FACTORS THAT DETERMINE VARIATION IN ESTIMATES

DR. Nabil Dmaidi

Purpose of An Estimate

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

Contractors 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

Engineers Purpose of Estimate

1. Provide the owner with probable estimate. 2. Evaluate alternatives.

DR. Nabil Dmaidi

Comparison of Contractors and Engineers Estimator

Contractors Estimator

Engineers 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.

Determines expected cost.

Does not know who will receive award, therefore does not know contractors 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.

Has knowledge of actual materials suppliers to be used and quantity discount prices.
DR. Nabil Dmaidi

TYPES OF ESTIMATES
1. Preliminary 2. Unit price 3. Assembly or Conceptual Cost 4. Detailed estimate
2 Million dollars building
Accuracy within 20% 15% 10% 5% Preliminary Unit Price Assembly Detailed Time 5min 1hour 1day 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

A cost prediction based solely on size and/or capacity of a proposed project. Before any engineering or design is completed. Rely on broad data from already executed similar project

relate cost in dollar to the main capacity/size parameter

number of beds in hospital square feet of office space number of students in school
DR. Nabil Dmaidi

Preliminary Estimate (cont)

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

Parking Garage
$15.0/sq. ft or $4500/parking space

High School
$80 to 110/sq. ft or $40,000/ student seat

Medical Centers
$90 to 130/sq. ft

DR. Nabil Dmaidi

2.

Unit Price Estimate

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

Performed when conceptual design decisions are being made.

Work package concept can be used to determine the element or assembly to be studied
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 ft2

DR. Nabil Dmaidi

4.

Detailed (Definitive )Estimate

Prepared after drawings and specification are completed.

Requires a complete quantity takeoff based on drawing and the complete set of contract documents
Need information on labor rate "productivity", material cost, cost of renting or purchasing equipment

DR. Nabil Dmaidi

Variation Factors in Estimating

1. Time

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

Published by R.S. Means and ENR Used to update old cost information

Uses
1. To update known historical costs for new estimates 2. To estimate replacement cost for specific assets 3. To provide for contract escalation

Limitations
1. They represent composite data, average of many projects. 2. They fail to recognize technological changes. 3. 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 F = P (1 + i) n

F = future cost

P = present cost i = predicted rate of cost escalation per period n = number of periods (years)

DR. Nabil Dmaidi

2. Location

Some factors affecting cost in different locations are: 1. Transport cost 2. Taxes 3. Labor supply and local productivity 4. Codes and local inspection

Construction costs also vary in different regions of the USA.

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

As the quantity built increases, the unit cost decreases:

Size Factor =
Proposed Size Comparison Size

UCM = Unit Cost Multiplier

UCM = SF
E-1

DR. Nabil Dmaidi

Use This Side for Unit C ost Mult ipliers (UCM Met hod)

Use This Side for Tot al C ost Mult ipliers (TCM Met hod) Project Size Fact or 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 .0 1 .1 1 .2 1 .3 1 .4 1 .5 1 .6 1 .7 1 .8 1 .9 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.0 C omplex Project s 0.381 0.486 0.577 0.660 0.736 0.807 0.875 0.939 1 .000 1 .059 11 .1 6 1 70 .1 1 .224 1 .275 1 .326 1 .375 1 .423 1 .470 1 6 .51 1 .561 1 .605 1 .648 1 .691 1 .733 1 .774 1 5 .81 1 .855 1 .894 1 .933 1 .972 2.01 0 2.047 2.084 2.1 21 2.1 57 2.1 92 2.228 2.263 2.297

Table for Unit and Total Cost Multipliers

Buildings 1 75 .1 1 28 .1 1 .096 1 .072 1 .052 1 .036 1 .023 1 1 .01 1 .000 0.991 0.982 0.974 0.967 0.960 0.954 0.948 0.943 0.938 0.933 0.928 0.924 0.920 0.91 6 0.91 2 0.909 0.905 0.902 0.899 0.896 0.893 0.890 0.887 0.885 0.882 0.880 0.877 0.875 0.873 0.871

C omplex Project s 1 .904 1 9 .61 1 .443 1 .320 1 .227 1 53 .1 1 .093 1 .043 1 .000 0.963 0.930 0.900 0.874 0.850 0.829 0.809 0.780 0.774 0.758 0.743 0.730 0.71 7 0.705 0.693 0.682 0.872 0.662 0.653 0.644 0.636 0.628 0.620 0.61 3 0.606 0.599 0.593 0.586 0.580 0.574

Buildings 0.235 0.338 0.438 0.536 0.631 0.725 0.881 0.91 0 1 .000 1 .090 1 78 .1 1 .266 1 .354 1 .440 1 .527 1 2 .61 1 .697 1 .782 1 .866 1 .950 2.033 2.1 6 1 2.1 99 2.281 2.363 2.445 2.526 2.607 2.688 2.768 2.849 2.929 3.008 3.088 3.1 67 3.246 3.325 3.404 3.482

DR. Nabil Dmaidi

Chart to Convert Unit Prices

Unit Price Cost Multiplier (UCM)
2.000 1.500 1.000 0.500 0.000 0.1 1.0 Size Factor Buildings
DR. Nabil Dmaidi

10.0

Complex Projects

Chart to Convert Total Project Cost

Total Project Cost Multiplier (TCM)
4.000 3.500 3.000 2.500 2.000 1.500 1.000 0.500 0.000 0.1 1.0 Size Factor Buildings
DR. Nabil Dmaidi

10.0

Complex Projects

4. Shape
50
Bldg A Area = 15ooft2 Perimeter = 160ft

40
Bldg B Area =1500ft2 Perimeter = 150ft

30

40

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

10

15

5. "Learning Effect"

Increased productivity by doing repeated work.

Detailed analysis will be discussed later.

DR. Nabil Dmaidi

6. Other Factors

Hard to quantify but should be evaluated:

Quality Soil condition

Weather Condition
Competition Productivity

DR. Nabil Dmaidi