mn/DOT will manage and control costs through a department-wide priority on cost estimating and cost management, reliable and accurate estimates, statewide uniformity and consistency, improved communication and credibility with external stakeholders, and clear accountability. Mn/DOT leadership is committed to developing a standard process and supporting policies, integrating processes and policies across all functions, and making the necessary organizational adjustments to fulfill the vision.

12. DevelopmentCE and CM Processes • Process focus • Structured modeling technique • Interactive workshops • Tools • Guidebook Cost Estimation and Cost Management

13. Structured Modeling Technique Used IDEF0 • Integration DEFinition for Function Modeling (IDEF0) • Modeling Technique based on combined graphics and text that are presented in an organized and systematic way to gain understanding, provide logic for potential changes or support systems level design and integration activities • IDEF0 Model consists of a hierarchical series of diagrams, text, and glossary cross-referenced to each other • IDEF0 is being used for documentation, understanding, design, analysis, planning, and Integration • Based on structured analysis basic principle “To divide is to conquer, providing that it is clear how the divided pieces are structured together to constitute the whole”

14. IDEF0 Syntax • Boxes • Arrows • Diagrams • Types of IDEF0 Diagrams • Diagram Features

15. IDEF0 Boxes • Box provided a description of what happens in a designated function • Function name is a verb or a verb phrase • Box number is shown insider lower right corner Perform Cost Estimation 1

16. IDEF0 Arrows • One or more line segments with a terminal arrowhead at one end • Arrows segments may be straight, curved or branching configurations • Arrows do not represent flow or sequence, they convey data or objects related to functions to be performed • Bend arrows shall only have 90 degree arcs Straight Curved Forking Joining

17. IDEF0 Arrow Positions and Roles Estimating Procedures/ Policies Controls Prepare Base Estimate Function 1 Project Scope Historical Data Base Estimate Inputs Outputs Estimators/ Estimating Spreadsheet Mechanisms Function - An activity or transformation identified by a verb phrase that describes what must be accomplished Inputs - The data or objects that are transformed by the function into output Controls - Conditions required to produce correct output (often called a constraint) Mechanisms -The means used to perform a function Outputs - The data or object produced by the function

18. Interactive Workshops • Introduction of Technique • Variety of Mn/DOT/FHWA Professionals • Modeled CE and CM Process for four Mn/DOT Project Development Phase • Modeled “As Is” first then “Would Be” processes • Formalized model using IDEF0 • Reviewed All Models Cost Estimation and Cost Management

19. Process Modeler Working Groups Facilitator Cost Estimation and Cost Management

20. Notes Whiteboard with different colors

21. CE and CM Tools • Basis – NCHRP Report 574 Tool Appendix • Survey tool usefulness • Workshop • Which tools • Tools and CE/CM process Cost Estimation and Cost Management

22. Cost Estimation and Cost Management

23. Cost Estimation and Cost Management

24. DevelopmentHow to Convert Process Models to Technical Reference Manual? Challenge! Cost Estimation and Cost Management

25. TRM Challenges • Who is primary user? • How present overall content? • How to present detailed “how to” steps? • What tools are used with which steps? • What is layout, format, and structure? Cost Estimation and Cost Management

26. Technical Reference Manual • CONTENTS • Introduction • Essentials • Practice • Appendix

27. Introduction • CE and CM Vision • Technical Reference Manual Layout Cost Estimation and Cost Management

28. Essentials • Project Development Process and CE/CM Process Integration • CE and CM Policies • CE and CM Process Overview Cost Estimation and Cost Management

29. Project Delivery ProcessPhases

30. Project Development ProcessMajor Activities

31. Project Development ProcessPlans and Programs

32. Project Development ProcessTimeline by Project Type

33. Planning Phase and Cost Estimating

34. Scoping Phase and Cost Estimating

35. Design PhaseChange Process

36. CE and CM Policies Project Cost Estimation Policy Uncertainty, Risk and Contingency Policy Communications Policy Project Cost Management Policy Program Management Policy

37. Total Project Cost Components

38. Gated Process

39. Cost Estimating and Cost Management Process Overview

40. Cost Estimating and Cost Management Process Framework

41. Practice • Overview of Cost Estimation and Risk Methodologies • Planning, Scoping, Letting • Design Cost Estimation and Cost Management

42. Design CE and CMCM Through Estimate Updates

43. Cost Estimation and Cost Management

44. Appendix • Glossary of Terms • Cost Estimating and Cost Management Tools • Tips for Estimating Cost Estimation and Cost Management

45. Tool Structure • Selected smaller set of tools from NCHRP Report 574 • Used same structure and layout • Added “How To” instructions • Used Mn/DOT Examples when available Cost Estimation and Cost Management

46. D4.1 Project Estimate File Tool Appendix – General Description Estimates are usually created by the collaborative effort of many individuals and to be able to follow the assumptions upon which the estimate is based, and preserve the information for future efforts there should be a structured system for accumulating all estimates and their supporting documentation. Estimators are required to prepare and maintain a master reference file that contains critical scope, policy, and supporting information (assumptions, methods, and procedures), which is used to prepare the project estimate. This master file is maintained as a permanent reference file.

47. P4.1 Project Estimate File What is it? – Master reference file containing critical scope and estimate information. Why? – Good documentation supports cost estimate credibility, enables reviewers to effectively assess estimate quality, and aids in the analysis of changes. What does it do? – Provides corporate memory and historical database for cataloging the basic rationale behind the original cost estimate and reasons for subsequent cost revisions. When – Prepared and maintained from the initial estimate to project close out. Examples – Typical outline Tips – Need certain level of detail to track changes Resources – Tool Appendix

48. D4.1 Project Estimate FileHow to Use It • Set up notebook using tool outline sections • Populate notebook with project definition basis • Populate with cost estimate information • Populate with risk and contingency information • Include reconciliation documentation when comparing to previous estimates • Identify key information for a Cost Estimate Summary

49. D4.1 Project Estimate File • D4.1 PROJECT ESTIMATE FILE • TYPICAL OUTLINE • EXCUTIVE SUMMARY • Total Project Cost Estimate Summary One Page (Category Level with some Elements of total project cost) • Key Project Requirements • Key Estimate Assumptions • Major Risks • TOTAL PROJECT COST ESTIMATE DETAILS (changes with project development phase) • Estimate Basis • Project Description (narrative description of project requirements) • Drawings (schematic, preliminary, final) • Specifications • Cost Estimate • Cost Estimate Summary (categories and some elements) • Cost Estimate Details (categories, elements and line items) • General Cost Basis for Estimate (impacts all cost in estimate) • Assumptions (as required for different category, element, or item estimate) • Backup Calculations (for different category, element, or item estimate) • Review notes, reconciliation documents, and recommended changes • Risk Analysis - Risks (red flag items, risk register, etc) and Contingency (contingency basis and calculation) • Notes:

50. Tips and Watch Outs • Planning • Tips • Although the project has not been fully defined, do your best • to determine the full scope of the project before putting an estimate together. Try to come up with as comprehensive a list as you can, • time permitting, of all of the elements that will be required in the project. • Visit the site in person. Become familiar with not only the roadway • and operational issues, but other site conditions as well. • Utilities, bridges, sidewalks, buildings, cut and fill slopes, waterways, etc. • will have an effect on project costs and the more familiar • the estimator is with a given site the more likely these items will be considered. Cost Estimation and Cost Management