CE 142 Construction Methods and Project Management
Lecture 9 Construction Cost Estimates
SAFETY AND RISK MANAGEMENT
CONSTRUCTION INDUSTRY
FINANCIAL MANAGEMENT
TIME MANAGEMENT
SCOPE MANAGEMENT
CONSTRUCTION PROJECT MANAGEMENT
COST MANAGEMENT QUALITY MANAGEMENT
PROCUREMENT MANAGEMENT
HUMAN RESOURCES MANAGEMENT
SAFETY AND RISK MANAGEMENT
CONSTRUCTION INDUSTRY
FINANCIAL MANAGEMENT
TIME MANAGEMENT
SCOPE MANAGEMENT
CONSTRUCTION PROJECT MANAGEMENT
COST MANAGEMENT QUALITY MANAGEMENT
PROCUREMENT MANAGEMENT
HUMAN RESOURCES MANAGEMENT
In the business of design and construction, profitability is based on accurate and comple com plete te cos costt es esti timat mation ion “Cost estimating is employed as one of the main tools of successful cost management. Once an initial budget has been established, it is important to test its assumptions by employing a series of increasingly increasingly pr precise cost estimating techniques that coincide with further development of design and construction details.”
Estimating requires a talent to predict or avoid the unexpected. A good estimator understands construction materials, methods and systems, as well as the labor and equipment required to complete all tasks in their correct sequence, on time and on budget.
The structure of an estimate Estimates are typically organized in a work-breakdown structure (WBS). A work breakdown structure (WBS) is a hierarchical system used to define and group discrete tasks or elements, covering the work scope of the project. 100% Rule: A WBS must include 100% of the work defined by the project scope and capture all deliverables – internal, external and interim.
The structure of an estimate
The Construction Specification Institute’s (CSI) has created the "de facto" standard for the Construction Industry (known as MasterFormat).
The CIS has also created the UniFormat, a new design based structure focusing on early stages of a project planning.
MasterFormat also referred as the CSI Format )
(
Created by the Construction Specification Institute CSI, 1961 -
- Used by nearly every business, in specifications and pricing - Focus on materials and methods (construction approach) - Contains 49 divisions (as of 2008) - Better suited for pricing & construction
Example:
DIVISION 05 – METALS 05 00 00 METALS 05 01 00 Maintenance of Metals 05 10 00 STRUCTURAL METAL FRAMING 05 12 00 Structural Steel Framing For more information http://www.csinet.org/s_csi/sec.asp?CID=1377&DID=11339
Uniformat First introduced in 1998, Guiding Principles established in 2007 -
- Functional elements of a project (design approach) - Organized in nine categories - Better for conceptual understanding of a building - Provides a way to compare major components of different projects
Uniformat A Substructure B Shell C Interiors D Services E Equipment & Furnishings F Special Construction & Demolition G Building Sitework Z General
CONSTRUCTION CONTRACTS
Types of Construction Contracts 1. STIPULATED SUM / UNIT PRICE Stipulated sum and stipulated unit price are grouped together because of the similarity of their cost control requirements as described separately from the contractor’s and owner’s view point. A Contractor in a stipulated sum agrees to construct project for a fixed amount no matter what difficulty or expenses he encounters. The remuneration may be made in a series of partial payments after acceptance of the contractor’s work.
1. STIPULATED SUM / UNIT PRICE
A “unit-price contract” is one on which payment for the work is to be based on the computed quantities of work performed on specific work items and materials furnished and used by the contractor on the project, each such quantities being multiplied by the contractor’s bid price of the unit.
1. STIPULATED SUM / UNIT PRICE There are contracts:
two
types
of “unit-price”
1. Unit-Price Flat Rate : Rate per unit remains constant regardless of change in estimated quantities given. 2. Unit-Price Sliding Rate : If estimated quantities increase or decreases by stipulated percentage, then the unit price is adjusted accordingly.
2.0 COST-PLUS “Cost Plus” is another type of contract. The prime contractor is generally involved prior to completion of the contract documents, when the scope of work is not clearly defined. The contractor is reimbursed for his actual expenditures and is paid a fee for supervision. The fee paid to him may be based on a percentage of the cost of the work or a fixed amount predetermined as compensation for his services.
3.0 PROJECT MANAGEMENT CONTRACT The third type of contract is the Project Management Contract. It provides a method for project development where the owner hires the Project Manager who in turn employs the services of architects, engineers, and other consultants. In this method, the initiation of policy, programming, budgeting, design, and construction are controlled by a team of professionals under the direction of a project manager.
CONSTRUCTION COST ESIMATING An estimate may be defined as a process of calculating. Forecasting or predicting the costs and quantities of the different item of work included in the bid schedule of a certain project proposed for construction.
KINDS OF ESTIMATES Range in accuracy 1.0 Floor Area Estimate
+/- 40%
2.0 Function Estimate
+/- 30%
3.0 Factor Estimate
+/- 20%
4.0 Parameter Estimate
+/- 15%
5.0 Detailed Estimate
+/- 7%
1. FLOOR AREA ESTIMATE :
Experience showed that for a similar building project, the building costs are very closely related to floor area. It is based on historical data. A minimum of information is used to develop this type of "Ball Park Estimate." The estimate is prepared from in-house-data available from past jobs on similar plants. From these actual jobs, the proposed plant capacity is divided by an existing plant cost. This cost is multiplied against the new plant capacity or unit to derive new plant cost and then adjusted for escalation. A cost estimate determined this way is only valid for a similar plant.
2. FUNCTION ESTIMATE: Measures the cost of a building relative to its use or function.
Type of Project
Function Estimates
School Building
Cost per student Cost per bed Cost per seat Cost per parking space
Hospital Theater Parking deck
3.FACTOR ESTIMATE: A factored estimate requires that all process equipment must be priced. A factored estimate is produced by taking the cost of individual types of process equipment, and multiplying it by an "installation factor" to arrive at the Total Direct Process Cost.
3.PARAMETER ESTIMATES:
This is an improvement over the floor area estimate because several parameter measures are used instead of one. Lump sum cost of trade are related to component system of construction. a. Structural steel cost related to gross area covered. b. Parking area per number of building occupants. c. HVAC cost per CM of the building.
5.0 DETAILED COST ESTIMATES: This is a careful calculation of the quantities and costs of everything that is stipulated in the contract based on detailed construction plans, specifications and bid documents. A detailed estimate of the cost is prepared by determining the cost of materials, labor, equipment, subcontract work, overhead, and profit. Detailed estimates are generally prepared by the contractors from a complete set of contract documents prior to submission of the bid to the owner.
Major elements of Detailed Cost Estimate
-Direct costs (may be grouped in systems or assemblies) Materials Labor Equipment
Major elements of a Detailed Cost Estimate -
Indirect costs Taxes Insurance Bonds Operating costs
- Overhead, profit, other markups - Contingency - Time & escalation - Phasing & mobilization costs - Geographic index
COMPETITIVE ESTIMATING AND BIDDING “Bid low enough to obtain the project, yet high enough to make profit” is the most competitive bidding Philosophy. Competitive estimating and bidding rely on the following factors:
1. Accuracy of quantity take-off and unit cost analysis 2. Quotations of Suppliers and Subcontractors 3. Competitors bid price 4. Construction Methodology 5. Direct Labor rates 6. Equipment rental rates
Common estimating options - Spreadsheets
and manual takeoffs “Excel is still the king”
- CAD and digital takeoff systems - Online databases and services BNI R.S. Means - Corporate software (modular systems) - Building Information Modeling (BIM)
Estimating Software - Desirable Features - Must be able to handle multiple projects (!) - Hierarchical/WBS organization - Detailed view per item - Take-off system (screen-based or digitizing devices) - Handling of complex systems and assemblies - Items linked to cost of products & resources (labor, materials, subcontractors, etc) - Automated calculations
Estimating Software - Desirable Features (cont.) - Purchasing & contracting - Cost comparisons (between different systems &/or providers) - Closeout capabilities, (Manual overrides & customization) - Reporting (links to scheduling)
To Be or not to Be(IM) BIM Advantages
- Better coordination - Problems identified earlier - Hidden conflicts are discovered more easily (Structural vs MEP) - Reduction of RFIs - 2D Drawings are an output of model - Produce takeoffs (debateable)
To Be or not to Be(IM) -BIM Challenges: - Heavy requirements (processing power, storage, net traffic) - Adoption of same technology across different disciplines - Existing legacy of 2D CAD - No standards to date - Does not replace knowledge of materials & systems - Misconception that BIM will do the work for you
Sample Problem 1 The labor and material cost for a riprapping work is as follows: Labor: 1 Foreman @ P50.00/hr 1 Skilled worker @ P40.00/hr 5 Unskilled workers @ P35.00/hr Materials: Cement = 3 bags @150.00 /bag Sand = 0.25 cu. m. @ P300.00/cu. m. Boulder = 1 cu. m. @ P250.00/cu. m. The accomplishment of the above laborers is 0.45 cu. m. per hour. Profit, overhead, and miscellaneous expenses is 30% of the labor and material cost. VAT is 10% of the labor cost.
Sample Problem 1 Questions: 1. Determine the labor cost per cubic meter. 2. Determine the cost of materials per cubic meter. 3. Determine the total cost of riprapping per cubic meter.
Sample Problem 2 For a given project, it is estimated that 4m of 610mm diameter reinforced concrete pipe can be installed in one hour using the following. Rate/hour 1 backhoe……………..P800.00 1 plate compactor……..P120.00 1 foremen……………...P50.00 2 skilled laborers………P40.00 10 unskilled laborers…...P35.00 The pipe cost P570.00/m. For every meter of pipe, the following materials are required: 0.07 bag of Portland cement @ P130.00/bag 0.15 cu. m. of sand @ P300.00/cu. m.
