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Construction Management Process
Estimating Project Costs
Estimating Project Costs
Ã¢â‚¬Â¢ This presentation introduces you to how estimates
are used in construction
Ã¢â‚¬Â¢ What factors influence costs
Ã¢â‚¬Â¢ What makes up an estimate
Ã¢â‚¬Â¢ How costs are estimated
Ã¢â‚¬Â¢ Estimating techniques
Ã¢â‚¬Â¢ What contributes to a quality estimate
What is an Estimate?
Ã¢â‚¬Â¢ An estimate is an educated guess.
Ã¢â‚¬Â¢ The estimate is a summary, based on the best
information available, of probable quantities and
costs (materials, labor, equipment, and
subcontracts) needed to complete a project.
Ã¢â‚¬Â¢ The estimate includes taxes, overhead, and profit.
Ã¢â‚¬Â¢ The estimate is crucial because it can make or
break your project either by not pricing everything
well or by overpricing.
Characteristics of a Good Estimator
Ã¢â‚¬Â¢ Must be able to build the
project mentally before
Ã¢â‚¬Â¢ Must be able to read
contract documents well,
be knowledgeable about
and must have good
Ã¢â‚¬Â¢ Must be able to be
practical, yet creative.
Characteristics Of A Good Estimator (cont.)
Detail oriented and thorough
Familiar with purchasing
Familiar with computer applications
Work well with numbers and statistics
Factors Impacting Project Costs
Ã¢â‚¬Â¢ Project size – The larger the
project the more it will cost.
Also, as the project size
increases, so do efficiencies
around any particular activity.
Ã¢â‚¬Â¢ Complexity of the project Ã¢â‚¬â€œ As
complexity increases so does
the cost. Shape, height, and
unique materials as well as
applications, will almost
always increase the costs of a
project due to resources
needed to construct around
Factors Impacting Project Costs (cont.)
Ã¢â‚¬Â¢ Site location Ã¢â‚¬â€œ The location of
the project impacts the ease of
procurement and delivery of
materials, labor, and equipment.
Therefore, it is going to impact
the overall pricing of the project.
Location also impacts the
availability and cost of labor.
Ã¢â‚¬Â¢ Time of construction Ã¢â‚¬â€œ The
estimator must be careful to
anticipate fluctuations in prices
and availability of labor during
different stretches of time.
Factors Impacting Project Costs (cont.)
Ã¢â‚¬Â¢ Quality of work Ã¢â‚¬â€œ The quality of the
project is defined by the standards
set forth in the specifications which
clearly impact costs.
Ã¢â‚¬Â¢ Market conditions Ã¢â‚¬â€œ In very tight
markets where construction
contracts are scarce, the cost of
construction becomes very
competitive, and the estimates will
reflect this condition.
Ã¢â‚¬Â¢ Management Factors Ã¢â‚¬â€œ
Management factors include such
things as knowing that a particular
owner or architect is more difficult to
deal with or that your are going to
have to watch things more carefully
with an inexperienced subcontractor
or knowing that the owner is very
slow a making decisions.
Types of Estimates
Ã¢â‚¬Â¢ Conceptual estimates Ã¢â‚¬â€œ Used when there are no drawings at
all or when you are in the idea or concept stage of a project.
Often the owner does not know if their project is feasible so
they do not wish to start spending money on design.
Ã¢â‚¬Â¢ Preliminary estimates Ã¢â‚¬â€œ Used when you have a preliminary
set of drawings with overall dimensions and it provides a
somewhat higher level of accuracy to establish initial budgets
and financing scenarios. However, it should never be used to
commit to a contract price.
Ã¢â‚¬Â¢ Detailed estimates Ã¢â‚¬â€œ Used whenever you have a complete
set of plans and specs. Counts every brick and stick, but as
accuracy of plans/specs increases, so does the time and
effort and skill that is required to complete the estimate.
Understanding Project Costs
Ã¢â‚¬Â¢ Direct costs- Costs that actually go into building
the facility such as materials, labor, equipment,
Ã¢â‚¬Â¢ Indirect costs Ã¢â‚¬â€œ Expenses incurred in order to
manage and deliver the materials, labor,
equipment, and subcontracts employed on any
job. Often referred to as overhead or general
conditions and it includes supervision, job
trailer expenses, temporary utilities, testing and
inspections, job photographs, security, etc.
The Actual Estimating Process
Ã¢â‚¬Â¢ When you have a
estimate there are three
things to be concerned
Getting Started with an Estimate
Ã¢â‚¬Â¢ In preparation for the estimating task, the
project team must become familiar with the
requirements of the project by doing the
Ã¢â‚¬â€œ Reviewing the plans and specs
Ã¢â‚¬â€œ Holding a pre-bid meeting
Ã¢â‚¬â€œ Conducting a site visit
Reviewing Plans and Specs
Ã¢â‚¬Â¢ Having an overall understanding of the difficulty of
the construction will assist the estimator when
making judgment calls that inevitably impact the
accuracy of their estimate.
Ã¢â‚¬Â¢ In addition to discovering red flag issues, the plan
and spec review provides an opportunity for the
estimator to uncover details that require clarification
or questions about the project that are not
addressed in the contract documents.
The Pre-Bid Meeting
Ã¢â‚¬Â¢ This meeting occurs at the project site and
provides an opportunity for the bidding
contractors to get many of their questions
Ã¢â‚¬Â¢ The estimator is often the person sent simply
because that is the person who is the one
most familiar with the project at this stage and
who has developed a query list after a
through review of the plans and specs.
The Site Visit
Ã¢â‚¬Â¢ No one should ever estimate a job without
first visiting the job site.
Ã¢â‚¬Â¢ There are site conditions that cannot be
understood by merely looking at the plans and
Ã¢â‚¬Â¢ Only by walking around will you get a good
sense of the lay of the land which will help
your judgment with pricing.
How to Build the Estimate
Ã¢â‚¬Â¢ You build an estimate in the
same order that you build
the actual facility.
Ã¢â‚¬Â¢ Generally you start from the
ground up and through the
48 divisions of the CSI
Ã¢â‚¬Â¢ Each CSI division is broken
down into detailed items of
Ã¢â‚¬Â¢ This format is the most
common way to organize
The Work Breakdown Structure
Ã¢â‚¬Â¢ The WBS establishes the basic building
blocks of both the estimate and schedule.
Ã¢â‚¬Â¢ The purpose of the WBS is to organize and
identify the work of the project by breaking
down each division of work into a separate
Ã¢â‚¬Â¢ A work package is made up of detailed items
of work bundled together under a particular
Ã¢â‚¬Â¢ You must quantify all of your materials, labor,
and general conditions before you can price
any of the work.
Ã¢â‚¬Â¢ You must calculate Ã¢â‚¬Å“how manyÃ¢â‚¬Â first before
you can calculate Ã¢â‚¬Å“how much.Ã¢â‚¬Â
Ã¢â‚¬Â¢ Once you determine quantities you can apply
a unit price factor to the equation
Pricing the Work
Ã¢â‚¬Â¢ Once all of your quantities are calculated you
are halfway done with the estimate.
Ã¢â‚¬Â¢ Now all that is left is to plug in the unit costs
for each item of material, labor, equipment,
and general conditions in your estimate.
Ã¢â‚¬Â¢ As an estimator your primary concern is
where the costs will come from and their
reliability. Most costs derive from R.S. Means.
Obtaining Subcontractor and Vendor Bids
Ã¢â‚¬Â¢ Today subcontractor and vendor bids make up the
bulk of the construction estimate.
Ã¢â‚¬Â¢ While the estimating team is putting together their
own pricing for self-performed work, they must also
be gathering prices from subs for work they are not
going to self-perform.
Ã¢â‚¬Â¢ The four steps to ensure that the solicitation of the
subcontractors and vendors pricing is complete and
thorough includes: soliciting the bids, receiving the
bids, analyzing the bids, and choosing the bids.
Completing the Estimate
Ã¢â‚¬Â¢ Once the estimate is
contractor prepares and
submits their bid to the
Ã¢â‚¬Â¢ The particular bid
procedure will specify
when and how the
contractors will be
notified as to whether
they have been
awarded the contract.
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