Cost Estimation

1 An Introduction and definitions.

Cost Estimation Methodologies

Cost Estimation 2 Select the most appropriate cost estimating methodology (or combination of methodologies)

for the data available to develop a high-quality cost estimate.

Basic Course Cost Estimation Life cycle

3 Passes through the duration of work and projects with accurate changes and difficulties affecting

decision-making. It is very important that are given very high attention during all stages of project life

Cost Estimation Processes

4 From here we will learn about the processes and procedures of cost estimation, and we

will deepen into those processes using regular systematic steps.

Chapter 04

Cost Estimation
 Topics
Start the cost estimating (How-to / Start-to-Finish details).
1
Part 1 Project Definition.
Part 2 Cost Methodology Tasks.
Part 3 Cost Estimate Tasks.

Cost Estimator Roles: SUBTITLE TEXT HERE 2

SITE INVESTIGATION / Data collection:

3

Eng. Ahmed Said

4.1. Start the cost estimating
(How-to / Start-to-Finish details).

There are three basic Parts in

the process of estimating the
cost:
Cost Estimation Process

12-Sep-19
Task 2:
Build or Task 3:
Obtain a Define or
Task 1: Work Obtain the
Start Here Breakdown
Receive Project
Customer Structure Technical
Task 4:
Request and (WBS) Description
Develop
Understand Ground Rules
the Project and
Project
Task 12: Definition Assumptions
Update the Cost Tasks
Estimate
as Required Task 5: Select
Cost Depend on which
Estimating
Cost phase you are.
Methodology
Task 11: Present Estimation
Will be detailed the Cost Estimate Processes
more with procedure Results
steps in advanced Cost Task 6:
course Estimate Select/Build
Tasks Cost This include
Model/Tool Determining
Task 10:
estimating
Document the
structure (CBS)

Eng. Ahmed Said

Cost Estimate Task 7:
Gather and
Task 9: Normalize
Develop and Task 8: Data
Incorporate Develop the
the Cost Risk Cost
Assessment Estimate
This after conduct
sensitivity analyses

6
Par t 1 Pr oject Definition.
Ta s k 1 Receive Customer Request and
Understand the Project.

Eng. Ahmed Said 7

Four Critical Elements Related To Conducting Cost Estimates

Data Expectations
1. What data do you need? 1. What is your expectation of the estimate?
2. Are the data readily available? 2. What is the expected outcome or usage of
3. If the data are not readily available, what are the estimate? (based on estimate type)
your alternatives? 3. What is the customer’s expectation of the
4. Are the organizations you need to collect the estimate?
data from cooperative & accessible? 4. What is the team expectation of the
5. Are non-disclosure agreements required? estimate?
5. What is the Agency-wide expectations of the
estimate outcome and usage?

Resources Schedule
1. How many people are required to conduct the 1. How long have you been given to complete
estimate? the estimate?
2. How many people are available to conduct the 2. How long do you need to complete the
estimate? estimate, given the available resources and
3. What is the budget required to conduct the data?
estimate? 3. Do you have the resources needed to
4. What is the available budget to conduct the conduct the estimate with the allotted
estimate? schedule?
4. Do you have the time to collect the required
data and analyze the data?
Par t 1 Pr oject Definition.
Ta s k 2 Build or Obtain a Wor k
Breakdown Str ucture (WBS).

The objective of this task is to provide a consistent structure that includes all
elements of the project that the cost estimate will cover.

control work items and packages and

facilitate the costing

cost breakdown structure (CBS)

Eng. Ahmed Said 9

 1. Start by defining the required levels of the project,
on which the structure will be divided

2. Identify the elements of the project WBS at the

lowest level

WBS 3. Create a dictionary defining elements of the

project's WBS.
 OBS RBS
CBS
Project
WBS-Code Cost
1.1.2.1.2.L.1.R.1 Rebar
1 5000000 $ 1.1.2.1.2.M.1 Formwork
Cost $990
Cost $1000
Cost Center M.3.1.1.1

Civil Work
1.1.2.1.2.M.2 Reinfts.
WBS-Code 1.1 Cost $1000 1.1.2.1.2.L.1.R.2 Wire
Cost 1200000 $ Cost $10
Cost Center M.3.1.1.2
Start Finish 1.1.2.1.2.M.3 Concrete
Cost $1000
WBS

Manager
1.1.2.1.2.L.1.R.1 Carpenter
Cost $700
1.1.2.1.2.L.1 Formwork
Concrete work Cost Center CR.3.1.1
Cost $1000
WBS-Code 1.1.2
Cost 125000 $ 1.1.2.1.2.L.2 Reinfts. 1.1.2.1.2.L.1.R.2 Helper
Start Finish Cost $1000 Cost $300
Cost Center CL.1.1.2

1.1.2.1.2.L.3 Concrete
RC Columns (Item # 3.1.1) Cost $1000

WBS-Code 1.1.2.1
Cost 27000 $
1.1.2.1.2.E.1 Cranage
Start Finish
Cost $1000
1.1.2.1.2.O.1.R.1 Testing
1.1.2.1.2.E.2 Tools Cost $500
RC Columns (1st Floor) Cost $1000 Cost Center QC.3.1.1
Activities

WBS-Code 1.1.2.1.2
Cost 9000 $ 1.1.2.1.2.O.1.R.2 Misc.
1.1.2.1.2.O.1 Misc.
Cost $500
Start Finish Cost $1000
Cost Center GN.3.1.1
Par t 1 Pr oject Definition.
Ta s k 3 Define or Obtain the Project
Te c h n i c a l D e s c r i p t i o n ( S c o p e B a s e l i n e ) .

1. Establish a common baseline document that thoroughly describes the project to

be used by the project team and project estimators to develop their estimate(s).

3. Ensures that cost projections jointly developed by the Project Offices

4. Ensure that the estimating team understands and can obtain the documents that
thoroughly describe the project to be estimated.

Eng. Ahmed Said 13

To a c c o m p l i s h t h e s e t a s k s t h e r e a r e
sever al activities r elated to
under standing the characteristics of
the pr oject, including:

1. Collect project data

3. Determining the factors of quality and

delivery affecting the cost.
the main
milestones of the project

5. Defining the strategies of purchase and

testing.

Eng.
LogoAhmed
here Said
Par t 2 C o s t M e t h o d o l o g y Ta s k s .

Ta s k 4 Develop Gr ound Rules and Assumptions (GR&A).

• In this Task, a complete set of

ground rules and assumptions are Some of the main contents of the
developed to provide an integrated basic rules and assumptions.
definition of the project, specifying 1. Base year price of the dollar.
the scope of work and estimating the
required cost. 2. The total projected and approved
cost estimates.
3. Including and excluding current
estimates.
4. Schedule, milestones and items
timeline.

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 Ground Roles & Assumptions
GR&A commonly address, but are not limited to, the following topics:

1. Scope:
The scope identifies all items included and excluded in the cost estimate,
including but not limited to design, procurement, testing, component
transportation, logistics, fabrication, installation, maintenance, operation,
expected spare parts, life cycle cost (LCC) and warranty costs.

2. Make or Buy decision:

The decision to manufacture or buy depends on the analysis of the cost of both
options and the comparison between them. It also depends on the required
quantity, technical capabilities and tools to implement either option.

3. Potential Risks and opportunities:

Describe the potential risks and their impact on the costs and ways of
mitigating them, as well as the available opportunities that provide the
costs and methods of exploitation and maximize the benefit from them.
 4. Budget profile:
Budget planning is one of the most important factors that affect the cost,
since the availability of the necessary fund supports the commitment to
cost and get discounted prices and, conversely, the budget deficit delays
business and increases the accumulated burdens.

5. Schedule and key milestones.

Affect the level of activities and purchases as well as the
distribution of estimated costs across time periods.

6. Labor Wages and equipment Rates:

This information also includes labor availability, wages and rates to be
used to estimate costs and equipment. Overhead impact to labor and
equipment must be added.

GR & A
7- Overhead & Profit Values or Percentage:
Determining the method of calculation of profit and general expenses. And
determine the maximum and appropriate value of these amount depending
on the quality and amount of the project. This will be detailed in another
course.

8. Base year Dollars and Inflation number.

This necessary for future and company analogous data
base.

9.Spare parts and warrantee period cost.

Important task to read the general and special conditions to reflect
contract requirement

GR & A
Par t 2 C o s t M e t h o d o l o g y Ta s k s .

Ta s k 5 S e l e c t C o s t E s t i m a t i n g M e t h o d o l o g y.

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 Use Of Cost Estimating Methodology

12-Sep-19
Feasibility

Project Evaluation + Design

Phases Bid & Awarding
Construction
Parametric
Analogy Lesson Learned &
Engineering Normalization +
Estimation Build-Up Modularization
Extrapolation
Methodology (Bottom Up -
From Actual
Micro

Eng. Ahmed Said

Estimation)

Gross Estimation Detailed Estimation

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Par t 2 C o s t M e t h o d o l o g y Ta s k s .

Ta s k 6 S e l e c t / B u i l d C o s t M o d e l / To o l .

It is important to ensure a “sanity

check” on the original estimate and to
show an alternative estimate view of
the data.[5]
• Some models deal with accurate
details that require extensive
experience and information.
• It is very important that the
ground rules and assumptions
(GR&A) contain the models used.

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Par t 2 C o s t M e t h o d o l o g y Ta s k s .

Ta s k 7 Gather and Nor malize Data.

• In this task, the largest possible Experts contribute more to early

amount of data and historical identification and analysis of risk and
information is used to develop it and time to estimate costs.
obtain a more accurate cost
estimate.
• Because the data at the beginning of
the cost estimation task are unclear
and become clearer over time

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 Mechanisms for identifying quantitative cost data

The following are potential mechanisms available to the cost estimator for identifying
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quantitative cost data:

Surveys and/or questionnaires

Questionnaires
Consists of examining existing data in
the form of databases, meeting Documents Model
minutes, reports, attendance logs, specific data Model specific data collection/input forms
and Records
financial records, newsletters, etc.
Mechanisms for
identifying quantitative
cost data

Target
Interviews
research Face To Face
(public domain or otherwise), including reviews,  Interviews can be conducted in person or over the
papers, and statistical analysis , Specific cost, telephone
technical, and programmatic data from primary Focus groups  Questions should be focused, clear, and encourage
and secondary sources (e.g., budget data, contract open-ended responses
cost data, labor rates, workforce estimates, etc.).

A facilitated group interview with

individuals that have something in
common
 Three Principal Types of Data
Data Category
62
28
55
56
68
45
98
78
62

Cost Data 25% 25% 25% Project Data

Technical/Operational Data
Data Type
1. Development and Production Schedules
1. Physical Characteristics
2. Quantities Produced
2. Performance Characteristics
3. Production Rates
3. Performance Metrics
4. Equivalent Units
4. Technology Descriptors 5. Breaks in Production
Historical Costs Existing Case/Cost 5. Major Design Changes 6. Significant Design Changes
Labor Costs Estimating Requirements 6. Operational Environment 7. Anomalies (e.g., strikes, natural disasters, etc.)

Data Sources

Engineering
Functional Technical
Drawings
Basic Accounting Specialist Databases Engineering
Cost Reports Project Database Functional Organizations
Records Historical Databases Specifications
and Libraries Contracts
(Secondary)

End User and

Performance/Functional Operators
Specifications Project Management
Cost Analysis Cost Proposals Plan Major
Estimator Master Equipment
(Secondary) Subcontractors
Lists
Par t 3 C o s t E s t i m a t e Ta s k s .

Ta s k 8 Develop the Cost Estimate.

Eng. Ahmed Said 26

Par t 3 C o s t E s t i m a t e Ta s k s .
Ta s k 9 Develop and Incor por ate the
Cost Risk Assessment.[5]

Eng. Ahmed Said 27

Par t 3 C o s t E s t i m a t e Ta s k s .

Ta s k 1 0 Document the Cost Estimate.

Eng. Ahmed Said 28

Par t 3 C o s t E s t i m a t e Ta s k s .
Ta s k 1 1 Present the Cost Estimate
Results.

Eng. Ahmed Said 29

Par t 3 C o s t E s t i m a t e Ta s k s .
Ta s k 1 2 Update the Cost Estimate as
Requir ed.

Eng. Ahmed Said 30

 Re s p o n s i b i l i t i e s
• Analyze drawings and specifications.
• Understand contractual terms and conditions.
• Assemble accurate and well-organized estimates and proposals in a timely manner.
• Provide clear detailed quantity take-offs.
• Organize sub-contractors’ Suggestions Available quotations, negotiate to ensure quotes meet
contract documents and issue proper documented purchase orders.
• Complete Budgeting and Scheduling for projects and track same.
• Monitor progress, requisition change orders and identify any potential risks.
• Maintain relationships with sub-contractors and clients.
• Ensure site personnel are provided with proper documentation related to project.
• Work with and deal with concerns of field personnel.
• Provide and maintain unit pricing and database for material and labor costing.
• Formulate cost break down from estimates and for project progress.
• Meet with potential clients to discuss options for proposed services.

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 Jo b
• Prepare detailed cost estimates by analyzing plans and specifications and performing quantity
take-offs for select trades. Be technically savvy. Utilizing on-screen take off software is a positive.
• Develop and prepare conceptual estimates with minimal subcontractor assistance using limited
preliminary design documents/information.
• Develop subcontract interest in projects and manage the subcontractor RFP process.
• Qualify and level subcontractors' proposals according to project specifics.
• Itemize trade specific scopes and prepare bid packages.
• Prepare detailed critical path job schedules.
• Continually Marketing the company and looking for future opportunities to grow the business.
• Ability to maintain discretion and confidentiality always.
• Follow Growth/compensation potential for the right candidate contractors.
• Interact with clients, architects, engineers and Local Jurisdictions to understand and incorporate
project objectives, schedules, permits, costs, etc.

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 Skills
• A leader that assumes total responsibility for their work.
• A Team Player that works well with others and can effectively direct and manage others.
• 4 Year degree in Construction Management, Engineering, or 10+/- years of experience.
• Extensive knowledge of industry practices, procedures, and market trends.
• Able to plan, prioritize, and manage multiple tasks.
• Detailed oriented with the ability to focus on quality, accuracy, and attention to detail.
• Proficient with commercial estimating software such as: MC2, Timberline/SageCRE, QuickBid, On-
Screen Takeoff, etc.
• Maintain professionalism when faced with aggressive deadlines.
• Excellent leadership, personable, communication, and written skills.
• Ability to interact, develop, and maintain a positive professional relationship with all levels of
personnel.
• Meet deadlines with minimal supervision.
• Demonstrate commitment to continuous learning.
• Review basic software generated estimates for completion and technical accuracy ensuring quality
and integrity.
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 It is often required by the contract documents that the contractor visit the
site and attend a pre-bid conference.
The importance of the visit and the items to be checked vary depending
on the type of the project and its location.
As a contractor expands to relatively new and unfamiliar areas, the
importance of the preliminary site investigation increases, as does the
list of items that must be checked.
Examples of the type of information that should be collected are as
follows:
1. Site access
2. Availability of utilities (electric, water, telephone)
3. Site drainage
4. Transportation facilities
5. Any required protection or underpinning of adjacent property
6. A rough layout of the site locating the proposed storage trailer and
equipment locations

12-Sep-19 Eng. Ahmed Said 34

 Examples of the type of information that should be collected are as
follows:
7. Subsurface soil conditions (bring a post hole digger to check
this)
8. Local ordinances and regulations, and note any special
requirements (permits, licenses, barricades, fences)
9. The local labor situation and local union rules
10.Availability of construction equipment rentals, the type and
conditions of what is available as well as the cost
11.Prices and delivery information from local material suppliers
(request proposals for the project)
12.The availability of local subcontractors (note their names,
addresses, and what type of work they usually handle)
13.The conditions of the roads leading to the project, low bridges,
and load limits on roads or bridges
14.Housing and feeding facilities if workers must be imported
15.Banking facilities

12-Sep-19 Eng. Ahmed Said 35

 Cost Estimation
1 An Introduction and definitions.

Cost Estimation Methodologies

Cost Estimation 2 Select the most appropriate cost estimating methodology (or combination of methodologies)

for the data available to develop a high-quality cost estimate.

Basic Course Cost Estimation Life cycle

3 Passes through the duration of work and projects with accurate changes and difficulties affecting

decision-making. It is very important that are given very high attention during all stages of project life

Cost Estimation Processes

4 From here we will learn about the processes and procedures of cost estimation, and we will

deepen into those processes using regular systematic steps.

Bottom-Up (Engineering Build-Up)

5 Methodology and procedure.
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