Construction Cost EstimatingClass #2: Concept Estimating

Prof. Ralph V. Locurcio, PE

A complex process involving the collection of available information on the scope of a project, the expected resource consumption, and future changes in resource costs.

This information is synthesized in a visualization of the construction process and translated into an approximation of the final cost.

Extensive knowledge of: Construction processes & methods Materials & methods Contracts & work practices Construction documents & details Background business factors Design & code requirements Verbal & written communications Good common sense & judgment

KickoffMeeting

WorkPlan

EstablishStandards

UpdateDatabase

PrepareEstimate

DocumentEstimate

ReviewEstimate

Adjust Estimate?

SubmitBid

ProjectExecution

ProjectCompletion

Yes

No

Revise

Lessons Learned

Feedback to improve data base

Reality C

heck Yes

No

Read the Plans, Specs & Contract

Conduct Site Visit

Decide Construction

MethodPrepare Schedule

Plan for SubcontractsPlan for EquipmentMaterial Take-Offs

Estimate costs

Determine contingency

Analyze Risk Factors

Finalize Bid

Systematic analysis of: Project components Equipment needed Construction methods Temporary work items Support activities Externalities

Conceptual Used for early decisions & feasibility Rough estimate using minimal data Relies heavily on past data Level of accuracy about 70%

Detailed Used for major decisions; i.e. bids & budgets Based on final design documents Level of accuracy up to 95%

% Accuracy

% D

esig

n

0 25 50 90 100

100

90

60

30

Based on prior experience: Weight check… weight of equipment Cost-capacity factor- ratio of Q/$ Comparative cost of structure – $/unit

Feasibility estimates Appropriations estimates Time & location adjustments

Basis is cost per unit based on past experience with similar units. Compare structures of like construction, (e.g.

school: steel, concrete, quality, local labor, weather) Develop cost per unit, e.g.

A$/pupil = A Cost/A pupils Apply to new construction:

B Cost = B pupils x A$/pupil

Schools: $/pupil Bridges: $/feet of span Stadium: $/seat Hospital: $/beds Offices: $/ft2

Warehouses: $/ft3

Plant cost ratio… process plant ratiodifferentiates machine ft2 from admin ft2

Floor area… cost/ft2 … but Total horizontal area… all floors equal Finished floor area… $ based on type finish Cubic foot of volume… floor height varies

Used for capital budgeting Expect 80-90% accuracy Based on historical data base Methods:

Panel… hist data on “typical” panels Bay… hist data on “typical” bays Plant component… equip cost + other TPC = ET/(1-PT)

Where ET=tot equip cost/(1-% all other cost items) ET = $$$ equip/(1-70%)

Cost indexing Based on similar “group” of key items Compare “group” over time or location Final cost based on ratio x calculated cost:

Est Cost = T2/T1 x Calc Cost Est Cost = (T2/T1)(L2/L1) x Calc Cost

“The future ain’t what it used to be”…Yogi Berra

Need to project costs to mid-point of the construction year for budgeting

Generally average past 3-5 years cost data & project forward

Based on three primary factors:

A. Scope… quantitiesB. Constructability… methods

C. Risk… externalities

Technology in project - complexity Milestone deadlines for work - timing Material & equipment - availability Staffing needed – skill & availability Contract terms – allocation of risk Amount of competition - markets

Construction quality – skill required Allowable tolerances – productivity Complexity of design – learning curve Flexibility of methods – special terms

Unspecified material or workmanship Differing site conditions Error in bidding Changes in cost over time Subcontractor error or failures Weather & environmental issues Strikes & labor issues Utilities & support issues

1. Determine project characteristics:Scope, constructability, risk

2. Examine the project design & site3. Structure the estimate 4. Determine elements of cost 5. Calculate estimate

Technical specifications Referenced standards Project drawings Testing and performance Special methods or procedures Physical elements & site characteristics Errors & omissions

Structure often follows specification template

Ensure nothing left out Need a plan for completing the project Logical flow of resources & materials Productivity factors

Labor- craft & skill resources; sub-contractors; union labor; wage rates; training; “effective” labor rates; productivity factors (weather, complexity, experience, management)

Material- price, shipping, availability, storage, relation to specifications

Equipment- purchase vs. lease, single use, down time, cost of maintenance

Capital- interest rates, payment flow, retainage Time- overhead costs, required completion date,

Material take-off from plans1. Quantities of all construction materials2. Compare with specifications

Labor cost for construction or installation1. Effective labor rates2. Team composition & duration

Construction equipment schedule1. On hand vs. lease or purchase2. Time on job

Follow elements of cost1. Ensure all items are covered

Calculate the estimated cost Solution in class

Based on historical data Accuracy = +30% Used for planning purposes when no

design exists Used to check validity of detailed

estimate

Assumes cost of equipment is dominant factor in plant cost

Estimate based on % of cost allocated to equipment relative to total cost of facility

Estimated cost is proportional to known cost

Must adjust for time & location

Assume that the equipment portion of a chemical processing plant constructed in 2006 cost $1.2M and the total plant cost was $2.5M. Therefore the equipment portion of the total cost was 46%. Estimate the cost of a new plant with the same processes if the equipment for the new plant has been determined to cost $2.7M. Assume time and location factors are negligible in this case.

Solution:

Assume that the equipment portion of a chemical processing plant constructed in 2006 cost $1.2M and the total plant cost was $2.5M. Therefore the equipment portion of the total cost was 46%. Estimate the cost of a new plant with the same process if the equipment for the new plant has been determined to cost $2.4M. Assume time and location factors are negligible in this case.

Solution: C2/E2 = C1/E1 … solve for C2

C2 = [C1/E1] x E2

C2 = [$2.5M/$1.2M] x $2.4MC2 = [2.08] x $2.7 = $5,625,000M

Similar to comparison of $/sf unit measure Used when facility has differing ceiling

heights Calculate the $/cf of known facility Determine $/cf of known facility Calculate total cf of new facility Using known $/cf calculate cost of new

facility Adjust for time and location

Determine the cost of a new warehouse which will have 3 distinct storage areas with differing ceiling heights. Area 1 = 12’; Area 2=14’ and Area 3 = 10’. The floor area of all three areas is 4000sf. A similar warehouse was constructed earlier this year for $2.4M. In that building the floor area was 8000sf and the ceiling height was a uniform 14’. Assume time and location factors are negligible in this case.

Solution:

Determine the cost of a new warehouse which will have 3 distinct storage areas with differing ceiling heights. Area 1 = 12’; Area 2=14’ and Area 3 = 10’. The floor area of each area is 4000sf. A similar warehouse was constructed earlier this year for $2.4M. In that building the floor area was 8000sf and the ceiling height was a uniform 14’. Assume time and location factors are negligible in this case. Solution: Existing Building

A = 8000sf x 14’ = 112,000 cfCost/cf = $2,400,000 / 112,000 cf = $21.43/cfNew BuildingA1 = 4000sf x 12’ = 48,000 cf A2 = 4000sf x 14’ = 56,000 cfA3 = 4000sf x 10’ = 40,000 cfTotal = 144,000 cfCost = 144,000 cf x $21.43/cf = $3,085,714

Prices “escalate” over time due to inflation Must adjust estimated cost to “mid-point” of

construction. Determine period of construction Determine start date of construction Determine mid-point of construction =

average cost Determine “escalation rate” = given index Multiply estimated cost by “escalation rate” Note: escalation is compounded, ie. increase is

cumulative over number of years of escalation

Prices differ by region of the country Must consult a reliable index to determine

“relative” cost of construction between regions RS Means Cost Data or Engineering News

Record are examples Adjustment is a simple ratio multiplied times the

estimated construction cost. So… C2/C1 = L2/L1 X Estimated Construction Cost

and C2 = C1 x L2/L1

You have been asked to prepare a conceptual cost estimate for the construction of a new university dormitory at Florida Tech to open in 2010. You have 2005 RS Means data that provides a cost of $30,000/bed for similar dormitories in the northeast of the US, and a construction period of 2 years. The Means data states that construction costs escalate at 10% per year in the southeast. If the dorm is to house 200 students at Florida Tech and the Means Cost Comparison Index between the northeast and southeast is 0.80, what is the estimated cost for the new library at Florida Tech at the mid-point of construction? Estimated Florida Tech cost:______________________

1. $30,000 per bed x 200 beds = $6,000,000… in the northeast in

20052. In the southeast in 2005…

$6,000,000 x 0.80 = $4,800,0003. Construction start is…

Occupancy – 2 years = 2010 – 2 = 2008

4. Mid-point of construction is =2008 + 1 = 2009

5. Years of escalation…2009 – 2005 = 4 yrs

6. Escalation: $4,800,000 x 1.10 = $5,280,000

(2005-06) $5,280,000 x 1.10 = $5,808,000

(2006-07) $5,808,000 x 1.10 = $6,388,800

(2007-08) $6,388,800 x 1.10 = $7,027,680

(2008-09)

Therefore… the estimated cost of the new dormitory for Florida Tech at the mid-point of construction in 2009 is:

$7,027,680