Fundamentals of Cost Estimating

Fundamentals of Cost Estimating

OBJECTIVES

• Gain knowledge of techniques used in Project estimating, from the conceptual stage to the final detailed estimate
• Understand the different types of estimates used to accurately and progressively estimate project costs
• Understand the different types of contracts based on the distribution of risk between contracting parties
• Effectively apply incentive arrangements to get the best results from the contract

WHO SHOULD ATTEND?

This course is designed for project cost estimators, project designers, project planners and schedulers, contracts professionals, project procurement and purchasing staff, and project control and business services professionals who have the responsibility for preparing cost estimates and project proposals in client and contracting companies.

COURSE OUTLINE

Day One

Cost Estimating Basics

• The estimating life cycle
• Phases of the Design Process
  • Programming phase
  • Schematic design
  • Design development
  • Construction documents
• Estimating accuracy by phase
• Conceptual Cost Estimates
  • Rough Order of Magnitude Estimates (Broad Scope Estimates)
  • Assemblies cost estimates
  • Cost indices
  • Semi-detailed Estimates (Narrow Scope Estimates)
  • Definitive Estimates (Detailed Scope Estimates)
• Quantity take-off
  • Basic procedures
• Types of construction contracts
  • Lump-sum contracts
  • Unit-price contracts
  • Cost-plus contracts
  • Cost-plus contract with guaranteed maximum price (GMP)
  • Time-and-materials contracts
• Procurement methods
  • Bid method
  • Negotiated method
• Pre-construction services
• Risk analysis and contingencies

Broad Scope Cost Estimating Techniques

• Adjustments to Project Cost for Broad Scope Estimates
• PERT Project Cost Analysis
  • PERT Unit Cost Estimates
    • Formulae for Cost Estimating
    • The Normal Distribution Curve
    • Z-Value Table
    • The Probability of Project Completion within Budget
    • Estimating Project Unit Cost by Using the Standard Deviation
    • Estimating the Project Unit Cost at a Required Probability
    • The Probability of Completing the Project at a Required Cost
    • PERT vs Standard Deviation & Z-Values
    • Adjustments to Estimates Based on Previous Projects
  • Adjustments for Time
    • Review: Future Value of Money
    • Review: Present Value of Money
    • Equivalent Annual Interest Rate
    • Index to Adjust for Time
    • Equivalent Compound Interest
  • Adjustments for Location
    • Location Index for Construction
  • Adjustments for Size
  • Combined Adjustments
  • Economic Price Adjustment
  • Unit-Cost Adjustments
  • Learning Curves
    • Estimating Durations based on the Learning Curve Effect
    • Estimating Costs based on the Learning Curve Effect

Day Two

Budget Estimating Process

• Estimating by design phase
  • Programming budget estimates
  • Schematic design budget estimates
  • Design development budget estimates
• Estimating pre-construction services
  • Request for proposal
  • Development of pre-construction services estimate
  • Pre-construction services contract
  • Budget control log

Bid Contract Estimating Process

• Pre-estimate activities
  • Estimating process
  • Solicitation of lump-sum bids
  • Order-of-Magnitude estimates
  • Work Breakdown Structure
  • Estimating team
  • Scheduling the estimating work
  • Subcontractors and major suppliers
  • Estimating forms
  • Accuracy and error prevention
• Pricing self-performed work
  • Recap sheet
  • Materials
  • Labour
  • Applying pricing factors
  • Summary recap
• Estimating subcontractor work
  • Subcontractor work
• Estimating General Conditions
  • Project summary schedule
  • Alternative techniques
  • Elements of the general conditions estimate
• Completing the estimate
  • Final document review
  • Completing the bid summary
  • Final mark-ups
  • Sales tax
  • Validating the estimate

Day Three

Unit Price Estimates

• Unit price bid forms
• Direct cost estimation
  • Materials
  • Labour
  • Indirect labour
  • Subcontractors
  • Recap summary sheet
  • Direct-to-indirect cost factor
• Mark-up determination
• Variation-in-quantity contract provision
• Risk analysis
• Bid finalization

Negotiated Contract Estimating

• Guaranteed Maximum Price Estimates
  • Contract procurement process
  • Documents
  • Strategies
  • Estimating process
  • Contingencies
• Fee determination for negotiated contracts
  • Reimbursable versus Non-reimbursable costs
  • Home office overhead
  • Risk evaluation
  • Fee structure
  • Cost savings split
• Cost proposals for negotiated contracts
  • Strategies for responding to the Request for Proposal
  • Documents to be included with the Request for Proposal
  • General Contractor interview and selection process
  • Negotiated subcontracts

Day Four

Contract Types and Compensation Arrangements

• Risk distribution in contracting
• Project risk profiles
• Contract types according to risk distribution
• Fixed Price Contracts
  • Firm Fixed Price
  • Fixed Price with Economic Adjustment
• Incentive Contracts
  • Fixed Price Incentive
  • Cost Plus Incentive
• Cost-Plus Contracts
  • Cost Reimbursement
  • Cost Plus Award Fee
  • Cost Plus Fixed Fee
• Time-and-Materials

Day Five

Narrow Scope Cost Estimating Techniques

• Power-sizing techniques (Capacity Ratios)
• Factor estimates
• Cost estimating relationships (CER)
• Design-to-cost-estimates
• Target cost estimates
• Adjusting for Project Type and Quality Level
• Features Determining the Quality Level (Grade) of a Structure
• Adjusting for Quality Level by Using a Costing Publication
• Economic Constraints
• Parametric Cost Estimating
• Analysis of Estimating Accuracy