Escolar Documentos
Profissional Documentos
Cultura Documentos
I. INTRODUCTION
The purpose of this chapter is to:
Outline and provide perspective on the estimating process by discussing each
step in detail.
Define standard estimating terms and provide useful checklists and forms.
Present an overview of the many types of estimates differentiating the end
user, application, and accuracy of each. A detailed explanation of various
estimating techniques is presented in Chapter 2.
Introduce the basics of the estimate design basis, content, and format.
Because the estimate is one of the most comprehensive documents prepared
on a project, it impacts the entire project team and many project-related
activities. This overview will prepare the reader to better understand many of
the chapters throughout this book and, particularly, the estimating subtopics
that are discussed in-depth in Chapters 2-6.
I
I
Legend:
1. Project initiation
2. Scope definition
3. Pre-estimate planning
4. Quantity take-offs and item descriptions
5 . Data sources and costing
6. Direct cost totals
7. Summary and cover sheets
8. Documentation and checking
9. Management review
10. Estimate issue and filing
1 I. Cost feedbackkontinual improvement
Replace heat exchanger E-2’s cooling water supply system with new 2800
gallons per minute cooling tower and associated pumps. This will accom-
modate an increased heat load to the exchanger and replace the existing,
deteriorated tower as part of the plant’s Utility Upgrade Undertaking.
Provide a 3-bedroom, 2I/i-bath, 2-story, 2400 SF brick home on lot 4C in
the Wolverine Den subdivision in Ann Arbor, Michigan. A home office
will also be provided. A masonry block foundation to be used as crawl
space. The home shall have city sewer and water supply. All utilities are
underground including 2-line telephone, gas feed for furnace and water
heater, and 200 amp power supply. This home is being built to accommo-
date a growing family and home business.
Purchase and install a new cooling tower processing 2800 g.p.m. of process X
cooling water and a temperature drop of 15 O F . Scope includes pumps (sizes
stated), piping (sizes, materials of construction, and routing, if known, are
stated), foundations (sizes, concrete and rebar specs, etc.), and electrical
distribution and new starters for two-60 horsepower motors in an existing
motor control center. Flow control to be provided on the input side of the
cooling tower and level control in the pit. (Location, structural information
and any clarifying drawings and sketches could also be provided. Demo-
lition and other construction scope items would also be listed.)
Home (as stated above) to be constructed of #2 white pine framing and asphalt
shingle roof (type X). Windows to be of Brand Y or equal, (similar specs
for doors, foundation, cabinets, appliances, etc.) or refer to drawing num-
bers.
Scope statements are generated for each of the major categorical disciplines
of work (equipment, piping, structural, etc.). Scope statements may evolve
1) sequentially through a “trickle-down” effect or 2) iteratively. In many
cases, the design basis can be followed immediately by a sequential series of
detailed scope statements that “trickle down” one to the next. Figure 1.3
shows the evolution or “trickle-down” effect of a chemical process on the
various disciplines of work on an engineering project. Calculations, specifi-
cations, drawings, and bills-of-materials are the deliverables.
Oftentimes, however, it is necessary to reiterate the design basis. An iter-
ation or looping effect may be caused when a higher level scope requirement
is impacted by a secondary requirement. For example, a process requirement
may require a specific amount of floor space and ceiling height. The floor
space and height are secondary requirements because they were caused by
the process requirement in the primary design. The floor space or height
requirements, however, may demand more space than is available (due to
personnel access, future expansion plans, aviation height restrictions, or other
reasons of which the process designer may have been unaware). These sec-
ondary space limitations will cause a reconsideration and modification of the
process requirements or start a search for another site.
Defining the scope of the estimate requires that the design basis informa-
tion be analyzed and assigned a functional and systematic structure. This
working structure for a project and estimate is referred to as a work break-
down structure (WBS).
The Work Breakdown Structure (WBS)
One way to help clarify your scope is to prepare a work breakdown structure
(WBS). A WBS is to an estimate as a table of contents is to a book-the
01 General requirements
02 Site work
03 Concrete
04 Masonry
05 Metals
06 Wood and plastics
07 Thermal and moisture protection
08 Doors and windows
09 Finishes
10 Specialties
11 Equipment
12 Furnishings
13 Special construction
14 Conveying systems
15 Mechanical
16 Electrical
There are numerous dimensions which need to be explored and each step
will be discussed in detail:
1. Estimate purpose
2. Estimate type
3. Estimate accuracy
4. Estimate end users
5. Estimate format and forms
6. Estimate contributors
7. Estimate timing and review
8. Estimate preparation costs
9. Estimate units of measure
Many of the items discussed in Step 3 may seem redundant at first with items
in Steps 4 through 9. However, this is not the case. The points in Step 3 have
to do with planning the execution of Steps 4 through 9. The discussions on Steps
4 through 9 pertain to the actual execution of estimating at each of those steps.
Estimate Purpose
Planning the estimate b purpose means determining how the estimate will get
used. Will the estimate be used: 1) for an appropriation, 2) to figure a life
cycle cost including operations and maintenance, 3) for competitive bidding,
4) to verify the validity of a contractor's bid, 5 ) or used for some other purpose?
The estimate purpose is the main driver of the amount of time, money, and
resources that will be required for estimate preparation. It is also the main
determinant of estimate input requirements.
Estimate Type
The estimate type is the nomenclature that is used to describe one of the
several estimate functions as explained previously in Section V.A.
Estimate Accuracy
As already stated, the required estimate accuracy is one of the main criteria
which needs to be established at this stage. The required accuracy is directly
related to the availability of information/scope, time, available resources (peo-
ple, equipment, money), and estimating methodology or algorithm.
These four trade-offs describe the classic Estimating Paradox-the more
accurate the estimate, the more information is required; the more information
required, the more time is required to produce the estimate; the more time
required to produce the estimate, the more resources are required to develop
the estimate; the more resources required, the more money it will cost to
produce the estimate; the more money spent, the more pressure to reduce
resources, time, information, and accuracy.
Accuracy Depenh on the Availability of Information/Scope. Estimate accu-
racy depends on how much is known about a project. An estimator should
try to ascertain whether the project can best be described using either I) phys-
ical sizedquantities and equipment capacities/model numbers, or rather 2) a
broadly stated intention to deliver a certain capacity per year. The most
common approach to defining the scope is to define the “knowns.” This is
usually done with the aid of a work breakdown structure and code of accounts.
Figure 6’s [2] blackened space defines the boundary of the scope by empha-
sizing that which is included in the project.
It is also very useful to focus on that which is excluded from the scope
to eliminate as much as possible, thereby, highlighting everything that re-
mains. Refer to Figure 7 [23 to see how defining that which is excluded from
the scope (Figure 7’s blackened area) defines the boundary of the scope. The
stating of both the included and excluded portions of the scope is referred to
as an “includes-excludes scope specrj?cation/description. This is a very pow-
”
Time
Figure 8 The effect of time on estimate accuracy.
Estimate Detail Forms. Detail forms contain the deepest level of scope
item descriptions and associated direct costs. Prior to the development of the
estimate detail items (Step 4), the estimator must possess all documentation
that defines the scope of the project. Written design basis and scope state-
ments, drawings and sketches of any type, quotes and purchase orders, spec-
ifications, etc. are used to formulate the estimate details.
This discussion provides some guidelines in choosing and designing forms
with regard to estimate planning. Many companies have choices of standard
forms based on: 1) whether the labor is plant labor or contract labor, 2)
whether construction equipment is considered a direct cost or an indirect cost,
3) whether the job will have subcontractors involved, 4) varying plant loca-
tions, or 5) other distinctions.
Table 3 lists the types of columns (fields) found on many standard estimate
detail sheets and software. An example of an estimate detail form is shown
in Figure 9.
Estimate Summary Sheet. The estimate summary sheet generally item-
izes 1) the subtotal of each direct cost category (as determined in “sort/select/
summary” planning and 2) the subtotal of each indirect cost category. The
calculation of these indirect costs on the summary sheet are covered in Step
7. See the example estimate summary form in Figure 10.
Estimate Cover Sheet, See Step 7 for a list of questions that are often
used on cover sheets.
Estimate Assumptions/Docurnentation. The documentation of assump-
tions is critical to the understanding and interpretation of an estimate. Suffi-
cient planning should be done up-front so that all critical documentation gets
recorded during the traditional estimating process. The logging of drawing
and specification changes may have an effect of putting forth a claim for
extra work. Change order logs, responsibility matrices, and other general
project management tools can be used to document the basis for the estimate.
Estimate Contributors
It is not uncommon for the estimator to receive an incomplete scope state-
ment-a good list of process equipment, instrumentation, and piping, yet weak
in site, buildings and associated support systems, structural, electrical, and
off-sites considerations. On any size project, these missing items can have
significant impact on costs. On detailed estimates, it is important for the
estimator to have sufficient discussions with the primary and secondary scope
providers to explore the technical correctness and completeness of the scope.
Conceptual estimates need to be explored for missing items because many
techniques deal with battery-limit processes and the off-sites are add-ons.
Table 3 (cont.)
~~~ ~~ ~
Figure 9 Sample estimate detail form (labor, material, construction, equipment, and subcontract). Construction equipment is often
given as an indirect cost.
pirect costs
1. General requirements
2. Site work
3. Concrete
4. Masonry
5 . Metals ~~ -
6. Wood and plastics
7. Moisture-thermal control
8. Doors, windows, and glass
9. Finishes
10. Specialties
11. Equipment
12. Furnishings
13. Special construction
14. Conveying systems
FUBTOTAL-direct costs I
indirect costs c3
Labor payroll burdens
t3
Zonstruction equipment (not listed above)
Step 9 in the estimating process discusses carrying out the estimate review
process.
ton, VA; tables of weight and measures for unit conversions; currency ex-
change tables; etc. Other sources are consultants in the estimating field, your
work colleague, or an associate from a professional or trade association.
Costing
To compute an estimate for an item, you need to know the scope from Steps
2 through 4 and have a source of cost data. Once found, the cost data and
the scope are combined to establish the cost for each estimate item-both
direct and indirect costs. This process is called costing. The estimated amounts
are entered on the estimating detail form.
The costing process may require 1) extending unit rates and quantities to
obtain the cost, or 2) allocating the amount of money directly to the labor,
material, or subcontract (LMS) portions of the item. To obtain the direct cost
totals of any category, we apply the costing process to all scope items which
have been priced in Step 5 of the process. [Note: Sometimes, but rarely,
construction equipment is treated as a direct cost. When labor, material,
subcontracts, and construction equipment are all direct cost items, we will
refer to these as LMSEs rather than LMSs.]
Labor costs should specifl, if at all applicable, all field craftlcrew levels
for scheduling and manpower planning needs. Plant labor should be distin-
guished from contractor’s and shift work should be noted. Wage data, crew
sizes, productivity, etc. should be documented in a backup sheet.
In some cases, labor costs are allocated as a “chunk”-an educated guess
by the estimator. In other cases, labor is derived by estimating the number
of people working for an estimated amount of time to accomplish the task.
This is referred to as crewing. Labor costs may also be derived from quan-
tities, unit production rates, and wages as follows in Figure 11:
Materials are often separated into classifications such as owner’s purchases
and contractor’s purchases. The contractor’s purchases are sometimes differ-
entiated between those purchased by home o a c e and purchased by field. This
separation helps in procurement management. Some owners differentiate ma-
terials bought by themselves, the engineering contractor, and the construction
contractor. Some owners itemize materials that come from the owner’s exist-
ing inventories or from corporate parts warehouses.
hrs $
$Labor = Quantity x x-
Quantity hr
~
of the project costs. If desired, it can also provide the ratios of costs for
comparison to known standardkommon ratios. Ratio checking is a common
method to see if any costs are “out of range.”
Direct Costs. The estimate summary sheet’s direct cost section should
reflect the categories that were used for the detail sheets. Additional summa-
ries are provided based on agreements made at the pre-estimate planning
sessions. Note that the summary sheet in Figure 1.10 recaps the direct cost
values plus functions as a checklist of common indirect cost items.
Indirect Costs. The indirect costs don’t usually take as much time to
estimate as the direct costs do, but their cost contribution is significant and,
at times, exceeds the direct costs. Indirect costs may include any of the
following items [4]:
Direct labor payroll burdens (social security, unemployment insurance. work-
er’s compensation)
Overtime (premium pay portion) on field labor
Sales taxes on the direct and indirect materials and, when applicable, labor
Clean up
Field overhead (includes the field staff, payroll and payroll burdens, office,
small tools and construction equipment, consumable supplies, and tempo-
rary construction facilities such as power, trailer, roads, etc.)
Office overhead (home office, staff support, payroll, and payroll burden)
Engineering
Bond (for general contractors)
Contractor’s profit/fees
Escalation
Contingency/management reserves (risk assessment)
Nonproductive time such as rework, training, safety meetings, “show-up pay”
due to bad weather
Other (permits, general insurance premiums, royalties, licenses, and freight/
duty when not included with direct costs)
Owner’s costs
Adjustments (includes rounding, late adds, estimate changes that result from
estimate reviews. Even though these may be direct cost adjustments, it’s
often convenient to make these adjustments on the indirect cost summary
sheet as a one line entry.) If used, leave an audit trail so adjustments can
be alloted to the appropriate item for cost control purposes
Many of the indirect costs are related to the direct costs. Some companies
use a range of ratios or factors which are applied to the direct labor and
material to calculate the indirects. Labor burdens, sales tax, small tools and
consumable supplies may be related to the direct costs. Dependrng on the
type of estimate, office and field overhead, construction equipment, and non-
productive time may be calculated from the directs using a factor or may be
scoped in detail and computed. Escalation and engineering costs are often
estimated in detail or can be factored as a percentage of the subtotal of direct
and the field-related indirect costs (often called construction costs).
Contingency costs are put in the estimate to add funds for uncertainties
that will most likely ,occur. Contingency does not cover scope changes or
major unforseen events such as natural disasters or strikes. Allowances for
scope items which are known but not quantifiable should be treated as direct
costs-not contingency. Many owner companies treat contingency as funds
which make the risk of overrunninglunderrunning the project a 50-50 prob-
ability. Additional contingency funds, often called management reserve or risk
protection funds, may be added to lower the chances of overrunning. A number
of software programs are available that analyze the risks associated with the
project scope, schedule, etc.
You should prepare your cover sheets with the current project participants
and end users in mind. Also provide adequate information so that the estimate
can be properly used in the future to prepare other estimates.
When making comparisons, make sure that you’re comparing “apples with
apples” rather than “apples with oranges.” In other words, “Grow apple
orchards or you’ll end up with fruit cocktail.”
Few and wise are the companies that spend the time and money routinely
utilizing all these estimate checking methods.
REFERENCES
I. Standard Cost Engineering Temzinology, AACE Recommended Practice and
Standard No. 10s-90, AACE, Inc., 1990
2. Reprinted with permission from Fundamental Building Blocks of Total Cost
Management, TCM Concepts, Knoxville, TN, 1994
3. International CostRrice Indices, The Cost Engineer b Notebook, AACE, Inc.,
November 1989.
4. Clark, F. C. and Lorenzoni, A. B. Applied Cost Engineering, Marcel Dekker,
Inc., New York, 1985.