Standard Operating Procedure Updated: April 7, 2017 Page 1 of 15 DOCUMENT NUMBER: SOP602 TITLE: ARSLS Program FEMCO Estimating Procedure *** DRAFT Pending NSF Review *** PURPOSE: The purpose of this procedure is to define the high-level process, framework and guidelines for the development of capital investment estimates for the Arctic Research Support and Logistics Services (ARSLS) Program. This procedure has been developed in order to provide an improved and consistent approach to the development, accuracy classification, and review/approval of these estimates. BACKGROUND: This procedure is applicable to all capital investment estimates, regardless of class or accuracy range, relating to facilities projects in the ARSLS Program. For the purposes of this procedure, capital investment estimates (hereafter referred to simply as estimates) are those that involve either the design, procurement and / or installation of permanent structures or equipment at the National Science Foundation (NSF) arctic research sites (namely Alaska, Canada, Russia, Greenland and the Arctic Ocean). For the ARSLS Program, estimates are utilized for a variety of purposes such as: establishing and appropriating budgets, long-range capital planning, selecting and prioritizing potential projects or technologies, and validating supplier / subcontractor bids. Therefore it is important to establish a set of agreed upon guidelines for estimate methodologies and deliverables so the intended purpose and accuracy of each estimate is understood by the end user. Though this procedure does not directly relate to other non-capital project cost analysis, like operating or life- cycle evaluations, some of the processes listed may be applied PROCEDURE: Estimate Classifications and Accuracy Ranges The ARSLS Program has standardized on the estimate classification system described in AACEI Recommended Practice 17R‐97 - Cost Estimate Classification System. The classification system is broken into five major categories (Class 1-5) and is primarily based on maturity level of project definition deliverables, end usage, methodology, expected accuracy range, and preparation effort. 17R-97 recommends establishing a benchmark accuracy range for a Class 1 estimate (considered the most accurate) based on clearly defined and specific characteristics listed above. From this benchmark accuracy range for a Class 1 ARSLS Program estimate, a series of suggested index values listed in 17R-97 can be used to calculate all other classification accuracy ranges (Classes 2-5).
The purpose of this procedure is to define the high-level process, framework and guidelines for the development of capital investment estimates for the Arctic Research Support and Logistics Services (ARSLS) Program. This procedure has been developed in order to provide an improved and consistent approach to the development, accuracy classification, and review/approval of these estimates.
BACKGROUND:
This procedure is applicable to all capital investment estimates, regardless of class or accuracy range, relating to facilities projects in the ARSLS Program. For the purposes of this procedure, capital investment estimates (hereafter referred to simply as estimates) are those that involve either the design, procurement and / or installation of permanent structures or equipment at the National Science Foundation (NSF) arctic research sites (namely Alaska, Canada, Russia, Greenland and the Arctic Ocean).
For the ARSLS Program, estimates are utilized for a variety of purposes such as: establishing and appropriating budgets, long-range capital planning, selecting and prioritizing potential projects or technologies, and validating supplier / subcontractor bids. Therefore it is important to establish a set of agreed upon guidelines for estimate methodologies and deliverables so the intended purpose and accuracy of each estimate is understood by the end user. Though this procedure does not directly relate to other non-capital project cost analysis, like operating or life- cycle evaluations, some of the processes listed may be applied
PROCEDURE:
Estimate Classifications and Accuracy Ranges
The ARSLS Program has standardized on the estimate classification system described in
AACEI Recommended Practice 17R‐97 - Cost Estimate Classification System. The classification system is broken into five major categories (Class 1-5) and is primarily based on maturity level of project definition deliverables, end usage, methodology, expected accuracy range, and preparation effort. 17R-97 recommends establishing a benchmark accuracy range for a Class 1 estimate (considered the most accurate) based on clearly defined and specific characteristics listed above. From this benchmark accuracy range for a Class 1 ARSLS Program estimate, a series of suggested index values listed in 17R-97 can be used to calculate all other classification accuracy ranges (Classes 2-5).
Source: AACE International Recommended Practice No. 17R-97, November 29, 2011
The first step in categorizing an estimate’s classification per AACEI Recommended Practice 17R- 97, is to review the primary and secondary characteristics of the estimate.
As the maturity level of project deliverables is the primary characteristic in determining estimate classification, the following table has been developed to aid in determining estimate class for the ARSLS Program. This table was developed based on AACEI Recommended Practice No. 56R- 08 - Cost Estimate Classification System - As Applied for the Building and General Construction Industries and has been amended for specific ARSLS project characteristics and deliverables.
ARSLS Project Deliverable Maturity Matrix
Estimate Classification
Class 5 Class 4 Class 3 Class 2 Class 1
ARSLS General Project Data
Project Scope Description General Preliminary Defined Defined Defined
Project Location General Approximate Specific Specific Specific
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Project Execution Plan None Preliminary Defined Defined Defined
Project Schedule None Preliminary Defined Defined Defined
Work Breakdown Structure None Preliminary Defined Defined Defined
Contracting Strategy Assumed Assumed Preliminary Defined Defined
Availability of Historical Data None Limited Available Available Available
Engineering Deliverables
Plot Plans / Layouts Started Started Preliminary Complete Complete
Mechanical Equipment List Started Started Preliminary Complete Complete
Electrical Equipment List Started Started Preliminary Complete Complete
Civil/Structural Discipline Drawings
None
Started
Preliminary
Preliminary
Complete
Architectural Drawings None Started Preliminary Preliminary Complete
Specifications and Data Sheets None Started Preliminary Preliminary Complete
Mechanical Discipline Drawings None Started Preliminary Preliminary Complete
Electrical / I&C Discipline Drawings
None
Started
Preliminary
Preliminary
Complete
Source: Amended from AACE International Recommended Practice No. 56R-08, December 13, 2011
AACEI also recommends the EST and project team consider other factors impacting the estimate classification, such as:
• Level of non-familiar technology in the project.
• Complexity of the project.
• Quality of reference cost estimating data.
• Quality of assumptions used in preparing the estimate.
• Experience and skill level of the estimator.
• Estimating techniques employed.
• Time and level of effort budgeted to prepare the estimate. Along with the estimate classification (1-5), if required, a representative accuracy range can be
determined using the guidelines listed in AACEI Recommended Practice 17R‐97. This method indexes the Class 2-5 accuracy ranges from a pre-determined Standard Class 1 accuracy range, which is specific to the ARSLS Program. In order to establish the Class 1 accuracy range for the ARSLS Program the following matrix has been developed to incorporate a weighted approach to defining a standard Class 1 Estimate for the ARSLS Program. This matrix segregates major phases of a typical ARSLS estimate and typical cost methodology / sourcing for a Class 1 ARSLS Program estimate.
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ARSLS Standard Class I Estimate Accuracy Matrix
Cost Basis for Standard Class I ARSLS Estimate By Project Cost Phase
Expected Accuracy
Range
% of Total
(Typical)
Planning and Design
H: +5% L: -3%
10 %
• Engineering and home office labor hours are bottoms-up, segregated by individual and task, are deliverables based and developed by individual discipline leads.
• Labor rates are based on named individual / contractual rates.
• Other engineering and home office costs such as travel or 3rd party services are based on solicited quotations and actual market pricing.
Procurement and Fabrication
H: +5% L: -3%
30 %
• Capital equipment and major purchase order pricing is derived from vendor quotations based on job specific data sheets and specifications. The quotes are technically and commercially reviewed and approved.
• Bulk commodity pricing is based on supplier quotations from fully designed quantities and specifications or recent actual ARSLS Program purchase orders for like scope when available.
• Subcontracted Fabrication, if required, is based on subcontractor quotations on fully designed scope and specifications.
Shipping and Logistics
H: +10% L: -5%
10 %
• Freight (CONUS and non-CONUS) is quoted by the original supplier or a qualified transport vendor.
• GrIT and Greenland flight transport costs are calculated on a cost per weight basis using engineering calculated weights and ARSLS Program published unit costs ($ / unit weight).
Field Construction H: +10% L: - 10%
30 %
• If applicable, field construction costs are developed from qualified subcontractor quotations based on fully designed quantities and a detailed scope of work and execution plan.
• If not quoted, direct construction labor hours are estimated from quantity based, bottoms-up installation rates, adjusted for specific project conditions. These installation rates are applied to detailed built-up labor rates or actual ARSLS program subcontractor rates.
• If not quoted, construction indirect costs are bottoms-up, detailed estimates which include construction equipment and temporary facility schedules supported by supplier quotations.
Other Costs / Mark-ups
H: +5% L: -3%
20 %
• Escalation is calculated using standard forecasting indices applied against a cost-loaded schedule.
• Bonds, insurances and taxes are based on actual ARSLS Program rates and / or legal requirements.
• An appropriate amount of contingency is applied to the estimate based on a detailed risk analysis and applied contingency values applied to discrete items as agreed to by the project team.
• Overhead and profit is included based on the delivery model of the project using verified market and / or contractual rates.
Composite Standard Accuracy Range for ARSLS Class I Estimates
H: +7% L: -5%
100%
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Using the calculated Standard Accuracy Range for ARSLS Class I Estimates (+7% to -5%), the EST and project team can assign a specific ARSLS expected accuracy range for all other estimates (Classes 2-5). The following table has been developed to show the ARSLS expected accuracy range using the mid-point index value to a Class I estimate as suggested in 17R-97 for demonstration purposes. Depending on the degree of confidence the EST and project team have in the expected accuracy range, they may choose to use a lower or higher 17R-97 index value for a given estimate. The low and high ranges for accuracy range from 56R-08 are also provided for reference.
ARSLS Standard Estimate Accuracy Matrix
ESTIMATE
CLASS
MATURITY LEVEL OF PROJECT
DEFINITION DELIVERABLES Expressed as %
of complete definition [a] [b]
END USAGE Typical
purpose of estimate
[a] [b]
17R-97
EXPECTED ACCURACY
RANGE Typical +/-
range relative to index of 1 (i.e. Class 1 estimate) [a]
ARSLS EXPECTED ACCURACY
RANGE Using mid- point index value from
17R-97
56R-08 EXPECTED ACCURACY
RANGE As comparison
[b]
Class 5
0% to 2%
Screening or
feasibility
4 to 20
-60% to +84%
L: H:
-20% to -30% +30% to 50%
Class 4
1% to 15%
Concept study or feasibility
3 to 12
-38% to +53%
L: H:
-10% to -20% +20% to 30%
Class 3
10% to 40%
Budget authorization
or control
2 to 6
-20% to +28%
L: H:
-5% to -15% +10% to 20%
Class 2
30% to 75%
Control or bid/tender
1 to 3
-10% to +14%
L: H:
-5% to -10% +5% to +15%
Class 1
65% to 100%
Check estimate or bid/tender
1
-5% to +7%
L: H:
-3% to -5%
+3% to +10%
Notes: [a] From AACE International Recommended Practice No. 17R-97, November 29, 2011
[b] From AACE International Recommended Practice No. 56R-08, December 13, 2011
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Estimate Development Flow-Chart
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Estimate Development Details
Responsibility: • Project Manager (PM) The PM is responsible for all aspects of the project, including cost estimates. With respect to the estimate, the PM is essential for helping define purpose, scope budget and schedule of the estimate. The PM is a key source for ensuring the EST has the required information and support to perform the estimate and should, at a minimum, be involved with the kick-off, review, and approval of the estimate. • Estimating Lead (EST) The EST is responsible for the estimate development process
including the coordination of all deliverables and activities with the project team, leading the development and review of the estimate, acting as the key interface with the client on estimating responsibilities, managing estimate budgets and schedules, as well as ensuring all estimates follow applicable ARSLS Program standard processes. • Engineering Lead (ENG) The ENG is responsible for engineering deliverables and
activities which support the cost estimates. Regardless of maturity of design, the ENG is critical to the estimating process for accurate and comprehensive scope definition on which the estimate is built. The ENG responsibilities may include supporting the quantification of materials, providing engineering drawings and specifications, and technical review of solicited pricing. At a minimum, the ENG should review and approve the scope as defined in the Basis of Estimate (BOE) and confirm correct translation into the actual pricing details. In addition, the ENG is responsible for providing input into the engineering / design services portions of the estimates. • Construction / Logistics Lead (CON) The CON role for any ARSLS Program estimate is defined as the key resource(s) for information and guidance related to the execution approach, construction means and methods, modularization / prefabrication and transport of materials and equipment to the site. This role, if not specifically identified, can be filled by the PM, active site Construction Manager, or ENG. Because the majority of ARSLS projects are at remote locations with difficult labor conditions, the logistics and construction costs can be a large component in the estimate. Therefore, the CON is a critical resource to ensuring the estimate is based on an accurate and realistic execution approach. • Procurement Lead (PRO) The PRO is responsible for contacting and obtaining major
supplier and subcontractor pricing deemed necessary for the estimate. This pricing can vary between budgetary to firm. The PRO is also a key contact for obtaining historical project pricing data that may be used to support the estimate and providing input into the contracting approach to be used as the basis of the estimate. • Project Controls Lead (PC) The PC supports the estimate by providing the project
schedule on which the estimate is based. The PC can also be a key resource for supplying historical project information, if available, for as-installed quantities, labor rates, labor productivities, and other actual project information tracked and reported by project controls.
1. Establish Estimate Requirements
Prior to starting any estimate, four major requirements must be defined. It is the responsibility of the EST to ensure these criteria are understood by the PM and anyone involved with the estimate request.
• Schedule – How long does the EST have to develop the estimate, and what are the key milestones for development (due date, engineering completion, etc.)?
• Budget – What resources have been dedicated for the estimate and do they align with the expectations of the EST and PM?
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• Purpose – What will the estimate be used for? Is the end-usage of the estimate in line with the anticipated classification, budget, and schedule?
• Scope – What is being estimated? Can the requesting party clearly articulate the scope of the estimate?
2. Review the Scope, Project Execution Plan and Inputs
After an estimate has been requested and the fundamental requirements identified, the EST needs to review all available information that will be used to develop the estimate. These inputs include Project Execution Plans (PXPs), bridging documents and written scope descriptions, engineering documentation, pricing resources including historical and actual costs, and project team members who will contribute content to the estimate. It is imperative that the EST identify early on in the process if there is sufficient information available to develop the estimate, and to work with the PM and other project team members to address any gaps.
3. Develop the Estimate Plan
One of the most critical steps in the estimating process is the development of an Estimate Plan prior to starting any pricing activities. It is incumbent upon the EST to think through the process of the estimate and comprehensively address how the estimate will be developed. The Estimate Plan should include:
• Purpose of the estimate
• General project description
• Planned methodology and classification
• Schedule for developing the estimate / milestones
• Planned execution approach
• Planned engineering deliverables
• Planned quantity and pricing basis including historical cost and supplier quotations
• Planned review requirements and final deliverables
The Estimate Plan will be updated throughout the estimate development process, eventually converted into the Basis of Estimate at completion.
4. Kick-off with Key Stakeholders
After the Estimate Plan has been developed the EST should hold a kick-off meeting with key stakeholders in the estimate process, which typically include the PM, ENG, PRO, CON and PC. The Estimate Plan should be used as the basis of the meeting, ensuring alignment with the team.
5. Research Project Specific Requirements
Typically, each ARSLS Program estimate will have its own set of unique requirements, such as technology being used, remote location, logistical and transportation issues, etc. The EST should engage the PM, ENG, CON, Client and Scientific Team to fully understand these requirements prior to developing the estimate.
6. Collect and Review Key Deliverables
Working with the project team, specifically the ENG, CON, PRO and PC; the EST will gather the required information to develop the estimate. This information will have been identified in the Estimate Plan and may include the PXP, engineering drawings and specifications, quantities developed by engineering, the project schedule, and pricing resources.
7. Define Estimate Breakdown Structure
The EST, PM, ENG and CON should jointly agree on the estimate breakdown structure (EBS). Specifically, this breakdown should be organized in a way that considers the end use of the estimate. As an example, if the estimate will be used for long term capital planning the EBS should include funding years as part of the cost segregation. If the estimate will be used as a
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validation against subcontractor bids, the EBS should align with the schedule of values being issued with the request for proposal (RFP). Other considerations for the EBS include the Construction Specifications Institute (CSI) master format, region of work, direct, indirect and home office costs, supply chain, and self-perform and subcontracted scope. Whenever possible, a consistent EBS should be used for similar estimates in order to aid in cost trending and reconciliation efforts.
8. Quantify Scope
Regardless of the class of estimate and methodology used, all ARSLS Program estimates require some amount of quantification. AACEI typically segregates estimate methodologies into two broad categories, conceptual (capacity factoring, parametric ratios) and deterministic (detailed, bottoms-up). The majority of ARSLS Program estimates use some combination of both methods and it is incumbent upon the EST and ENG to ensure accurate quantification of scope. If it is possible for the ENG to provide quantities through engineering discipline take-offs or 3D modeling extraction, the EST should request this information. If the EST is performing the take-off of quantities, the ENG should review and approve. The EST should also consider the maturity of the design and method of take-off used to develop the quantities and apply appropriate material take-off allowances, overbuy and waste allowances.
9. Obtain Critical Supplier / Historical Pricing
Utilizing historical pricing and supplier / vendor quotations is an important element in ARSLS Program estimates due to the unique technologies, logistical issues and construction challenges inherent in the majority of projects estimated. The Estimate Plan will have established which pricing components the EST will utilize historical or supplier / vendor quotation. The PRO is the key resource in obtaining supplier / vendor information and should be involved with all supplier requests and communications. Any supplier quotes should be technically and commercially reviewed by the ENG, PRO and EST. Quotations may require conditioning and the EST should apply any required design development allowances to account for future price growth typically incurred in the design and submittal process. The PRO can also offer sources for historical information, examples being actual purchase orders, subcontracts, change order estimates, etc.
10. Develop Estimate of Direct Costs
The direct costs included in an estimate are typically defined as the installation of permanent facilities, including direct craft labor, trade dedicated construction equipment, direct equipment and materials and direct subcontracts. If required, the EBS should clearly define the direct costs included in the estimate. Following the Estimate Plan and information developed in Steps 1 through 9, the EST should develop the direct costs for the estimate. The following steps are tailored to more definitive estimates (Classes 1-3) however the fundamental methodologies and concepts can be applied to all estimates.
• Labor
o Labor Rates - The EST will develop direct labor rates specific to the region and scope of work. At a detail level, the labor rates should be built-up by craft position and include base wage, fringes, legalities, and other costs such as: overtime premiums, and incentives for craft attraction and retention. Typically these individual rates will be consolidated into typical crew mixes and applied to specific activities accordingly. Historical or published labor rates may be used as a basis or check.
o Unit Installation Productivities – The EST will develop the installation units (labor hours / unit) to be applied to the estimated quantities for a given activity. For detail estimates, these installation units are typically derived
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from published or in-house database sources and are traditionally stated for ideal construction conditions, in some industries referred to as US Gulf Coast (USGC) standards. When using these standard rates, the EST must apply productivity adjustments to account for conditions that will improve or inhibit installation work as compared to standard units. These adjustments should consider factors such as weather, work schedule, craft availability and skill level, worksite congestion and complexity of the job. For the ARSLS Program, the majority of projects occur in non-ideal conditions and labor productivities should be developed with input from the CON and project team.
• Trade Dedicated Construction Equipment
o Construction Equipment Production Rates and Pricing – For detailed estimates where equipment that can be directly identified to particular construction operations in support of a specific trade, the EST should develop an equipment schedule by task. The EST and CON will determine durations based on usage rates and stand-by time, for applying appropriate rental rates (cost / duration). The EST must consider mobilization and demobilization, as well as operator and operating costs, such as fuel and maintenance costs. With some projects, Client owned equipment may be used and it is the responsibility of the EST to determine the appropriate rates to be used, if any.
• Materials and Capital Equipment
o Bulk Material Pricing – The EST will develop the unit pricing basis for all bulk materials quantified for the scope of work. For detail estimates, these unit prices are typically derived from published or in-house database sources, and similar to labor rates, should be conditioned for location and project specifications. If available, historical or vendor quoted pricing discussed in Step 9 should be utilized to the maximum extent possible.
o Capital Equipment – The EST will develop pricing for major mechanical and electrical equipment as required. With many ARSLS Program estimates, capital equipment can constitute a large portion of the direct costs, therefore utilizing historical and vendor quoted pricing from Step 9 is important to improving the accuracy and quality of the estimate. If equipment items are readily available in the market or commercially “off the shelf” costs, the EST can use published pricing. If the design and specifications for the equipment is not complete, the EST and ENG should determine if design development allowances are required to account for the likelihood of cost increases associated with unique specifications only present with fully designed items. With all major equipment pricing the EST will need to verify if pricing is inclusive of freight, transport packaging and protection taxes and duties are included in the price or accounted for separately.
o Subcontracted Scope – The EST and CON should identify scope that will be subcontracted out and determine the basis for pricing. For ARSLS estimates, pre-fabrication or modularization are typical, given the remote locations, therefore the EST should solicit subcontractor pricing or utilize historical pricing for this scope whenever possible. For scope that is typically performed by specialty subcontractors such as painting and insulation, and other subcontracted scope, published or in-house rates may be used,
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however the EST needs to apply appropriate adjustments for location and market conditions.
11. Develop Estimate of Indirect / Other Costs
The indirect costs included in an estimate are typically defined as the construction management / field supervision, indirect field labor, temporary provisions and indirect construction equipment (shared equipment). Indirect construction costs are also referred to as general conditions. Other Costs include logistics and freight, material taxes, as well as home office engineering and support and any other project specific costs. If required, the EBS should clearly define the indirect and other costs included in the estimate. Following the Estimate Plan and information developed in Steps 1 through 9, the EST should develop the costs for the following pricing components:
• Indirect Construction Costs
o Construction Management and Field Supervision – The EST, CON and
PM should determine the required construction management (CM) and field
supervision staffing based on the project execution plan, contracting model
and scope of work. The EST will price the CM and supervision based on
duration and work schedule, applied to actual / contractual rates when
available. The EST will also price travel, lodging and subsistence costs for
the project location. With ARSLS Program estimates, specific attention
should be given to the use of Program staff for CM / supervisory roles and
whether they are included in separate Program budgets.
o Indirect Field Labor – The EST and CON will evaluate and quantify the
activities for construction labor not directly related to permanently installed
scope such as site clean-up, snow removal, temporary site office set up, etc.
This labor should be quantified and priced according to the direct labor in
Step 10.
o Temporary Provisions – The EST and CON will evaluate the need for
indirect materials and subcontracts on the project that support the
construction operations. These costs typically include temporary facilities,
offices, supplies dumpsters, tool and material storage, temporary power and
utilities, small tools and consumables, personal protective equipment,
temporary heat, etc. If required, contractor housing and subsistence can be
carried in this section as well as contractor mobilization and demobilization.
The EST will use a combination of historical rental rates, published pricing,
and supplier / subcontractor quotes for this scope. For the ARSLS Program,
specific cold-weather temporary provisions need to be fully addressed by the
EST and CON.
o Shared Construction Equipment – The EST and CON will also identify
equipment that supports the overall construction operation and is not carried
in the direct construction equipment category. Examples are snow removal
equipment, dust control equipment, and staff trucks. Scaffolding is
sometimes carried in this category if the amount and use is not specific to
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discrete scope. The EST should identify if any shared construction
equipment is not accounted for in other sections of the estimate, or other
ARSLS Program budgets and price this equipment as shown in Step 10.
• Other Costs
o Logistics and Freight – For the majority of ARSLS estimates, a major
pricing component is freight and transport. The EST, CON and PM should
review the project execution plan and agree to the basis of transporting
materials and equipment from the original sourcing location to the actual field
site. Included in this basis should be discussions on the degree
modularization and pre-fabrication. For major logistical transport
requirements not covered by existing ARSLS Program capabilities (an
example being a heavy haul contract), the EST will work with the PRO to
solicit subcontract pricing. For logistics costs currently supported by the
ARSLS Program (such as the GrIT on Air National Guard flights), historical /
contractual rates will be used. The EST will also assess typical non-
permitted overland freight costs and determine if typical percentages of
material costs are adequate or if subcontractor pricing is needed.
o Material Taxes / Import Duties – For all CONUS sourced materials, the EST
and PRO will define the appropriate sales tax rates that need to be applied to
all material costs. For non-CONUS materials, the EST and PRO will establish
all required local and country taxes applicable for the subject materials.
These percentages will be clearly stated in the estimate basis. Similarly, if the
project site is located outside of the United States, any required import duties
or taxes will be addressed by the EST and PRO and the basis of pricing or
exclusion will be stated.
o Project Specific Costs – The EST will work with the PM to determine if any
other project specific costs are required. Examples are specialty insurances,
bonding requirements, and net asset charges. These costs will be clearly
stated in the BOE as included or excluded with applicable basis.
12. Develop Professional Services Costs
The professional services costs for ARSLS Program estimates are typically comprised of the front-end / preliminary engineering, detail engineering, project management and home office support. Whether these services will be performed by the [ARSLS Contractor] or a design-build subcontract, the EST, PM and ENG need to determine if professional services will be included with the project costs. For some delivery models, such as engineering, procurement and construction management (EPCM) contracts, the CM costs addressed in Step 11 will be carried under professional services. The EST, PM and ENG will estimate the required professional services staff (typically by individual position), activities and required durations. The EST will price this scope with actual / contractual rates. Any non-labor costs such as travel, 3rd party subcontracts, operations manuals, etc. will be defined by the EST, PM and ENG and priced using historical / contractual rates.
13. Apply Mark-ups
Estimate mark-ups which are typically applied at summary project cost level are established in the estimate plan and agreed to by the EST and PM. Though mark-up
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requirements vary depending on the scope of the project, the primary mark-ups required on ARSLS Program estimates are escalation, contingency, and overhead and profit.
• Escalation – The EST will work with the PRO and PC to assess the cash flow / spend curve of the project (or a cost loaded schedule if available) to calculate the escalation costs for the project. For escalation percentages, the EST will utilize published industry recognized escalation forecasts such as those provided by Global Insight / IHS.
• Contingency –AACEI defines contingency as an amount added to an estimate to allow for items, conditions or events for which the state, occurrence and/or effect is uncertain at the time of the estimate, however experience shows will likely result, in aggregate, in additional costs. Contingency does not cover major scope changes and is not hidden profit, rather it is an anticipated cost. Contingency does not change the overall accuracy of the estimate, rather changes the probability of the project overrunning the estimated costs. Based on this definition, and the relative amount of uncertainty in ARSLS projects, nearly all ARSLS Program estimates require some amount of contingency. The EST will work closely with the PM and other key project stakeholders to determine the method for calculating the contingency applied to the estimate. A variety risk analysis exercises can be performed to identify and mitigate potential project risks and calculate estimate contingency. A common method of calculating contingency is to use a weighted approach, where the estimate is segregated into discrete categories and the project team individually assigns a contingency percentage and associated dollar value based on the perceived uncertainty and risk of overrun for the category. The aggregate of these contingency values are added together resulting in a weighted contingency percentage and value to be applied to the estimate. A sample template for weighted contingency analysis is included as Attachment 4. If required, more rigorous risk models can be developed, which include calculating potential impacts for discrete risk events and multiplying them against the probability of occurrence. For large complex projects a Monte Carlo simulation can be performed. Regardless of method, the agreed to estimate contingency and basis of calculation will be clearly stated in the BOE.
• Overhead and Profit – The EST will work with the PM to determine the appropriate overhead (also referred to as General and Administrative costs) and profit / fee to be applied to the estimate. Delivery model, market conditions and subcontracting plans should be considered to ensure all scope requiring overhead and profit (including lower tier subcontractors) is addressed. For [ARSLS Contractor] scope, contractual rates should be applied.
14. Compile and Finalize Basis of Estimate
As stated in Step 3, the Estimate Plan will be continuously updated by the EST throughout the development of the estimate based on the actual scope, methodologies, price sources, assumptions and exclusions used in the estimate (Steps 4 – 14). When the estimate development is completed, the EST will ensure the BOE fully addresses all areas of the estimate, including:
• Purpose of the estimate
• General project description
• Overall cost summary
• Estimate methodology and classification
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• Estimate development schedule
• Execution approach for the project
• Estimate breakdown structure / division of responsibility
• Detailed written scope of work
• Engineering deliverables and project documents used to develop the estimate
• Quantity and pricing basis
• Major allowances
• Project schedule milestones
• Escalation, contingency and other mark-ups
• Major assumptions
• Excluded costs
• Related attachments 15. Prepare Estimate Reports
At the completion of the estimate development, the EST will prepare all required estimate reports and summary tables to be issued for review. At a minimum, the EST should prepare the ARSLS Program standard estimate summary sheet, and detail reports. Reports by EBS can be provided as needed. The BOE should be issued along with all cost data.
16. Initiate Review Cycle – Amend Estimate
Comprehensive review of the estimate by all key stakeholders is critical in ensuring the estimate requirements established in Step 1 have been met. The EST and PM will have already established in the Estimate Plan the required review cycle of the estimate. The review and approval stages can differ for each estimate based on estimate purpose, classification, value, contract type and risk profile. A R S L S C o n t r ac t o r internal estimating review requirements may be applicable for some ARSLS Program estimates, and it is incumbent upon the EST to ensure these requirements have been met before issuing an estimate. At a minimum, each ARSLS estimate shall have the following reviews:
• Project Review with the PM, ENG, CON, PRO and PC
• Client Review with third party peer analysis
• Client Review with NSF representatives Reviews are typically led by the EST. A best practice for estimate reviews is to first agree on scope and pricing basis using the BOE as roadmap. Only after the scope and pricing basis have been agreed to is the actual pricing and cost data reviewed. The EST will document and make all changes and adjustments after each review cycle. A trend log should be maintained by the EST to ensure all review recommendations have been made and the project has the ability to identify pricing impacts of these changes.
17. Issue Estimate and Deliverables
After all required approvals have been given to the estimate, the EST will prepare final documents for issue to the project team and client. The EST will archive the estimate deliverables as well as all necessary back-up with the appropriate ARSLS document control procedures.
Outputs
• Estimate Summary
• Estimate Details
• Basis of Estimate
Attachments 1. Sample Estimate Plan / Estimate Basis
Standard Operating Procedure
Updated: April 7, 2017
Page 15 of 15
2. Sample Estimate Summary Sheet
3. Sample Estimate Detail Sheet
4. Sample Weighted Contingency Sheet
References 1. AACEI Recommended Practice No. 17R-97
2. AACEI Recommended Practice No. 56R-08
Attachment 1
Plan / Bas i s o f Es t i ma t e
Template
Prepared for
National Science Foundation Division of Polar Programs
Date
Attachment 1 Contents Section Page
1. Purpose of Estimate .............................................................................................................................................. 1
2. General Project Description ................................................................................................................................. 1
7. Detailed Scope of Work ........................................................................................................................................ 2
11. Major Allowances and Adjustments .................................................................................................................... 3
14. Other Costs and Markups ..................................................................................................................................... 3
15. Major Assumptions ............................................................................................................................................... 3
Estimated Project Costs are shown in the following table:
Table 3.1 – Overall Project Cost Summary
Sample Table
Total Project Costs
* See Attachments B and C for cost estimate details
This cost estimate has been prepared for guidance in project evaluation and implementation from the information available at the time of the estimate. The final costs of the project will depend on actual labor and material costs, competitive market conditions, final project costs, implementation schedule and other variable factors. As a result, the final project costs will vary from the estimate presented herein. Because of this, project feasibility and funding needs must be carefully reviewed prior to making specific financial decisions to help ensure proper project evaluation and adequate funding.
Attachment 1 CONTENTS, CONTINUED
2
4. Estimate Methodology and Classification
Text
5. Estimate Development Schedule
Description Date(s)
Estimate kick‐off meeting
Engineering Deliverables Due
Vendor Pricing Due
Finalize Estimate Scope
Issue Draft Estimate Basis
Draft Estimate Complete
Draft Estimate Project Review
Final Estimate Project Review
Client Estimate Review
6. Execution Approach
Text
Table 6.1 – Execution Work Breakdown Structure / Division of Responsibility
Item
Description
Location / Final
Destination
Responsible Party
Sample
7. Detailed Scope of Work
1) Text A
Sub‐text A 2) Text B
Sub‐text B 3) Text C
Attachment 1 CONTENTS, CONTINUED
3
Sub‐text C
8. Design Document Basis
The estimate was developed utilizing the below engineering documents:
Document Revision Date
9. Quantity Basis
Text
10. Pricing Basis
Text
11. Major Allowances and Adjustments
Text
12. Project Schedule
The estimate is based on the following project schedule:
Description Date
13. Escalation
Text
14. Other Costs and Markups
Text
Table 14.1 – Other Costs and Mark‐up Percentages
Description Basis
15. Major Assumptions
Text
Attachment 1 CONTENTS, CONTINUED
4
16. Excluded Costs
Text
17. Attachments
A.
B.
C.
Estimate Summary
Attachment 2
Project Name:
Project Manager:
Project Location:
P
E
R
D
roject Number:
stimated By
evision:
ate:
COA
Description
QTY's
UOM
Labor
Material
Subcontract
Construction
Equipment
Other Costs
Total
05
Metals
1
LS
$0
06 Wood, Plastics, and Composites 1 LS $0
07 Thermal and Moisture Protection 1 LS $0
08 Openings 1 LS $0
09 Finishes 1 LS $0
10 Specialties 1 LS $0
11 Equipment 1 LS $0
12 Furnishings 1 LS $0
13 Special Construction 1 LS $0
21 Fire Suppression 1 LS $0
22 Plumbing 1 LS $0
23 Heating, Ventilating, and Air-Cond. (HVAC) 1 LS $0
25 Integrated Automation 1 LS $0
26 Electrical 1 LS $0
27 Communications 1 LS $0
28 Electronic Safety and Security 1 LS $0
31 Earthwork 1 LS $0
32 Exterior Improvements 1 LS $0
33 Utilities 1 LS $0
A Total Direct Costs $0 $0 $0 $0 $0 $0
01
Construction Management and Field Supervision
$0
01 Indirect Field Labor $0
01 Temporary Provisions $0
01 Shared Construction Equipment / Scaffolding $0
01 Logistics / Freight $0
01 Material Taxes / Import Duties $0
01 Other General Conditions / Project Specific Costs $0
B Total Construction Indirects and Other Costs $0 $0 $0 $0 $0 $0
C Total Direct + Construction Indirects (A+B) $0 $0 $0 $0 $0 $0
Home Office Engineering & Design
$0
Home Office Support $0
D Total Professional Services $0 $0 $0 $0 $0 $0
Lower Tier Subs Overhead and Profit
$0
General Contractor Overhead and Profit $0
E Total General Other Expenses $0 $0 $0 $0 $0 $0
F Subtotal (C+D+E) $0 $0 $0 $0 $0 $0
Contingency and Risk
$0
Escalation $0
G Total Contingency, Risk, and Escalation $0 $0 $0 $0 $0 $0
H Construction and Home Office w/ Contingency Esc. (G+F) $0 $0 $0 $0 $0 $0
