T ECHNICAL A RTICLE
was created to provide accurate, strategic,
conceptual, and semi-detailed estimates
The Organization of an for capital projects executed at Kodak
Park.
Estimating Department Today, the capital estimating depart-
ment has become a worldwide corporate
resource as part of the worldwide capital
Larry R. Dysert, CCC, and Bruce G. Elliott, CCC and process reliability organization. It
serves the estimating needs of Kodak’s pri-
mary engineering offices (located in seven
ABSTRACT: countries around the world), and supports
There are many issues to deal with organizationally when creating and maintaining an estimates at all of our manufacturing
estimating department. This article reviews some of these issues and shows examples from plants. The department supports an ex-
the authors’ experience that may benefit others in similar situations. Identifying and tremely diverse customer base and pre-
documenting estimator skills and competencies, developing estimating training plans, pares estimates for a variety of machine,
acquiring estimating tools and resources, managing the estimating workload, measuring chemical, and manufacturing processes,
department performance, and interfacing with project management and controls—all of as well as for general construction and in-
these topics are important in achieving an effective estimating department. frastructure projects. In addition, the de-
partment supports the development and
maintenance of estimating data and tools,
international location factors, and histori-
KEY WORDS: estimates, estimator skills, core competencies, estimator training, database
cal project and process benchmarking in-
creation, estimating workload, project management, project controls
formation. The department is currently
comprised of 18 project estimators, in-
reparing estimates for capital partments to develop project cost esti-
P
cluding the department supervisor.
projects is a key part of a compa- mates. This article is based primarily upon
ny’s strategic asset planning. It is our experience with the worldwide capital
one of the core processes of total estimating department at the Eastman WHERE ESTIMATING FITS IN THE
cost management. Although the proce- Kodak Company (an owner organization), CAPITAL ORGANIZATION
dures, processes, and steps needed to pre- but much of the discussion is relevant to a
pare an estimate are often discussed and contractor’s estimating department as At a high level, our capital organiza-
written about, the organizational aspects well. tion is split into four divisions: administra-
of creating and maintaining an estimating tive, business flows, engineering/design,
department are usually ignored. This arti- and process reliability (see figure 1).
cle reviews many of these organizational BACKGROUND The administrative division is respon-
issues. sible for the overall administrative func-
We have experience in estimating In late 1986, the capital estimating tions of the capital organization and in-
from both an owner’s and an architect/ department was first formed as part of the cludes departments for financial systems,
engineer-contractor’s viewpoint. Both or- project management division of the East- human resources, quality systems, infor-
ganizations may maintain estimating de- man Kodak Company. The department mation technology, and summary report-
Worldwide capital
and process reliability
Business flows
Administrative Engineering/design Process reliability Skilled resources
(projects)
Project
Film flow Paper flow Digital flow Estimating
controls
Figure 1—Capital Organization at the Eastman Kodak Company
38 Cost Engineering Vol. 42/No. 8 AUGUST 2000
ing of capital budgets. The engineering form effectively in their position, and is • report writing; and
/design division is organized by functional also important to define the requirements • listening.
areas related to processes, including de- of an estimator for recruiting purposes
partments related to developing and im- (whether recruiting from other depart-
plementing global baseline technologies ments in-house or from outside compa- General Skills
and designs. The process reliability divi- nies).
sion is organized to support process relia- The core competencies are divided • Planning, organizing, and delegating;
bility and maintenance of the company’s into four major groups: business skills, • resourcefulness and problem-solving;
worldwide assets, and includes depart- software skills, communication skills, and • decision-making;
ments related to predictive maintenance, general skills. • teamwork and relationships;
reliability benchmarking and training, • following project process and proce-
spare parts management, etc. The skilled dures;
resources division maintains the in-house Business Skills • leadership and negotiations; and
construction force and the construction • marketing.
managers who are responsible for manag- • An understanding of the capital proj-
ing the in-house construction, as well as ect process;
all contracted construction. • a detailed understanding of the esti- Estimator Performance Expectations
The business flows division provides mate requirements for each class of The list of estimating core competen-
project management resources and is the estimate; cies is expanded upon and supplemented
interface to the customer areas (the manu- • ability to read engineering docu- by other needs (such as understanding
facturing divisions). Each business flow ments; specific industrial processes) in a docu-
maintains a group of project managers. • code of accounts/work breakdown ment known as the estimator performance
These project managers are responsible structures/project breakdown struc- expectations. This document establishes
for the actual capital projects required to tures; the level of the specific skills and knowl-
support the needs of the manufacturing • basic project controls (budgets, sched- edge required for various estimator job lev-
community with which they are aligned. ules, cost control, change manage- els (or wage grades). The estimator perfor-
The project managers, as needed, pull re- ment, progress measurement, earned mance expectations document is a rubric
sources from the engineering/design divi- value, and forecasting); for measuring the overall skill and perfor-
sion to create project teams for the execu- • data analysis (labor productivity, data- mance level of the estimator, and for indi-
tion of projects. The business flows divi- base standards and development, his- cating which areas require attention in
sion also includes the centralized estimat- torical data analysis, and benchmark- order to facilitate promotion to the next
ing and project controls departments. ing); wage grade.
As you can tell from this description, • strategic estimating skills (capacity
the capital estimating department is a cen- factoring, equipment factoring, cost
tralized corporate resource that provides modeling, general factor, and ratio ESTIMATING TRAINING
global estimating capabilities. The depart- development); and
ment is responsible for the preparation • detailed estimating skills (material Extensive training is conducted for
and/or review of all significant capital takeoffs, pricing, and costing). each estimator in accordance with the es-
projects. Each local plant site may prepare timator performance expectations and the
estimates for small capital and site-related estimating core competency areas describ-
projects (generally $50,000 or less in Software Skills ed above. The training for each individual
value). This is similar to most owner orga- estimator is summarized in a document
nizations. Approximately 80 percent or • Company software (accounting sys- called the employee development plan.
more of large owner organizations main- tem, purchase order system, material Similarly, the training plans for all estima-
tain a centralized estimating department. pricing system, timecard, and project tors are summarized in a department
charging systems); training plan, and are monitored on a
• general software (Excel, Word, Power- monthly basis.
ESTIMATOR SKILLS, point, or Lotus Notes); Regular informal training meetings
KNOWLEDGE, AND • estimating software (all estimating are scheduled for the entire estimating
CORE COMPETENCIES software used by the department); group on a monthly basis. These monthly
• estimating workload reporting system; meetings are typically conducted by a
An effective estimating organization • project historical retrieval and analy- member of the estimating department and
requires highly knowledgeable personnel sis system; and usually focus on recent enhancements to
who possess a broad set of both technical • risk analysis software. the estimating systems or other estimating
and nontechnical skills. We have defined resources, recent additions or updates to
this set of skills as “estimating core com- the estimating item cost database, or the
petencies.” Documenting the core compe- Communication Skills sharing of experiences on recent large or
tencies is important for estimators to un- significant estimates. Although most train-
derstand the basic skills required to per- • Presentation skills; ing sessions are taught by senior estimators
Cost Engineering Vol. 42/No. 8 AUGUST 2000 39
in the department, all estimators are en- ate and advanced) with potential corpo- of a LAN increases overall productivity for
couraged to organize and lead a training rate financial support subject to corporate the estimating group, and easily allows
session. guidelines and defined business needs. sharing of files and data between estima-
These informal training sessions are Last, estimators are encouraged to join tors. At Kodak, all estimators use Pentium-
supplemented by additional formal train- AACE International and to attend the based personal computers on a Microsoft
ing classes that are taught by either corpo- monthly meetings and other training op- NT-based network.
rate training resources or outside training portunities provided by the local AACE
organizations. These classes cover a vari- section. Many estimators are active both
ety of topics—from technical training in locally and internationally in AACE. Software
the industrial processes employed in As mentioned previously, our estimat-
Kodak’s manufacturing units, to software ing department prepares a variety of esti-
training in Excel or Word. Other topics ESTIMATING TOOLS AND mates, from very early strategic cost studies
may include business issues such as the RESOURCES through semi-detailed budget authoriza-
economic evaluation of projects or other tion estimates (and occasionally detailed
financial topics; general issues such as One of an estimator’s most important check estimates). A variety of estimating
teamwork, diversity training, or negotiat- tools is, of course, a computer and associ- techniques and estimating software is used
ing skills; or personal issues such as stress ated software. Today, the personal com- in preparing the many classes of estimates
management, nutrition, or other health- puter, or PC, is most often the estimator’s (see figure 2).
related topics. Estimators also are encour- computer of choice; it is usually connect- Kodak’s estimating software is orga-
aged to seek college degrees (undergradu- ed to a local area network (LAN). The use nized around a central estimating system
Risk Analysis Systems
Process Control System
•Class S
(PROCEP) MSTD Estimating Systems
•Class 1/2
Building SF Systems
•Class S Electrical estimating system
•Class 1 Subassembly system
Utilities/site system
Building demolition system Vessel fab module
Coating Machine System Battery-limits
(COMACS) equipment factored
EST1 module
Hopper system Estimating System
Coating station system Ductwork module
EST1 ITEM COST DATABASE
PHRAS
Semi-detailed and assembly level costs
organized by code of accounts
Project history retrieval and analysis system
•site prep/civil •piping
Database of actual and estimated project costs
•concrete •process air
and other project statistics using code of accounts
•steel •electrical/instrument
•architectural •insulation/paint
Analysis of costs based on
•equipment •indirects
standard benchmarking ratios and factors
Hard-copy backup information includes detail assembly
breakdowns, cost basis and descriptions, conceptual
estimating guides, and indirect cost standards
Software Modules Directly Linked to EST1
The specialized estimating modules generally have their
Are Indicated in Bold
own unique cost databases
Figure 2—Cost Estimating Systems Diagram
40 Cost Engineering Vol. 42/No. 8 AUGUST 2000
known as EST1. This system provides a Another important system is the proj- Kodak also participates in the cost en-
generic line-item estimating system and ect historical retrieval and analysis system gineering committee of the Industry
forms a “hub” from which many of the (PHRAS). Since one of the most impor- Benchmarking Conference facilitated by
other specialized estimating modules can tant tools for an estimator is experience, Independent Project Analysis, Inc. to col-
be accessed. The system also provides ac- PHRAS is designed to collect summary lect additional benchmarking data. Much
cess to our cost estimating database. The level project cost, schedule, and scope in- of this data is incorporated into the
EST1 system is typically used in the prepa- formation in order to provide a structured PHRAS system.
ration of all semi-detailed estimates. format for the collection of project experi-
As can be seen in figure 2, there is no ence. PHRAS is used to capture and ana-
single system that can satisfy all of the de- lyze data for all completed projects over Procedures
partment’s needs. This is especially true in $50,000, as well as for selected estimates Department estimating procedures
a department that works with such a wide and non-Kodak projects. The information are documented and maintained under
variety of projects. The department has collected by PHRAS is used for many pur- controlled distribution, as is end-user doc-
therefore concentrated on supplying many poses. It provides benchmarking data to umentation for the software systems, item
small, focused estimating systems to meet monitor project cost and schedule perfor- cost database information, and other re-
specific needs, and has linked these into mance, gives meaningful ratios and statis- source information. All resource informa-
the core estimating system where it makes tics to aid with estimate reviews, provides tion is also maintained on an intranet site
sense to do so. All of the systems support estimating database feedback and calibra- that is available to all Kodak sites world-
our standard code of accounts, and reports tion information, and serves as a strategic wide. The estimating procedures manual
are standardized as much as possible resource planning and forecasting tool. contains the following sections:
across the systems. The system also can be a strategic cost es-
Many of the specialized estimating timating system that generates estimates • overview of the estimating process;
systems are conceptual in nature, and are based upon benchmark measures. PHRAS • review of estimate requirements;
based on parametric estimating methods analysis provides the raw material for the • planning the estimate;
and algorithms. Most of these are based on many parametric estimating tools used at • structuring the estimate;
elaborate, custom-developed, Excel spre- the company. • developing the estimate;
adsheets. The department also uses Besides these estimating systems, esti- • analyzing cost risk and estimating
ICARUS project manager software, pri- mators also need access to word process- contingency;
marily for process equipment pricing. ing and spreadsheet software. Spread- • documenting the basis of an estimate;
Other than the ICARUS software, all sheets are useful for many purposes, and • estimate reporting;
other estimating software is developed and are a great general-purpose tool for ad hoc • review and issue estimate (including
maintained in-house by the estimating de- estimate reporting, in addition to using benchmarking analysis);
partment. them for customized estimating applica- • estimate maintenance (change man-
Kodak’s estimating line-item database tions. agement);
contains approximately 20,000 items (in- • estimate close-out (project close-out
cluding individual components and as- support); and
semblies). It was derived by benchmarking Data • estimate databases and systems main-
unit material and labor cost data from Kodak subscribes to R.S. Means, Ri- tenance.
many different sources. Depending on the chardson Engineering Services, and trade
discipline, up to 11 sources of unit rates services to acquire their published books
(including various contractor standards, in on cost information. New copies are ac- Maintenance
addition to commercial and other pub- quired every year and are kept in a depart- Just as with a mechanic at your local
lished sources) were compared and evalu- ment library. In addition to these, we rely automotive repair shop, tools are a key
ated to determine the “reasonable” aver- on several other published sources of in- contributor to an estimator’s productivity.
age unit rates that comprise our standard ternational cost factors and data. Vendor They must be maintained and kept up-to-
database. catalogs also are acquired and maintained date for maximum effectiveness. This is
In addition to estimating systems, the in the estimating library. The estimators not an easy nor exciting task; however,
department also has developed software have access to Kodak’s engineering and time and effort must be devoted to these
systems for risk analysis and benchmark- technical library and are provided with In- activities. The department budgets ap-
ing. These systems supplement the ser- ternet accounts to access vendor and other proximately 1½ work-years (about 8.5 per-
vices that the department provides, and related information from the worldwide cent of total workhours) to developing and
are another critical contributor to the de- web. maintaining our estimating tools and re-
partment’s success. Kodak’s risk analysis To supplement the published sources sources. Although much of this work is
software is made up of two systems: a on international cost factors, the depart- concentrated with a few individuals, all es-
strategic evaluation system based on over- ment sends out a yearly survey to our in- timators are expected to contribute.
all project definition status and technolog- ternational sites to obtain material and All scheduled improvements, en-
ical complexity, and a more detailed risk labor pricing information. This data is hancements, and maintenance of the tools
modeling system based on risk assessments consolidated and published for use by the and resources are scheduled and moni-
for individual components of the estimate. department. tored using standard project control tech-
Cost Engineering Vol. 42/No. 8 AUGUST 2000 41
niques. The activities are planned, bud- central area. This information can be very using benchmark data from our PHRAS
geted, and entered into SureTrak (which valuable. For instance, when a new esti- system.
is used as the project management tool). mate is being started, the estimator can ac- Individual performance measures are
Progress on activities is monitored on a cess the WRS and look up similar esti- supplemented by behavior and perfor-
monthly basis. It is expected that progress mates by keyword, estimate location, or mance surveys that are sent to selected
on these activities will slow during periods other meaningful data. The estimator customers and peers. These are summa-
of high estimating activity, but the oppo- could then easily locate the completed es- rized by the estimating supervisor and be-
site is also true. When the actual estimat- timates for similar projects, and obtain come a part of each estimator’s year-end
ing workload is low, estimators are expect- equipment pricing information or other reviews and performance appraisal.
ed to work on these development and data that is useful for preparing the cur-
maintenance activities. There is never a rent estimate.
time when the estimators don’t have The estimating workload is moni- INTERFACING WITH PROJECT
something to keep themselves busy. tored on a weekly basis by the estimating MANAGEMENT AND PROJECT
supervisor and the workload coordinator. CONTROLS
It also is reviewed by the entire estimating
MANAGING THE ESTIMATING department staff at monthly group meet- The estimating department does not
WORKLOAD ings. work in a vacuum. In many organizations,
estimates are treated as being “owned” by
Managing the workload of a large the estimator who prepared it, who as-
group of estimators can be a difficult task. MEASURING THE PERFORMANCE sumes full responsibility for its accuracy.
The individual workload assignment for OF THE ESTIMATING An estimate should be “owned” by the en-
the estimating staff needs to be monitored, DEPARTMENT tire project team. This requires a close in-
as well as the progress for all active esti- terface with project management and
mates. The estimating department at It is always important to measure per- project controls. After the initial estimate
Kodak uses a software application, the formance, and most organizations have is prepared, it is important that adequate
Workload Reporting System (WRS), to aid some form of performance measurement change management is in place so that
in managing the estimating workload. and/or continuous improvement process changes in project scope can be assessed,
All new (and even potential) esti- in place. The estimating department at and the project estimate updated accord-
mates are entered in the system, with their Kodak maintains a variety of measures and ingly. Project managers should ensure that
start and planned completion dates, statistics to measure performance and estimators are involved in project teams
planned hours needed to prepare the esti- record trends in workload, estimate types, early (when many important design deci-
mate, lead and supporting estimators, esti- etc. sions are made that may affect cost), and
mate customer, estimate type, and other One set of key measures comes di- that they stay involved, at least minimally,
miscellaneous data. At any point in time, rectly from the workload reporting system throughout the project process. The esti-
WRS can be used to display all of the esti- described above. Using this system, the de- mators need to be involved in project
mates that are currently in progress or are partment keeps track of the number of es- close-outs to obtain any cost information
planned in the future. The data can be timates completed, the average size of es- that may be beneficial in future estimates,
sorted by project, estimator, or by planned timates, estimate preparation costs as a and to collect data for the historical data-
completion date. This information is used percent of total project cost, and a variety base system.
to monitor the workload of the department of other measures. This data can be sorted Estimators usually will work closely
and to ensure that all estimates are obtain- in many ways, including by type of esti- with project controls personnel to format
ing the resources needed to be completed mate, project size, business unit, cus- estimates so that they can be cast in the
on time. The system also can indicate tomer, etc. This data can be reported by project work breakdown structure, and to
which estimators will be free to work on month and/or year. Standard reports with assist in preparing schedules and resource
the next or near-term estimates. One esti- a core set of measures are reviewed at the plans. Estimators are encouraged to devel-
mator is assigned as the workload coordi- monthly group meetings. op relationships with project managers
nator to centralize the input of all infor- The department also measures and and project controls personnel, and to
mation into the system and issue reports. tracks the progress of its planned improve- build relationships based on trust. Estim-
Working with the department supervisor, ment activities (also described above). ators often will make presentations at
he/she may assist in assigning estimators to Progress against the plan becomes one el- group meetings of project managers or
specific projects. The assignment of being ement of an overall performance matrix, project controls personnel to demonstrate
a workload coordinator is rotated on an ad and is a team contribution element on the new estimating tools, resources, or other
hoc basis. estimators’ year-end performance ap- ways in which estimating can add value to
When an estimate is completed, the praisals. Other items on this team perfor- the project process.
final estimated cost for the project and the mance matrix include the total hours
hours expended to complete the estimate charged to customers, the training hours
are input to the system. This provides a accomplished, the number of estimate
history on all completed estimates. The marketing presentations made, and the
actual completed estimates are filed in a number of estimate reviews completed
42 Cost Engineering Vol. 42/No. 8 AUGUST 2000
here are many issues to deal Bruce G. Elliott,
T with organizationally when
creating and maintaining an
estimating department. This
article reviews some of these issues and
shows examples from our experience that
CCC, is the estimating
department supervisor
at the Eastman Kodak
Company in Rochester,
NY. Bruce holds a B.S.
Welcome to the
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may benefit others in similar situations. in economics from Cal stop source for all of the leading
All of the above topics—identifying Poly San Luis Obispo, publications you need!
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competencies, developing estimating Cal State Long Beach. Bruce has 26 years
training plans, acquiring estimating tools
AACE members receive
of project estimating and management con-
and resources, managing the estimating significant savings on books from
trols experience in the engineering and con-
workload, measuring department perfor- struction industry for both owner and con-
the best cost/project management
mance, and interfacing with project man- tractor organizations. Bruce is an active publishers, and also get discounts
agement and controls—are important to member of the Genesee Valley Section of on AACE’s own Professional
achieve an effective estimating depart- AACE International.N Practice Guides, Transactions,
ment. Each of these subjects brings value Cost Engineers’ Notebook, and
by helping to develop people or assisting more!
in managing the department, but it is the
combination of all of these issues that
builds a truly successful estimating depart-
ment. phone 800-858-COST
or 304-296-8444
Larry R. Dysert, Visit us online at
CCC, is a project esti-
http://www.aacei.org
mator for the Eastman
Kodak Company in to view our publications
Rochester, NY. He catalog
holds a B.A. degree in
economics from the
University of Califor-
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member of AACE International, and is cur- Section Past President Pins
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of experience in project estimating and
project management for a wide variety of
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Certified Cost Engineer &
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Cost Engineering Vol. 42/No. 8 AUGUST 2000 43