; Estimates
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  • pg 1

               Estimate Types
• Concept
• Detailed
• Definitive
• You want to buy a car
     • ROM - $14000 -$16000 or monthly payment
     • New or Used
  – Find Car
     • Detail - what options, which model $15,595
     • Definitive - tags, tax, bank charges $16,750
       Concept or Preliminary
• Little data to work with
• Rough order of magnitude
  – Is the project a go? Or too pricey
• Time referenced cost indices
  – Can be based on resources or final product cost
  – Limited to
     • How similar is current job to indiced jobs
     • Factors included in price (land, financing)
• Time referenced cost indices
  – Can be based on resources or final product cost
  – Limited to
     • How similar is current job to indiced jobs
     • Factors included in price (land, financing)
         Example – Time Indices
• Wise to keep records of costs to use in
  determining cost of current project
    – Can use inflation to increase costs of similar projects to
      current costs
•   Cost-Capacity Factor
•   Look at cost/unit of product (or size)
•   C2 = C1(Q2/Q1) x
•   x is an Empirical Factor based on documented
    records for different types of projects
    – x = 0.6 for some types of plants
•   C1 = 4,200,000
•   Q2 = 150,000, Q1 = 120,000
•   x = 0.8
•   C2= 4,200,000 (150,000/120,000)0.8 =

• Does not look at time difference
                 Example 2
• C2 = C1(I2/I1) (Q2/Q1) x
• I2, I1 are cost indices for the project years
• Usually reflect change in CPI from base
• C2 = $4.2 M (4.04/2.48)(150/120)x
• C2= $8.2 M
            Component Ratios
• Once design has started and major components
  have been spec’d – can determine cost using
• Equip – Install – Cost ratio or plant cost ratios
• Plant Cost
            Parameter Costs
Relate costs to a few parameters (SF or bldg)
• Usually does not include land or cost of
  bringing in utilities
           Detailed Estimate
• After concept design and most of detail
• Requires
  – Quantity take-offs
  – Costs/unit
• Needs to be done carefully – so that margin
  of error is low (don’t eat into profits)
• Can also find errors
             Detailed Estimate
• In addition to quantity and prices,
• to get total price
  –   Add in indirect cost
  –   Plant and equip
  –   Home-office OH
  –   Profit
  –   Escalation
  –   Contingency
            Labor Productivity
•   Need to Evaluate
•   Effect of local practices
•   Market competitiveness
•   Weather
•   Completeness of plans and specs
•   Can lead to big differences in final price
•   Union or non-Union?
          Fair Cost Estimate
• Prepared from bid doc.
• Can serve as final check of plans before
  releasing for bid
• Used for
  – Determining measured job progress
  – For scheduling and cost control
• Done by Engineer/designer to check bids
     Contractors’ Bid Estimate
• May be less detailed than FCE is
• 30-80% of project often is sub’d
• Contractor does not need to detail sub bid
  unless doing cost and work
            Definitive Estimate
• More refined and accurate than bid
• Estimate gives final project cost with small margin
  of error
• Separate projects into 4 broad categories
• 1) Unit price projects
      • Prices set – quantities vary
      • May do definite estimate at bid
              Definitive Estimate
• 2) Traditional projects
      •   Lump sum
      •   Guaranteed max price, cost and low bid = definitive estimate
      •   Definitive estimate done before all drawings are done
      •   Has contingency fee
      •   Cost + - same as GMP
          Definitive Estimate
• 3) Design Construction
  – Lump sum
  – Chance for owner since he may get contract
    finished without desired product
  – GMP
  – Cost + - since designer is constructing
  – Can get cost estimate sooner without all design
          Definitive Estimate
• 4) Professional Construction Management
  – Definitive est can be completed early due to
    interaction between PC – designer – contractor
• Contingency factor – Experience factor to
  remaining work
• Monthly summary
Estimating and Controlling Labor
• Hard to estimate labor
• 2 components to labor cost
  – Price in $ terms (wages, fringe, payroll,
    insurance, taxes)
  – Productivity (work/time period)
     • Hard to determine
     • Can fluctuate due to weather, learning time, etc.
• Need to know how well labor works
•   p = Price of money elements ($/hour0
•   q = Productivity (units/hr)
•   Unit labor = p/q = $/unit
•   1/q = W (worker – hours/unit of output)
•   Unit Labor = P x W $/unit
•   Total cost = Q x P/q = Q x P x W
•   Gives total labor cost for quantity Q
•   Hard to find q, P, W
Est and controlling $ Component
• $ depends on craft structure or Union
• Regional and local autonomy of labor and
• Collective bargaining units
• Wage rates, fringe, insurance, work rules and
• Federal, state and local taxes and laws
• Wage and price control
• Can estimate all hourly or direct – indirect
                   Basic Wages
• Vary by location, craft, work within craft,
• Need to know
   – Location and labor agreements
   – Types of crafts or perform work
   – Craft grades to do work and wage rate
      • Contractor has no control over wages but needs to know
        cheapest person to do work
   – unemployment ins.
              Basic Wages
– Fringe benefits
   • Contractor wants to watch what the fringes are and
     not overpay
   • Insurance based on payroll
   • Workman’s Comp (WC)
   • FICA
   • SDI – state disability and unemployment ins.
   • Public Liability (PL)
   • Property Damage (PC)
                 Basic Wages
• WC, PL, PC = rate/100 straight time equiv.
  Payroll $2-$40/$100
   – WC, PL, PC depend on accident history or contractor
   – Vary widely depending on classification of work
• FICA and SDI = % of gross wages
• Taxes based on Payroll – Federal and state
  withholding taxes
• Wage Premiums – Overtime
• Contractor can have huge effect on $ by watching
                  Basic Wages
• Controlling Productivity
   – Productivity much more difficult to estimate
   – Factors influencing productivity – Qualitative
• Regional Variations
   – Training and experience and skill or labor pool
   – Work rules
   – Need basic productivity levels for various crafts then
     use multipliers to go from region to region
   – Training and experience cannot be forecast but good
     supers can hire and fire to improve productivity
• Environmental Effects
  – Effects of productivity
  – Ht above grade, heat, noise, light,
    constructions, stability of work-station, dust,
    etc., weather
  – Effects can be minimized by planning around
    seasons and using enclosures
                 Basic Wages
• Learning Curves
  – Skill and productivity  with experience and practice
  – Should try and do all units at once to avoid unlearning
• Work Schedule
  – How job can be done
  – No OT, scheduled OT
  – OT production is lower than 40 hr week production
• Importance of Worker Hours
  – Since wages vary, worker hours provide a look at how
    long a job takes
     Est different types of Const
• Building Construction
   – Means
   – Contractor’s may use Means for plus prices
   – Fair Cost est.
• Industrial Const.
   – No Means – must use own Database for labor
• Heavy Const.
   – Treat each bid item as separate entity
   – To find production = max production x job efficiency
     factor x swing and depth factor x bucket load factor

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