Cost Estimate Module 2 Dr. Ari Sandhyavitri Engineering Faculty UNRI, 2007
Cost Components • Cost (Direct costs): – – – –
Labours Materials Equipment Sub-contractors
• Price (In-direct cost): – Taxes – Insurances – Overheads: • Offices & adms. • Sites – General conditions – Risks: • Contingencies • Loss & profit
Types of Estimate Peurfoy and Oberlender (1989) classified estimate in 3 senses:
1. Approximate Estimates (preliminary, conceptual, or budget estimate). 2. Detailed Estimates. 3. Organisation Estimates.
Ad.1. Approximate Estimates ( preliminary, conceptual, or budget estimate)
• The project owner need to know the approximate cost •
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to ensure that the cost of a project does not exceed the allocated provided for the project. Feasibility Study (FS) during the development phase: – Economic analysis, investment cost of construction and revenue generation (private) – Design alternatives to meet owner’ s budget. – Experience and judgement for technical purposes; estimating cost of materials, workmanship, location and risks. Organisation of project. Contract strategies.
Ad. 2a. Detailed Estimates • Determine the costs of materials, labour, equipment, • •
subcontractor work, overhead and profits. Prepared by contractors in the form a complete set of contract document prior to submission of a bid. Consideration put into account for estimating process: 1. Review a set of bidding document from the project owner and its technical and administration specifications, and requirement standards. 2. Checklist of all work items Learn the drawings provided in the bidding doc. 3. Visitation of the project site ( Aanwidzing) 4. Check subcontracted works for specialists 5. Check the current costs of material, labours and equipment from suppliers; 6. Identify indirect costs; taxes, bonds, insurances, contingencies, and overheads 7. Set up adequate profits (e.g. at the range 5% -30%)
Ad. 2b. Steps for Preparing a Detailed Estimate 1. Review scope of the project and consider the effect of the proje ct location, security, traffics and other risks on costs. 2. Determine a material quantities takeoff for all works (1 m3 sand = 0.8 m3 in practice). 3. Price material. Material cost = Quantity x Unit price 4. Price labour. Labour cost = Quantity x Labour Rate Labour Production Rate 5. Price Equipment. Equip. cost = Quantity x Equip. Rate Equip. Production Rate 6. Subcontracted works for specialists. Receive and tabulate costs for each subcontractor. 7. Suppliers bids. Receive and tabulate the material, labours and equipment costs for each supplier. 8. Calculate indirect costs; taxes, bonds, insurances, and overhead s 9. Set up contingencies and mark up. Add cost for potential unforeseen works based on the amount of risks. 10. Profits. Adds cost for compensation for performing the work.
Ad. 3a. Organisation of Estimates • Essential to the preparation of an estimate – Work Breakdown Structure (WBS) – Construction Specification Institute (CSI)
• CSI : The organisation of work items is divided by some
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major divisions. Each major division is subdivided into smaller items following the CSI division of works (Example 1). WBS : Heavy Engineering construction contractors organise work in some groups (packages). Each group is subdivided into major divisions. Each major division is subdivided into smaller items following the CSI division of works (Example 2, 3 and 4)
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CSI • Provides a systematic checklist and guideline for the quantity takeoff (e.g. transportation materials, 1 -5% damage/waste) • Price extensions • Each division may contain 10-20 item of works • Summary cost estimate
Example 2. WBS for Sitework (Look at example 1 Item 2 as a starting point)
Example 3. Construction of Electric power Construction Bid Summary Using WBS
Example 4. Construction of Electric power Construction for Transmission Line A (Work Item 2100) Using WBS
References • Smith, N. J. (Editor), Engineering Project •
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Management, Blackwell Science, 1999, UK. Merna, A. and Smith, N. J. (1990), Project Managers and the Use of Turnkey Contracts, International Journal of Project Management, 8 (3), 183-189. Peurfoy, R, L and Oberlender, G, D, (1989), Estimating Construction Costs, McGraw-Hill Book Company,USA.
