FACTORS THAT DETERMINE VARIATION IN ESTIMATES DR Nabil

FACTORS THAT DETERMINE VARIATION IN ESTIMATES DR. Nabil Dmaidi

Purpose of An Estimate n To know in advance the expected cost in varying degree of accuracy, at different phases of the project. DR. Nabil Dmaidi

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. DR. Nabil Dmaidi

Contractor’s Purpose of Estimate. 1 Determine project cost and profit. . 2 To Implement cost control measure. . 3 To develop data base that can be used for future project. DR. Nabil Dmaidi

Engineer’s Purpose of Estimate. 1 Provide the owner with probable estimate. . 2 Evaluate alternatives. DR. Nabil Dmaidi

Comparison of Contractor’s and Engineer’s Estimator n 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. – n Has knowledge of actual materials’ suppliers to be used and quantity discount prices. DR. Nabil Dmaidi 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.

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

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

Preliminary Estimate (cont ) n n 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 DR. Nabil Dmaidi

Example of Preliminary Estimates n Parking Garage $15. 0/sq. ft or $4500/parking space n High School $80 to 110/sq. ft or $40, 000/ student seat n Medical Centers $90 to 130/sq. ft DR. Nabil Dmaidi

. 2 Unit Price Estimate n – 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. DR. Nabil Dmaidi

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 ______________________________ DR. Nabil Dmaidi

. 3 Assembly or Conceptual Estimate n Performed when conceptual design decisions are being made. n Work package concept can be used to determine the element or assembly to be studied n 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 _____) DR. Nabil Dmaidi

Elemental Estimate Analysis Gross floor Area = 250, 000 ft 2 DR. Nabil Dmaidi

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

Variation Factors in Estimating . 1 Time n n – – – 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 DR. Nabil Dmaidi

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

To update old cost information to current date cost of new facility = cost of old facility x new cost index old cost index To predict future cost n F = P (1 + i) F P i n = future cost = present cost = predicted rate of cost escalation period = number of periods (years) DR. Nabil Dmaidi

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

. 2 Location (Cont. ) ENR Regional Index City Cost Index Boston 1120 Chicago 1400 New York 1700 DR. Nabil Dmaidi

. 3 Size n As the quantity built increases, the unit cost decreases: Size Factor = n Proposed Size Comparison Size UCM = Unit Cost Multiplier UCM = SF E-1 DR. Nabil Dmaidi

Table for Unit and Total Cost Multipliers DR. Nabil Dmaidi

Chart to Convert Unit Prices DR. Nabil Dmaidi

Chart to Convert Total Project Cost DR. Nabil Dmaidi

. 4 Shape ’ 40 Bldg B Area =1500 ft 2 Perimeter = 150 ft ’ 10 Bldg A Area = 15 ooft 2 Perimeter = 160 ft ’ 40 ’ 30 ’ 50 ’ 15 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 DR. Nabil Dmaidi ’ 15

". 5 Learning Effect" n Increased productivity by doing repeated work. – Detailed analysis will be discussed later. DR. Nabil Dmaidi

. 6 Other Factors n Hard to quantify but should be evaluated: – Quality – Soil condition – Weather Condition – Competition – Productivity DR. Nabil Dmaidi