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. Detailed
2. Preliminary
3. Concept/Multiple Options

3-1: Accuracy and Reliances increases

1-3: Estimate uncertainty reduces

Question 3

Accuracy of Cost Estimates

Answer 3

• Concept: +/- 50%
• Pre-Feasibility: +/- 30%
• Feasibility: +/- 25%
• Preliminary Design: +/- 20%
• Detailed Design: +/- 15%

Question 4

Capital Cost Estimate - CAPEX

Answer 4

• Land acquisition or access agreements
• Concept and pre-feasibility studies
• Resource consent applications with associated supporting studies, hearings, environment court
• Investigations to support design
• Design: preliminary through to detailed
• Building consents + 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 5

Design Fees

Answer 5

• Concept
• Pre-feasibility
• Feasibility
• Preliminary
• Detailed design

(Rule of thumb (5-10%) of Capital for all stages, but dependent on project)

Question 6

Field Investigations examples

Answer 6

• Geotechnical investigations
• Geological
• Topographical survey
• Contaminated site
• Hydrological
• Water quality

Question 7

Approvals

Answer 7

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

Specific to the site, scale and location

Question 8

Bill of Quantities - General Items

Answer 8

• Preliminary and General
• Mobilisation
• Management Plans and Submittals
• Miscellaneous
• Demobilisation

15% of project costs

Question 9

Bill of Quantities - Specific Items

Answer 9

• Earthworks quantities
• Concrete volumes
• Pipes
  etc

Question 10

Operating Cost Estimate - OPEX

Answer 10

Depends on project by may include:

• Operator fees
• Power supply
• Maintenance contract
• Materials
• Administration
• Annual reporting
• Monitoring

Question 11

Net Present Value - NPV

Answer 11

NPV is the present value of a project based on projected future cash inflows discounted back to current day rates compared to current investment - discounted back to current day rates

Often used to compare projects at optioneering stage

Question 12

Engineers Estimate

Answer 12

• Based on bill of quantities
• Rates based on experience/similar jobs and reference materials
• Accuracy +/- 20%

Question 13

Construction Cost Estimate Tender Price - Earthworks factors

Answer 13

• Haul distance
• Machine type
• Machine numbers
• Time of year
• Site commute
• Grade (fuel use)

Question 14

Construction Cost Estimate Tender Price - Materials factors

Answer 14

• Standard size
• Lead time
• Delivery cost
• Machinery needed to install
• Labour to install

Question 15

Summary of Tender Price Basis

Answer 15

Calculated by combination of:

• Basic $/hr or $/m^3 estimate
• Machinery
• For major earthworks Software
• Materials
• Percentage allowance for General items
• Contingency as % of overall cost estimate

Question 16

Independent Check

Answer 16

• Quantity Surveyor for costs
• Technical peer reviews
• Independent construction advice on constructibility and risk

Question 17

Construction Cost Estimate vs Tender Price

Answer 17

Difference

• Contractors margin
• Risk assessment
• Huger for the job
• Speciality/efficiencies not identified by the engineer
• Supplier relationship

Question 18

Tender Evaluation - Weighted Attributes

Answer 18

• Relevant experience and track record
• Organisational structure methodology
• Resources
• Programme
• Price

Question 19

Actual Construction Cost - what causes the changes

Answer 19

• Unforseen ground conditions
• extreme weather
• design inconsistencies
• supplier delays

Question 20

Actual Construction Cost - who wears the costs

Answer 20

• variations

- contract and specification details become important

Question 21

Financial Risk Assessment

Answer 21

• Probabilistic cost estimation
• Accounts for project risks, cost of risks and probability
• Financing often based on P80 or P90 cost

Question 22

Summary Project Cost Elements

Answer 22

• Land purchase/easement
• Resource consents
• Field investigations
• Design: Concept to detailed
• Construction
• Regulatory fees