Estimating As A Career

The Association for the Advancement of Cost Engineering
International
By Jeff Borowicz, CPC, CCC, PSP January 28, 2009
AACE
Estimating as a Career
Promoting the Planning & Management of Cost & Schedules
Agenda
Introduction Estimating Conceptual Estimates Budget Level Estimates Definitive Estimates Value Engineering Change Orders Claims Salary Survey Estimate Basics
Jeff Borowicz, CPC, CCC, PSP

Titles
Work Management Specialist Chief Estimator Senior Estimator Software Technologist Project Manager Planner Program Manager Engineer Cost Engineer Scheduler Cost Control Change Agent Field Order Reviewer Inspector Database Administrator Junior Estimator Contract Manager Expert Witness
Jeff Borowicz, CPC, CCC, PSP

Education
Ferris State University
BS Construction Management AAS Architecture
Societies
AACE (Since 1989)
Capital Section - Member FL Section (Orlando) - VP GL Section VP, Board BIM Committee Co-Chair Cert. Paper Reviewer AACE Journal Articles
Ellis University
MBA (6-12 Classes 4.0 GPA)
Employers
CH2M Hill PMA Consultants IMSI (Ford) General Motors - WFG DTE Energy
AIC
Eastern / Ferris CPC Discuss MI Chapter President, Board
The many Hats of Estimating

Estimator Lawyer Contracts Finance Software IT Negotiator Social Worker Executive Superintendent Actor Team Player Role Player Academic Realist Accountant Banker, etc.
Definition of Estimating
ESTIMATE AACE 10S-90 (1) A prediction or forecast of the resources (i.e., time, cost, materials, etc) required to achieve or obtain an agreed upon scope (i.e., for an investment, activity, project, etc.). (2) In cost estimating, a compilation of all the probable costs of the elements of a project or effort included within an agreed upon scope.
Estimating as a Career
Owner Estimating Contractor Estimating Vendor Estimating
Architect / Engineer Estimating Subcontractor Estimating
Estimating Markets & Disciplines

arkets nergy anufacturing ommercial Civil, Structural, Architectural, Mechanical, Electrical Trades Union vs. Open Shop Domestic vs. International
Promoting the overnment Planning & Management of Cost & Schedules
Owner Estimating
Portfolio Planning (one market) Conceptual, Budget and Definitive Estimating Estimating Services (for hire) Value Engineering Change Orders Risk Management Project Controls Claims
A/E Estimating
Multi-Market Estimating Conceptual, Budget and Definitive Estimating Value Engineering Change Orders Risk Management Project Controls Claims
Contractor & Subs Estimating

Multi- or Single-Market Hard Bid Estimating Subcontractor Contract Management Risk Management Value Engineering Change Order Control Project Controls Claims
Vendor Estimating
Package Systems (Air Handling Units, Kitchen Cabinets, etc.) Supply House Estimating (Structural Steel Commodities, Concrete Plant, Pipe Manufacturer, Electrical Supply, etc.)
Contractual Relationships
Owner Architect Prime Contractor Subcontractor Vendor Vendor Subcontractor Vendor Vendor Engineer Engineer Engineer Types:
Lump Sum Design-Bid-Build Design-Bid-BuildOwn- Operate GMP Multi-Prime T&M Others
Owner/AE Estimating Life Cycle

Construction Project Cost "Actual" Feedback Conceptual Level 4/5 (Project Studies) 0-30% Engineering Budget Level 3 (Project Implementation) 30% Design Appropriation Level 2 (Project Implementation) 60% Design Bid Estimate Level 1 ((Contractor Hard Bid) 90-100% Design
Life Cycle Analysis Construction Audits
Claims Evaluation 30%, 60%, 90% Design Value Engineering Change Order Processing Contractor Labor Rate Check Low Bidder Evaluations
Contractor Estimating Life Cycle

Construction Project Cost "Actual" Feedback into Estimating Competitive Hard Bid - Level 1
Low Bidder Evaluations
Life Cycle Analysis
Select Subcontractors & write Subcontract Agreements
Construction Profit (Loss) Evaluation (Un)Balancing the Bid / Schedule of Values Claim Assessment Change Order Processing
Value Engineering or Bid Alternates
Conceptual Estimates
CONCEPTUAL ESTIMATE An estimate made in the concept phase without the benefit of detailed engineering data. (This term is superceded by Recommended Practice No. 17R-97 Cost Estimate Classification System.)
+100%/-50%
+50%/-30%
Budget Estimates
BUDGET ESTIMATE A budget estimate is prepared with the use of flow sheets, layouts, and equipment details. (This term is superceded by Recommended Practice No. 17R-97 Cost Estimate Classification System.)
+30%/-15%
DEFINITIVE ESTIMATE (1) In estimating practice, describes estimating algorithms or cost estimating relationships cost that are not highly probabilistic in nature (i.e., the parameters or quantification inputs to the parameters algorithm tend to be conclusive or definitive representations of the scope). Typical definitive estimate algorithms include, but are not limited to, detailed unit and line-item cost linetechniques (i.e., each specific quantified item is listed and costed separately). costed separately). (2) An estimate prepared from very defined engineering data. For construction, the engineering data includes as a minimum, nearly complete plot plans and elevations, piping plans and instrument diagrams, online electrical diagrams, equipment data sheets and quotations, data structural sketches, soil data and sketches of major foundations, building sketches and a foundations, complete set of specifications. This category of estimate covers all types, from the minimum described above, to the maximum definitive type, which would be made from approved for construction drawings and specifications. (This term is superseded by Recommended construction Recommended Practice No. 17R-97 Cost Estimate Classification System.) 17RSystem
Definitive Estimates
+15%/-5%
Change Order
Hard Bid / Control Check Estimates

HARD BID / CONTROL CHECK ESTIMATEESTIMATE(1) Hard Bid Bid Estimate or Baseline Contractual Estimate between owner and Contractor or Contractor and Subcontractors. (2) Control Check happens during Construction and usually included additional Change Orders and potential/agreed to Claims.
Bid Price
Change Order
Value Engineering
Society for Advancement of Value Engineering (SAVE)
VALUE ENGINEERING A practice function targeted at the design itself, which has as its objective the development of design of a facility or item that will yield least life-cycle costs or provide greatest value while satisfying all performance and other criteria established for it. Do not confuse with Scope Reduction.
VE Study
Value Analysis
Value Management
Value Engineering
Value Methodology Standard James A. Rains Jr., 1999 JOINT COST MANAGEMENT SOCIETIES PROCEEDINGS
Value Management
Change Order
CHANGE ORDER A document requesting and/or authorizing a scope and/or baseline change or correction. 1) From the owners perspective, it is an agreement between the project team and higher authority approving a change in the project control baseline. 2) From a contractors perspective, it is an agreement between the owner and the contractor to compensate for a change in scope or other conditions of a contract. It must be approved by both the client and the contractor before it becomes a legal change to the contract.
Change Order Process

OWNER Contractual Change Order (CO) Process Forms to create an Estimate Instructions for Contractors to submit COs Owner Review of Estimates Contractual Negotiation of COs CONTRACTOR Change Order (CO) Process Acquire Owner forms to create an Estimates Follow Company protocols for submitting COs Get Subcontractor Quotations Submit CO Quote Revise Owner Comments Negotiate CO Value
Change Orders
Example
Claim Definition
CLAIM A demand or assertion of rights by one party against another for damages sustained under the terms of a legally binding contract. Damages might include money, time, or other compensation to make the claimant whole.
Between Owner and Contractor Between Contractor & Subcontractor Lawyers retrieve Cost Documents from other parties (DISCOVERY) Both parties build a case on facts and details around their positions
Claims
Claims
Owner Estimator Has details to form opinion of claimed work Contract Estimator Owner hires to re-create the estimate value based on details provided from DISCOVERY Process Contractor Estimator Builds their case based on their opinion of claimed work
Claims
Settle out of Court Mitigation
Both Parties hire an Independent party to rule on the outcome
Arbitration
Binding Non-Binding
Litigation
Called as an Expert Witness
So you want to be an Estimator
AACEi Annual Salary Survey
Estimating Basics
Market Sources
CAM (www.cam-online.com)
Owner Invitations Contractor Bid Lists Subcontractor Bid Lists

Builders Exchanges
Standard Estimate Formats

Pencil & Paper Forms Excel (Spreadsheets) Databases Systems
Sage (Timberline) Win Estimator U.S. Costs (Success) Others
Estimating Policies & Procedures

Policies
Rules of Engagement (Estimating Department) Estimating Policies
Procedures Basis of Estimate Scope of Work Assumptions Caveats Exclusions
Scope of Work
Drawings Specifications Sketches P&IDs Scope Document Contract Statement of Work (SOW)
Estimating Accuracy (AACEi)
+50%/-30%
+30%/-15%
+15%/-5%
Work Breakdown Schedule (WBS)
Construction Specification Institute (CSI) Breakdown

Master Format (1995 Edition) 16 Divisions
Division Division Division Division Division Division Division Division Division Division Division Division Division Division Division Division 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 General Requirements Sitework Concrete Masonry Metals Wood and Plastics Thermal and Moisture Protection Doors and Windows Finishes Specialties Equipment Furnishings Special Construction Conveying Systems Mechanical Electrical

Master Format (2004 Edition) 50 Divisions

Uniformat
Cost Coding
Takeoff Tools
Engineers Scale Architectural Scale Scale-Master Tape Measure Calculator PDA Promoting the Planning & Management of Cost & Schedules
Quantity Takeoff
Sketches Schematic Drawings Write-ups Photographs Construction Drawings Product Information Technical Data
Estimating Resources Owner/Contractors

Vendor Quotations Historical Project Data Lump Sum Quotations Unit Price Bids Subcontractor Unit Prices
Other Industry Resources

Architectural
RS Means Walker Blue Book / AED AGC / UAW Local Wage Rates ENR
Mechanical
Harrison Richardsons MCAA SMACNA
Electrical
Trade Service Promoting the Planning & Management of Cost & Schedules NECA
(Non-US) Metric Resources

Get familiar with Resources available if Constructing a Project not in the USA.
Typical Estimate Content

Material Labor Const Equipment Mark-ups Contingency Risk Summary of Costs
Material (National)
ENR - Monthly Week 1 Concrete Week 2 Pipe Week 3 Steel Week 4 Lumber Week 5 - Index
Material (Locally)
Data DIGest Ken Simonson AGC of America Chief Economist Weekly one-page e-mails Economic News relevant to Construction
News Sources
Estimating Software
Cost Items
Labor
AFL-CIO (Union) Davis Bacon Prevailing Wage State/Federal Non-Union (Open Shop) Skilled Trades (UAW) Fully Burdened All-In Rate NMA or Presidents Agreement
Local Contract Terms and Conditions
Labor
Labor
Crew Rate - Unit Price Development

Earthwork Crew (B-12A) Excavation, Bulk Bank Measure Backhoe, Hydraulic, crawler mtd.,1 CY cap. = 75 CY/hr or 600 CY/day Bare Costs Incl. Sub OH&P Crew B12-A Hr. Daily | Hr. Daily
---------------------------------------------------------------------------------------1 Equipment Operator (Crane)$31.15 $249.20 |$49.25 $394.80 1 Equipment Oiler 25.75 206.00 | 40.80 326.00 Hydraulic Excavator, 1 CY 490.80 | 539.90 ---------------------------------------------------------------------------------------600 CY / day Cost per Day $946.00 | $1261.10 -------------------600 CY 600 CY $1.58/CY $2.11/CY Which do I use?
Equipment
Resources: Blue Book, Dataquest, AED Green/Red Book, R.S. Means, Web Services Web Services: Iron Planet, Nations Rent, Rentmaker, Michigan CAT, etc. Purchased Equipment Rental Equipment Contractor Owned Monthly, Weekly, Daily, Hourly Rentals
Equipment Rate Build-up

CATERPILLAR 436C, DIESEL (2000) 4WD, 1.40 CY Bucket, Extendable, 93HP Tractor-Loader-Backhoe
Monthly Weekly Daily Hourly Operating Costs (Est.) $3,550 $995 $250 $38 $14.65/hr -------------------------------------------------------Hours per Unit: 173 40 8 1 -------------------------------------------------------$20.52/hr $24.87/hr $31.25/hr $38.00/hr Add $14.65 per hour to rates ================================= Total Bare Cost of Equipment $6,085 $1,581 $367 $52.65 per month per week per day per hour =================================
Reference: 2001 Blue Book Rental Rate Guide
Mark-ups
Sales Tax (MI = 6%) (By State) Country Taxes (Provincial Canada = PST/GST) State of MI Taxes (SBT / MBT) City Taxes (Pontiac/Detroit = 1%) Consumables Overhead Profit
Building Blocks of an Estimate

Initial Costs ------------------------Material Costs Productivity (MHs) Labor Rate Equipment Costs -------------------------Unit Price Unit Price w/ Markups ------------------------Material Costs Productivity (MHs) Labor Rate Equipment Costs -------------------------Unit Price -------------------------(x) OH&P (x) GCs (x) Escalation -------------------------All-In Unit Price All-In Unit Price (x) Quantity = Defined Work Cost ----------------------------(+) Direct Job Costs (i.e. Large Equipment, Building Permits, Mobilization, Demobilization, Bonds, Total Construction Cost Insurance) ---------------------------(+) Contingency (+) Engineering ------------------------------(+) Environmental Testing, Total Construction Cost Certification, special Permitting (+) Construction Manager (+) Field Representation --------------------------Total Project Costs
Contingency / Management Reserve

CONTINGENCY An amount added to an estimate to allow for items, conditions, or events for which the state, occurrence, or effect is uncertain and that experience shows will likely result, in aggregate, in additional costs. Typically estimated using statistical analysis or judgment based on past asset or project experience. Contingency usually excludes: 1) Major scope changes such as changes in end product specification, capacities, building sizes, and location of the asset or project; 2) Extraordinary events such as major strikes and natural disasters; 3) Management reserves; and 4) Escalation and currency effects. Some of the items, conditions, or events for which the state, occurrence, and/or effect is uncertain include, but are not limited to, planning and estimating errors and omissions, minor price fluctuations (other than general escalation), design developments and changes within the scope, and variations in market and environmental conditions. Contingency is generally included in most estimates, and is expected to be expended. See: MANAGEMENT RESERVE. MANAGEMENT RESERVE An amount added to an estimate to allow for discretionary management purposes outside of the defined scope of the project, as otherwise estimated. Use of management reserve requires a change to the project scope and the cost baseline, while the use of contingency reserve funds is within the projects approved budget and schedule baseline. Syn.: RESERVE; RESERVE ALLOWANCE.
Contingency
Definition: Unforeseen Work that cannot be properly identified but know should be accounted for in the Project Estimate. How to Apply Contingency Myths on ContingencySlush Fund? NO! Design, Construction and Change Order Contingency --- YES!
Risk
2006 AACE International Transactions - RISK.01- Dr. Flynn L. Auchey PE and Dr. Gloria J. Auchey AACE Technical article Management of Project Contingency and Allowance Jan Terje Karlsen and Jon Lereim, Cost Engineering, Sep 2005
Typical Capital Estimate
Bid Tabulations / Reconcile
Note: Examples ONLY

Historical Data
U.S. Cost Indexes

Definition of an Index The ENR indexes measure how much it cost to purchase this hypothetical package of goods and services compared to what is was in the base year. Different Indexes ENR Construction Cost Index (CCI) ENR Building Cost Index (BCI) R.S. Means Marshall & Swift Smith Group Index & More
ENR Indexes
International Cost Info

www.icoste.org
Cost Parity Indexes
4D (Cost) Building Information Modeling (BIM)
AACE International Certification

Estimating Related Certifications: AACE has certified thousands of professionals as: Certified Cost Consultants (CCC) Certified Cost Engineers (CCE) AACE has certified Estimator professionals as: Certified Estimating Professional(CEP) ASPE has certified Estimator professionals as: Certified Professional Estimator(CPE)

Estimating As A Career

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The Association for the Advancement of Cost Engineering

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Jeff Borowicz, CPC, CCC, PSP

Promoting the Planning & Management of Cost & Schedules

Jeff Borowicz, CPC, CCC, PSP

Promoting the Planning & Management of Cost & Schedules

The many Hats of Estimating

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Architect / Engineer Estimating Subcontractor Estimating

Estimating Markets & Disciplines

Promoting the overnment Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Contractor & Subs Estimating

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Owner/AE Estimating Life Cycle

Life Cycle Analysis Construction Audits

Promoting the Planning & Management of Cost & Schedules

Contractor Estimating Life Cycle

Low Bidder Evaluations

Life Cycle Analysis

Select Subcontractors & write Subcontract Agreements

Value Engineering or Bid Alternates

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Hard Bid / Control Check Estimates

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Change Order Process

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

So you want to be an Estimator

AACEi Annual Salary Survey

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Owner Invitations Contractor Bid Lists Subcontractor Bid Lists

Promoting the Planning & Management of Cost & Schedules

Standard Estimate Formats

Promoting the Planning & Management of Cost & Schedules

Estimating Policies & Procedures

Procedures Basis of Estimate Scope of Work Assumptions Caveats Exclusions

Promoting the Planning & Management of Cost & Schedules

Estimating Accuracy (AACEi)

Promoting the Planning & Management of Cost & Schedules

Work Breakdown Schedule (WBS)

Promoting the Planning & Management of Cost & Schedules

Construction Specification Institute (CSI) Breakdown

Promoting the Planning & Management of Cost & Schedules

Construction Specification Institute (CSI) Breakdown

Promoting the Planning & Management of Cost & Schedules

Construction Specification Institute (CSI) Breakdown

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules

Promoting the Planning & Management of Cost & Schedules