CIV 511
Construction Methods and Project Management
Lecture 9
Construction Cost Estimates
Dr. J. Berlin P. Juanzon CE, MBA, MSCM
SAFETY AND CONSTRUCTION
RISK INDUSTRY
MANAGEMENT
FINANCIAL
SCOPE
MANAGEMENT
MANAGEMENT
CONSTRUCTION
TIME PROJECT
MANAGEMENT MANAGEMENT PROCUREMENT
MANAGEMENT
COST HUMAN
MANAGEMENT RESOURCES
QUALITY MANAGEMENT
MANAGEMENT
In the business of design and construction,
profitability is based on accurate and
complete cost estimation
“Cost estimating is employed as one of the main tools of
successful cost management. Once an initial budget has
been established, it is important to test its assumptions by
employing a series of increasingly precise cost estimating
techniques that coincide with further development of
design and construction details.”
Estimating requires a
talent to predict or
avoid the unexpected.
A good estimator
understands
construction
materials, methods
and systems, as well
as the labor and
equipment required to
complete all tasks in
their correct
sequence, on time and
on budget.
The structure of an estimate
Estimates are typically organized in a work-breakdown structure
(WBS).
A work breakdown structure (WBS) is a hierarchical system used
to define and group discrete tasks or elements, covering the work
scope of the project.
100% Rule:
A WBS must include 100% of the work defined by the project
scope and capture all deliverables – internal, external and
interim.
The structure of an estimate
The Construction Specification Institute’s (CSI) has
created the "de facto" standard for the Construction
Industry (known as MasterFormat).
The CIS has also created the UniFormat, a new design-
based structure focusing on early stages of a project
planning.
MasterFormat
also referred as the CSI Format)
(
-Created by the Construction Specification Institute CSI,
1961
- Used by nearly every business, in specifications and
pricing
- Focus on materials and methods (construction
approach)
- Contains 49 divisions (as of 2008)
- Better suited for pricing & construction
Example:
DIVISION 05 – METALS
05 00 00 METALS
05 01 00 Maintenance of
Metals
05 10 00 STRUCTURAL
METAL FRAMING
05 12 00 Structural Steel
Framing
For more information
http://www.csinet.org/s_csi/sec.asp?CID=1377&DID=11339
Uniformat
-First introduced in 1998, Guiding Principles established
in 2007
- Functional elements of a project (design approach)
- Organized in nine categories
- Better for conceptual understanding of a building
- Provides a way to compare major components of
different projects
Uniformat
A Substructure
B Shell
C Interiors
D Services
E Equipment &
Furnishings
F Special Construction
& Demolition
G Building Sitework
Z General
CONSTRUCTION CONTRACTS
Types of Construction Contracts
1. STIPULATED SUM / UNIT PRICE
Stipulated sum and stipulated unit price are
grouped together because of the similarity of their
cost control requirements as described separately
from the contractor’s and owner’s view point.
A Contractor in a stipulated sum agrees to
construct project for a fixed amount no matter what
difficulty or expenses he encounters. The
remuneration may be made in a series of partial
payments after acceptance of the contractor’s work.
1. STIPULATED SUM / UNIT PRICE
A “unit-price contract” is one on which
payment for the work is to be based on the
computed quantities of work performed on
specific work items and materials furnished
and used by the contractor on the project,
each such quantities being multiplied by
the contractor’s bid price of the unit.
1. STIPULATED SUM / UNIT PRICE
There are two types of “unit-price”
contracts:
1. Unit-Price Flat Rate : Rate per unit
remains constant regardless of change
in estimated quantities given.
2. Unit-Price Sliding Rate : If estimated
quantities increase or decreases by
stipulated percentage, then the unit
price is adjusted accordingly.
2.0 COST-PLUS
“Cost Plus” is another type of contract. The
prime contractor is generally involved prior to
completion of the contract documents, when the
scope of work is not clearly defined. The contractor
is reimbursed for his actual expenditures and is paid
a fee for supervision. The fee paid to him may be
based on a percentage of the cost of the work or a
fixed amount predetermined as compensation for his
services.
3.0 PROJECT MANAGEMENT
CONTRACT
The third type of contract is the Project
Management Contract. It provides a
method for project development where the
owner hires the Project Manager who in turn
employs the services of architects, engineers,
and other consultants. In this method, the
initiation of policy, programming, budgeting,
design, and construction are controlled by a
team of professionals under the direction of a
project manager.
CONSTRUCTION COST ESIMATING
An estimate may be defined as a process of
calculating. Forecasting or predicting the costs and
quantities of the different item of work included in the bid
schedule of a certain project proposed for construction.
KINDS OF ESTIMATES
Range in accuracy
1.0 Floor Area Estimate +/- 40%
2.0 Function Estimate +/- 30%
3.0 Factor Estimate +/- 20%
4.0 Parameter Estimate +/- 15%
5.0 Detailed Estimate +/- 7%
1. FLOOR AREA ESTIMATE :
Experience showed that for a similar building project, the building
costs are very closely related to floor area. It is based on historical
data.
A minimum of information is used to develop this type of "Ball Park
Estimate." The estimate is prepared from in-house-data available
from past jobs on similar plants. From these actual jobs, the proposed
plant capacity is divided by an existing plant cost. This cost is
multiplied against the new plant capacity or unit to derive new plant
cost and then adjusted for escalation. A cost estimate determined this
way is only valid for a similar plant.
2. FUNCTION ESTIMATE: Measures the cost of
a building relative to its use or function.
Type of Project Function Estimates
School Building Cost per
student
Hospital Cost per bed
Theater Cost per seat
Parking deck Cost per
parking space
3.FACTOR ESTIMATE:
A factored estimate requires that all process equipment
must be priced. A factored estimate is produced by
taking the cost of individual types of process
equipment, and multiplying it by an "installation factor"
to arrive at the Total Direct Process Cost.
3.PARAMETER ESTIMATES:
This is an improvement over the floor area estimate
because several parameter measures are used
instead of one. Lump sum cost of trade are related to
component system of construction.
a. Structural steel cost related to gross area covered.
b. Parking area per number of building occupants.
c. HVAC cost per CM of the building.
5.0 DETAILED COST ESTIMATES:
This is a careful calculation of the quantities and costs
of everything that is stipulated in the contract based on
detailed construction plans, specifications and bid documents.
A detailed estimate of the cost is prepared by
determining the cost of materials, labor, equipment,
subcontract work, overhead, and profit. Detailed estimates
are generally prepared by the contractors from a complete set
of contract documents prior to submission of the bid to the
owner.
Major elements of Detailed Cost Estimate
-Direct costs (may be grouped in systems or
assemblies)
Materials
Labor
Equipment
Major elements of a Detailed Cost Estimate
- Indirect costs
Taxes
Insurance
Bonds
Operating costs
- Overhead, profit, other markups
- Contingency
- Time & escalation
- Phasing & mobilization costs
- Geographic index
COMPETITIVE ESTIMATING AND BIDDING
“Bid low enough to obtain the project, yet high
enough to make profit” is the most competitive bidding
Philosophy. Competitive estimating and bidding rely on
the following factors:
1. Accuracy of quantity take-off and unit cost analysis
2. Quotations of Suppliers and Subcontractors
3. Competitors bid price
4. Construction Methodology
5. Direct Labor rates
6. Equipment rental rates
Common estimating options
- Spreadsheets and manual takeoffs
“Excel is still the king”
- CAD and digital takeoff systems
- Online databases and services
BNI
R.S. Means
- Corporate software (modular systems)
- Building Information Modeling (BIM)
Estimating Software - Desirable Features
- Must be able to handle multiple projects (!)
- Hierarchical/WBS organization
- Detailed view per item
- Take-off system (screen-based or digitizing devices)
- Handling of complex systems and assemblies
- Items linked to cost of products & resources
(labor, materials, subcontractors, etc)
- Automated calculations
- Indirect costs, markup & overhead
Estimating Software - Desirable Features (cont.)
- Purchasing & contracting
- Cost comparisons (between different systems &/or
providers)
- Closeout capabilities, (Manual overrides &
customization)
- Reporting (links to scheduling)
To Be or not to Be(IM)
BIM Advantages
- Better coordination
- Problems identified earlier
- Hidden conflicts are discovered more easily (Structural
vs MEP)
- Reduction of RFIs
- 2D Drawings are an output of model
- Produce takeoffs (debateable)
To Be or not to Be(IM)
-BIM Challenges:
- Heavy requirements (processing power, storage, net
traffic)
- Adoption of same technology across
different disciplines
- Existing legacy of 2D CAD
- No standards to date
- Does not replace knowledge of materials & systems
- Misconception that BIM will do the work for you
