What is “Global estimate” also called and what does it rely on?
Also known as:
- Order of magnitude.
- Approximate.
- Rule of thumb.
- Ballpark.
Relies on a library of archive costs for similar projects related to its overall capacity or size.
Cost=historical cost / capacity rate * new project capacity
Give some examples of historical data that can be used in global estimation.
- Cost per megawatt for power stations.
- Cost per tonne of output for process plants.
- Cost per bed for hospital.
- Cost per linear meter of highway/railway.
- Cost per square meter or cost per unit volume for buildings.
- Cost per flight capacity for airports.
What are some problems with global estimating?
Does the cost of the project include:
- Final account sums.
- Design and engineering fees.
- Finance costs.
- Land (Problem for Holyrood).
How the measurement of the capacity is defined.
- How does linear capacity of linear projects allow for interchanges (highways).
- How does associated infrastructure be allowed for (access roads).
- Is area measured internally or does it include walls, external and internal?
Not comparing with similar projects:
- Different ground conditions.
- Different site locations (Flat terrain vs mountainous).
- Different site locations provide different logistical problems.
- Different standard of quality (motorway vs minor road).
- Bronfield (Contaminated land) / Greenfield.
- Individual item prices taken out of historical contractors estimates may not reflect true cost.
What is “Factorial Estimating”?
Some projects have a central fixed plant element, the cost of which can be determined accurately and in advance from suppliers. The cost of ancillary and peripheral engineering are calculated using a factor of the main plant element. (Also known as “Lang Factors”).
The reliability and accuracy of the factors heavily influence the overall reliability of the estimate.
- Should be built up from extensive experience by the orginisations estimating department.
- As the design changes the factors may well change also.
The accuracy of the estimate also depends on the reliability of the price of the plant item.
What is “Labour-hours estimating”?
The simplest and earliest estimating techniques. Requiers some knowledge of how an operation is to take place (similar operational estimating).
Suitable for labour intesive operations such as fabrications and mechanical/electrical installations.
The number of hours a project will take is determined and then multiplied by and appropriate labour all-in rate.
The whole project cost is determined by adding on allowances for materials and plant.
What is the most common reason for undertaking an estimating exercise?
To prepare a tender, which is needed to be as accurate as possible for the construction company.
If the estimate is too high, the chance of winning the work is reduced.
if the estimate is too low the change of making a profit is reduced.
When doing a tender estimate, it is generally not suitable to use “Global estimate”, “Factorial Estimate” or “Labour-hour estimate”. What estimates are used instead?
Unit-rate and Operational estimates since they can be very detailed. However, they require a lot of cost data.
What is “Unit-rate Estimating”?
- Can be compared to Global method.
- Unit-rate estimating will produce an estimate built up from rates applied to individual items.
- Therefore requires a “Bill-of-Quantities”.
- The cost and outpout data are applied to each major resource (labour, plant and materials).
- A rate (cost) is estimated for each unit of an item.
- The rate will include the cost of all resources involved in installing the cabling (labour, plants (equipment) and materials).
- The overall cost of the item is then determined by multiplying the rate by the quantity.
What is output rate?
Also known as wastage. For example:
Material - rebar 1.1 tonnes/tonne
Labour - Steelfixer 0.054 tonnes/hr
Plant - Crane 5 tonnes/hr
How do you calculate Direct costs?
Wastage: Rebar = 1.1 tonnes/tonne
Quatation for steel: Rebar = £397.93 per tonne
Direct costs = Wastage * Cost per unit = 1.1 * 397.93
What are some problems with unit-rate estimating?
- May hide associated costs.
- Assumes materials can be off loaded at the moment they are delivered and at the place they are needed.
- Output rate for specific items may change depending on workers available for example.
- Does not allow for plant idleness or sequence of work.
- Some danger in misplaced confidence because of the precision of the rates.
- Can’t be assumed that the rates are the same now as they have been historically.
What is “Operational estimating”?
It is the most fundamental type of estimating and is compiled from a consideration of the constituent operations and activities that are indicated in the construction programme.
It therefore needs documents which indicate the way work will be undertaken. This gives the estimator information which can be use to give a very detailed estimate.
This estimate allows for:
- Idle time.
- Uncertainties and risks. (Shows basic sources of costs, sensitivity of estimate to changes in assumptions and methods can be investigated, the reasons for variations in costs can be investigated).
- However, the process is time consuming, but does provide a library of operational data.
How is the cost of the project different from the tender bid?
The tender bid is different since the contractor must allow for risk, profit and overheads. These extra costs are termed “uplift”.
What is the estimators’ report used for, and what does it consist of?
The estimators’ report serves to provide the senior management with all the information they need to assess the commercial aspects of the project. It consists of:
- Project description.
- General method statements.
- Indication of risk.
- Contractual issues that may remain unresolved.
- The financial consequence of the design process. (are there areas that have been poorly design? (The contractor may have more expertise than the designer on some matters)).
- Major assumptions made in the preparation of the direct cost estimate.
- An indication of the projects profitability.
- Market and industrial conditions that may be pertinent to the project.
- Direct costs, broken down into resource areas, including subcontractors.
- The bill of quantities with direct costs.
