Cost Estimation

Question 1

Purpose of Cost Estimation

Answer 1

• project viability
• option comparison
• funding approvals
• cost control
• programming / cashflow
• financial planning

Question 2

Phasing of Cost Estimates

Answer 2

1. Feasability Estimate (FE)
2. Option Estimate (OE)
3. Scheme Estimate (SE)
4. Pre-design Estimate (PE)
5. Design Estimate (DE)
6. Construction Estimate (CE)

Question 3

I & R

Answer 3

Investigation and Reporting

Question 4

PFR

Answer 4

Project Feasability Report

Question 5

D & PD

Answer 5

Design and Project Documentation

Question 6

Accuracy of Estimate at Concept Stage

Answer 6

+/- 50%

Question 7

Accuracy of Estimate at Pre-Feasability

Answer 7

+/- 30%

Question 8

Accuracy of Estimate at Feasability

Answer 8

+/- 25%

Question 9

Accuracy of Estimate at Preliminary Design

Answer 9

+/- 20%

Question 10

Accuracy of Estimate at Detailed Design

Answer 10

+/- 15%

Question 11

Accuracy of Estimate at Tender Price

Answer 11

actual price + variation

Question 12

Capital Cost Estimate could include:

Answer 12

• land aquisition or access agreements
• concept and pre-feasability studies
• resource consent applications with associated supporting studies, hearings, environment court (if applicable)
• investigations to support design
• design - preliminary through to detailed
• Building Consents and regulator fees
• construction, including materials, equipment and labour
• field supervision of construction
• construction financing
• insurance and taxes during construction
• construction overheads
• inspections, testing, environmental compliance monitoring

Question 13

CAPEX

Answer 13

Capital Expenditure

Question 14

Design Fees

Answer 14

• concept
• pre-feasability
• feasability
• preliminary
• detailed design
  rule of thumb: (5-10%) of capital for all stages - but very dependant on project complexity, site constraints, number of options assessed etc

Question 15

Preliminary-Technical Studies

Answer 15

• river hydrology and morphology
• canal and intake structure hydraulics
• seismic hazard assessment
• geotechnical investigations
• initial geometric design

Question 16

Detailed Design

Answer 16

• detailed hydraulic analysis
• earthworks and linear design/alignment conformation
• structural design
• construction drawings and building consent application
• assistance with procurement and tender evaluation

Question 17

Field Investigations

Answer 17

• geotechnical investigations
• geological
• topographical survey
• contaminated site
• hydrological
• water quality

Question 18

Approvals

Answer 18

• Resource Consents
• Property owner conditions of access
• Legal Fees

Question 19

General Items in “Bill of Quantities”

Answer 19

approx. 15% of project cost
- P & G
- Mobilisation
- Management Plans and Submittals
- Misc.
- Demobilisation

Question 20

Specific Items in “Bill of Quantities”

Answer 20

• Earthworks quantities
• concrete volumes
• pipes
• etc.

Question 21

Operating Cost Estimate could include:

Answer 21

• operator fees
• power supply
• maintenance contracts
• materials
• administration
• annual reporting
• monitoring

Question 22

OPEX

Answer 22

Operating expenditure

Question 23

NPV

Answer 23

Net Present Value

• the present value of a project based on projected future cash inflows discounted back to current day rates compared to current investment
• often used to compare projects at the optioneering stage

Question 24

Engineers Estimate

Answer 24

• based on bill of quantities
• rates based on experience / similar jobs and reference materials
• may use an independent QS
• accuracy +/- 20%

Question 25

What factors should a contractor consider in tender price for earthworks?

Answer 25

- haul distance - machine type - machine numbers - time of year (work hours) - site commute - grade (fuel use)

Question 26

What factors should a contractor consider in tender price for materials?

Answer 26

- standard size - lead time - delivery cost - machinery needed to install - labour to install

Question 27

independant checks

Answer 27

- quantity surveyor for costs - technical peer reviews - independent construction advice on constructability and risk

Question 28

what is the difference between construction cost estimate versus tender price?

Answer 28

- contractor's margin - risk assessment - Hunger for the job also: - speciality/efficiencies not identified by the engineer - supplier relationship

Question 29

Tender Evaluation Weighted Attributes

Answer 29

- relevant experience and track record - organisational structure - resources - programme - price

Question 30

What changes the actual construction cost

Answer 30

- unforseen ground conditions - extreme weather - design inconsistencies - supplier delays

Question 31

Who wears changes in actual cost

Answer 31

- variations | - contract and specification details become important

Question 32

Financial Risk Assessment

Answer 32

- what are the risks to the project - how do these relate to the cost - what is the likelihood of each risk - probabilistic cost estimation - accounts for project risks, cost of risks and probability - financing often based on the P80 or P90 cost

Question 33

Project Cost Elements

Answer 33

- land purchase/easement - resource consents - field investigations - design - construction - regulatory fees

Question 34

Cost Approach

Answer 34

- accuracy of estimate increases with design detail - approach to estimate should be based on complexity of project - always apply contingency