Aace-estimating Panel Feb 2 2015

7/25/2019 Aace-estimating Panel Feb 2 2015

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Montreal Section of AACE InternationalPresents.

Its Only an Estimate!

A Panel Discussion: Roundtable


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Agenda


Safety Topic

Panel Introduction

Overview on Capital Cost Estimating Panel Questions & Discussion

Question period


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Safety Topic

Walking on Montreal Streets in Winter..


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The PANEL Introduction

The Owner: Guillaume Lafortune Hydro

Quebec

The Consultant: John Alarcon Hatch

The Contractor: Patrick Habib LCO


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The conceptOf Course,

Thats Only an

ESTIMATE..The ACTUAL cost

will be muchmore!


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Art Imitates Life..

Why estimators are cautious


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Industry Results

J. Hollmann Presentation 2011


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COST ESTIMATINGA predictive process used to quantify, cost, & price

resources required by scope of an asset

investment option, activity, or project.

As a predictive process, estimating must address

risks & uncertainties.

Outputs of estimating are used primarily as inputsfor budgeting, cost or value analysis, decision

making in business, asset & project planning, or

for project cost & schedule control processes.


Definitions


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Estimate Defined

Estimate (aace): A compilation of all the costs of the

elements of a project or effort included within an

agreed upon scope.

PMBoK: A quantitative assessment of the likelyamount or outcome. Usually applied to project costs,

resources, effort and durations and is usually preceded

by a modifier (i.e. preliminary, conceptual, feasibility,

OoM, definitive). It should also include some indicationof accuracy e.g. +/-percent).


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Basic Estimating Process

Planning Preparation Development Summation Document Review

Final

Estimate

MandateOwner reqts

Estimate Level

WBS

Est. Resources

Est. Methods

Schedule

Scope of Work

Site Survey

Labour rates

Productivity

Prev. Est.

Equip. Lists & Eng. DocsMTOs

Quotes/$ Databases

Direct Labour

Schedule Data

Indirect Costs/Owner

Risk Review

Methodology

Data Sources

Inclusions

Exclusions

Quantities

Cost summaries

Historical data

Benchmark data

Risk Evaluation

Variance Analysis

Owner

Requirements

WBS

Commodity

Coding

Estimate

Plan

Quantified & priced

Line items

Direct & Indirect

Allowances

Contingency & Esc.

Summary by WBS

Discipline

Quantities , hours

& cost

Variance report

Basis of

Estimate

Supporting

worksheets

Labour rates &

Crews

productivity

Activities typically shown for Class 3 estimate


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Reference: AACE International Recommended Practice No. 18R-97 COST ESTIMATE CLASSIFICATION SYSTEM


Estimate Classes


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Capacity factors (6/10 rule), analogous,expert judgment, cost indices (top down)

Factors applied to plant (Hand

factor) or equipment (Lang factor)Parametric estimating (related to aphysical attr ibute/s)

Model based with CAE 5D (BIM)

Detail l ine items with MTOs and

pricing from estimating databases& market pricing (bottom-upestimating)

School of Project Controls

Estimating Methods

Reference: Estimating in 3D: the Next Dimension, Barmania & McMullan, AACE International Annual Meeting, 2004


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Estimate Elements

Direct Contractor View

COST

ESTIMATE

Direct

Costs

Indirect

Costs

Labor Material Equipment Subcontract

TaxesGeneral

ConditionsRisk / Reward Overhead

Profit Contingency


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Estimate Summary


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Class & Stage-Gate

Doing the Right Project

Doing the Project Right

Project Shaping

18

Class 5 Class 4 Class 3Class

4,5

Sanction

Appropriat ion

4 Definit ive

5 Tender

Check


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Estimate types and Stage-Gate

At what stage are you most involved?

Is the stage-gate process

effective?

Where are there areas for

improvement? (e.g. communications,

interfaces)


Panel Discussion


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Flaws

Each of the stages do not meet requireddeliverables, leading to recycling: FEL G1 = Robust business case

FEL G2 = Scope complete (base case selected)

FEL G3 = Project ready to execute

Stage-gate approval conditional

FEL drives cost and schedule predictability*

FEL & Context: 3 key areas of context* Challenges of physical location

Availability & quality of construction labour

Permitting

* industrial megaprojects by E.W. Merrow, chapter 10


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From Social Media

Reference: When Good Projects Go Bad SOR - April 2011


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One of the reasons given for project

overrun is poor estimating.

How do you respond?

What is the most variable part of the

estimate and has greatest impact?

What can the industry do to improve?


Panel Discussion


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Flyvbjergs Top Reasons for

Mega project Overrun


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Most variable costs

Typical areas of highest growth:

Bulk Quantities

Construction Labour hoursIndirect related labour costs

Construction indirect costs

Field Overheads

Consultant services

Owner costs

EQUIP

23%

BULKS

24%

DIR.

LAB.21%

HO

13%

INDIR.19%

RATIOS


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Contingency& Escalation

How do you define each?

How do you assess conty?

Deterministic, probabilistic orparametric?

Who owns the project contingency?


Panel Discussion


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Project Contingency

ContingencyAn amount added to an estimate to allow for

items, conditions, or events for which the state,

occurrence, and/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.


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Risk Methods


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Risk Methods


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Escalation


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Estimating Accuracy:

What does it mean?

How do you establish and

validate it?

How do we improve it?


Panel Discussion


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Estimate accuracy


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International Projects:

How is labour productivity

evaluated in the estimate?

What are the things to watchfor remote locations?


Panel Discussion


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Sample Labour Productivity

evaluation sheet


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Selling the estimate: why so

important?

What is your estimate review

process/processes?

How do you convince mgmt, client

and stakeholders?

School of Project Controls

Panel Discussion


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Typical Reviews

Progressive internalreviews

Estimating/Controlsteam review

Project ReviewConsult. Mgmt

ReviewOwner Review


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Collecting Benchmarking &

Historical Data:Is it really worthwhile?

What is your approach?


Panel Discussion


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Budget and Cost Control Workflow

Capital EstimateScope of

WorkBudget

Trending &

Forecasting

CommitmentsChange Orders

Progress

Databases

Design Data/

Quantities

Project

Statistics

and Metrics

Final Cost

Market

Data


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Estimating & Project Controls:

Should front end estimating be

part of project controls?

How has technology affected the

estimating process? ( Systems/Methods)

What is role of estimating during

execution?


Panel Discussion


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Lessons learned and

estimating:

In summary, is there a

lesson learned that means

the most to you that youwould like to share?


Panel Discussion


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Question Period


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