Estimating Construction Costs How much will it cost?

? Cost estimating is the process of looking into the future and trying to predict project costs and resource requirements. The estimate represents the cost flight plan that will be followed by the constructor and that will aid him or her in achieving profit. One major reason for the failure of construction firms is incorrect and unrealistic estimating and bidding practices. Estimates are prepared and updated continually throughout construction of the project or facility. A consistent procedure for preparing an estimate is needed to minimize errors and achieve reliable results. 6.2 Types of Estimates Estimating methods vary in accordance with the level of design detail available to the estimator. Five major levels of estimates Order-of-Magnitude Estimate Conceptual Estimate Preliminary Estimate Engineers Estimate Bid Estimate / Constructors Estimate They differ by (1) requirements of available information, (2) extent of effort dedicated to preparation, and (3) the use for the estimate. 6.2.1 Order-of-Magnitude Estimate Prior to commencement of design, when only conceptual information is available, a comprehensive unit is used to characterize the facility being constructed. 6.2.2 Conceptual Estimate Conceptual estimate is useful in budgetary phase. This data is of limited use for project control. 6.2.3 Preliminary Estimate Based on preliminary design (40% completion of design). 6.2.4 Engineers Estimate Based on final or detail design. It indicates the total job cost without markup. Engineers estimate is used to 1. Ensure that the design produced is within the owners financial resources to construct; and 2. Establish a reference point in evaluating the bids submitted by the competing contractors. 6.2.5 Bid Estimate / Contractors Estimate The contractor prepares his estimate of the jobs cost to include a markup for profit based on the final drawings and specifications. 6.3 Approximate Estimate Preparation Approaches Very little information is required about the planned structure except general characteristics such as: Use: e.g. school, office, hospital, residential Kind of construction: e.g. wood, steel, concrete Quality of construction: cheap, moderate, top grade Locality: labor and material supply market area Time of construction: year Identify a similar completed structure with nearly the same general characteristics. 6.3.1 Comparative Cost of Structure (cont'd) Proportioning the cost according to the appropriate unit of the structure: E.g. Bridges (span in meters), Schools (students), Stadiums (seats), Hospitals (beds), Offices (square feet) Example Assume that the current cost for a 500-student school constructed of reinforced concrete for a region is $ 3 million. What is the approximate cost estimate for a 350-student school? Per-student cost =500/3mil Cost estimate =500/3mil*350 6.3.2 Total Finished Floor Area Widely used approach for buildings Only those floors that are finished are counted when developing historical base cost and when making the new estimate. Example Assume that the historical base cost of a 50 ft x 80 ft residentialbuilding with 30 floors was $20 million. Determine the cost for a 60 ft x 100 ft building with 35 floors. Historical base cost = 20mil/(50x80x30)=a Cost estimate for new project =a*60*100*35 6.3.3 Parametric Estimating Major unique features are priced separately and included as separate line items. Take buildings as an example, Each of these items are estimated separately by applying the historical cost for the appropriate unit for similar construction. 6.3.4 Bay Method Used for buildings or projects that consist of repetitive units. In the plan view, the building is made up of three types of bays. The only difference between them is the number of outside walls. Example Cost: Type I = $ 300k; Type II = $ 400k; Type III = $550k The cost for the building: (2 Type I + 6 Type II + 4 Type III) The estimate is modified by special add-ons for stairs, elevators, and mechanical and electrical equipment. Example: Labor resource enumeration for concrete placing Production rate of the concrete placing crew under normal circumstances (efficiency factor = 1) = 12 cubic yard / hour Average labor cost / cubic yard =

6.4 Detailed Estimate Preparation The preparation of a detailed bid-level estimate requires the estimator to break project into cost centers or sub-elements. Costs are estimated based on characteristic resources required: man-hours, materials, subcontractors, equipment-hours and dollars needed. A chart of cost accounts acts as a guide for the estimator to review the plans and specifications to highlight what cost centers are present in the contract being estimated. 6.4.1 Steps in Developing Detailed Estimate 1. Plan and prepare for the estimate. 2. Break the project into cost centers. 3. Estimate the quantities required for cost centers for physical end items; for non-physical cost centers, determine a appropriate parameter for cost calculation. 4. Price out the quantities using historical data, vendor quotations, supplier catalogs and other pricing information. This pricing may be based on a price per unit (unit cost) basis or a lump-sum (one job) basis. May require an analysis of production rates. 5. Calculate the total price for each cost center by multiplying the required quantity by the unit price. 6.4.2 Cost Centers Cost centers can be related to physical subcomponents or nonphysical subcomponents of the project. Physical subcomponent of the project: e.g., foundation piles, excavation, steel erection, interior dry wall installation. Non-physical components: e.g., insurance and bonding premiums, fees for licenses and permits, expense for special items related to safety and minority participation programs, and home office overheads. 6.4.2 Cost Centers The cost centers into which the project is divided for detailed cost estimation purposes are variously referred to as: 1. Cost accounts / Estimating accounts 2. Work packages 3. Line items Cost accounts are used to collect as-built costs while the job is in progress. During preparation of bid, cost accounts are not active. The estimating accounts are typically defined to provide target values for the cost accounts. Work packages are sub-divisions of a project through work breakdown structure (WBS). Line items are sub-elements of estimating accounts or work packages. 6.4.2.1 Work Packages and WBS A project is assumed to be a summation of its sub -elements (work elements or building blocks). The sub-elements are often referred to as work packages. The summation of the work packages can be shown in a hierarchical format called a work breakdown structure (WBS). A work package is a well-defined scope of work that usually terminates in a deliverable product. Each package may vary in size, but must be a measurable and controllable unit of work to be performed. It also must be identifiable in a numerical accounting system in order to permit capture of both budgeted and actual performance information. Work packages are used for both cost control and time control. 6.4.3 Plan for Estimating The estimator should be familiar with the project characteristics in three areas: (1) scope, (2) risk, and (3) constructability. The scope issues to be considered include: 1. Technological requirements of the project flexibility for construction methods? 2. Stated milestone deadlines for the project project completion date and any intermediate contractual milestone dates 3. Required material and equipment availability problems in obtaining structural steel, timber, quality concrete? Problems in obtaining equipment? Impact on cost and schedule? 4. Staffing requirements availability of workers of a particular craft during a particular month 5. Nature of competition & likelihood of acceptable rate-of-return 6.4.3 Plan for Estimating (cont'd) Risk: potential problems should also be evaluated. Examples of risk include: Material and workmanship requirements not specified Unknown or undiscovered site conditions and accessibility Labor and craft availability; Strikes and labor disputes Subcontractor failure; delay of owners approvals and decisions Changes in cost, sequence; etc. Risk can be referred to as a contingency, or a risk allowance Three estimates can be created: Base Estimate: the risk free parts Average Risk Estimate: reported project estimate; base estimate plus average risk allowances Maximum Risk Estimate: base estimate plus the estimated sum of money required if a risk were to occur to its full extent 6.4.3 Plan for Estimating (cont'd) Constructability evaluations include examination of construction quality requirements, allowable tolerances, and the overall complexity of the project. Complexity of a project can be determined from the technical specifications, the referenced standards, and any project drawings and documents. The specified construction technology, logistical and scheduling requirements, material specifications, etc. should be considered. Most estimators develop estimate around the structure of the technical specifications.

6.4.4 Estimating the Quantities The development of the quantities of work to be placed in appropriate units (e.g., square feet, cubic yards, etc.) is referred to as quantity takeoff or quantity surveying. Bill of Quantities (BOQ) is a document used for tendering in the construction industry in which materials, parts, and labor (and their costs) are itemized. Steps in preparation of a BOQ 1. Taking-off making of a detailed list of labor and materials necessary for the work 2. Squaring squaring out the dimensions taken off 3. Abstracting collecting all similar items together and arranging according to trades 4. Aggregating writing of the final bill 6.4.5 Pricing Out the Quantities Directcosts:Materials,Labor, Equipment, subcontracts Indirect costs Supervision ,Testing and inspections, Safety supplies, Security fencing, Cleanup, Bonds 6.4.5 Pricing Out the Quantities (cont'd) Pricing information comes from various sources. Prices can be checked from various construction cost guides, which list unit costs for every section of work for labor, material, and equipment. Some construction companies create their own cost databases based on historical performance. This may be the best way to go if the company has an excellent cost reporting system. For materials, prices can also be obtained directly from vendors, subcontractors, and retail suppliers. For labor, some estimators use the productivity data from various guides to calculate their own unit prices by using local wage rates. Typical estimateSummary Overhead, profit, and contingency are often calculated as a percentage of the total estimated cost. Overhead: (1) job-specific overhead, e.g. job site office, portable toilets, job photographs; (2) general overhead, e.g. office expenses, executive salaries 6.4.6 Approaches to Detailed Estimate Unit-price estimating is based on the standard costs or prices developed from data on previous projects to be used with the units so that estimating simply involves multiplying the quantity required (in standard units) by the unit price. Resource enumeration involves specifying the resources needed to perform the work and developing a cost per hour for the resource team. This cost is then divided by an assumed productivity rate to determine the unit cost. Unit pricing is used on typical jobs with work types that has been previously recorded and for which unit prices are available. Resource enumeration is used on work types which are new (and possibly complex) and for which unit prices are not available. 6.4.6.1 Unit Pricing The standard prices are developed from data on previous projects. Price of a line item = Quantity x Standard Unit Price Percent Efficiency Factor: Typically the estimator will intuitively adjust the unit price to reflect special characteristics of the job, such as access restrictions, difficult management environment. Dallavia method could be used. Adjusted cost estimate = normal cost estimate / efficiency factor Example: Consider a project with a cost estimate of $500M using unit-pricing approach under normal circumstances. If the efficiency factor is 80%, what is the adjusted cost estimate? Answer: Adjusted cost estimate = 500m/0.8 Dallavia method (used to calculate efficiency fac.) Example: After studying a project on which he is bidding, a contractor makes the following evaluations of the production elements involved:Blah (xxxx%) As the total of the eight elements is 625%, the average value will be 625/8 = 78% 6.4.6.2 Resource Enumeration The unit pricing method is sufficiently accurate to estimate the common accounts encountered on a given project. However, a project may have unique features for which unit-pricing data may not be available. For unique items, the price must be develope d by breaking the special work item into its sub-features and assigning a typical resource group to each feature. The productivity to be achieved by the resource group is estimated by using either historical data or engineering intuition. Advantage: Allows the estimator to stylize the resource set or crew to be used to the work . Drawback: Time-consuming 6.5 Summary Cost estimate is the basis for the contractors bid. five major levels of estimate in construction projects: (1) magnitude estimate, (2) conceptual estimate, (3) preliminary estimate, (4) engineers estimate, and (5) bid estimate first four are prepared by the architect/engineer and reflect the increasing refinement of the design. Methods to prepare approximate estimate are introduced (1) comparative cost of structure, (2) total finished floor area, (3) parametric estimating, and (4) bay method. Methods to prepare detailed estimate are introduced (1) unit pricing and (2) resource enumeration.

7.1 Importance of Construction Safety The three primary elements of construction management are (1)cost, (2) time, (3) quality. Safety is a component of quality. Motivations of job site safety are: 1. Humanitarian concerns 2. Legal and regulatory considerations 3. Economic costs and benefits 7.1.1 Humanitarian Concerns Pain, suffering, and even death should be minimized. For instance, if a worker loses a leg because of a job-related accident and is confined to a wheelchair, the work is a casualty ofthe workplace. 7.1.2 Legal and Regulatory Considerations To assure safe and healthful working conditions for employees, theWilliams-Steiger Occupational Safety and Health Act (OSHA) was signed in United States in 1970. Factories and Industrial Undertakings (Safety Management) Regulations, F&IU Ordinance, F&IU (Confined Spaces) Regulations, and F&IU (Safety Officers and Supervisors) Regulations are commonly used as references in Hong Kong. F&IU (SM) Regulations: contractors need to develop, implement and maintain a safety management plan ( 14 elements). 7.1.3 Economic Costs and Benefits Safety costs can be broken into three categories: 1. Direct cost of previous accidents 2. Direct cost of each accident occurrence 3. Indirect cost 7.1.3.1 Insurance Cost of Previous Accidents Increased insurance premiums due to previous accidents have significant effect on a contractors operating expense. Insurance premiums can be calculated using either manual rating system or merit rating system. Manual rating based on the past losses of the whole industry. The premium rates using manual rating systems are based on factors such as classification of operations, rates of pay, the frequency and severity of accidents in a particular classification, and attitudes of various industrial compensation commissions. 7.1.3.1 Insurance Cost of Previous Accidents The merit rating system bases premiums on a particular companys safety record. High-risk companies are therefore penalized with higher premiums The experience modification rate (EMR) compares a companys workers compensation claims experience to other employers of similar size operating in the same type of construction business. To calculate the EMR, your insurance company will consider 3 complete years of data ending 1 year prior to the effective date of the rating period are used. If 25% better your EMR is 0.75 7.1.3.2 Other Direct Cost and Indirect Cost Additional direct costs: salary of the safety engineer and his staff, implementation of a good safety program. The indirect cost of an accident includes: Cost of investigation Labor/wage losses --Equipment losses - Production losses - Cost of unfavorable public relations 7.2.1 Safety Management System safety management system under F&IU(SM) Regulations 1. Safety Policy state the commitment of the contractor to safety and health at work 2. Organizational Structure assure implementation of the commitments to safety and health at work 3. Safety Training equip personnel with knowledge to work safely without risk to health 4. In-house Safety Rules provide instructions for the achievement of safety management objectives 5. Inspection Program identify hazardous conditions and for the rectification of any such conditions at regular intervals 6. Hazard Control Program identify hazardous exposure or the risk of such exposure to the workers and to provide suitable personal protective equipment as a last resort where engineering control methods are not feasible. 7. Accident/Incident Investigation find out the cause of any accident or incident and to develop prompt arrangements to prevent recurrence. 8. Emergency Preparedness develop, communicate and execute plans prescribing the effective management of emergency situations 9. Evaluation, Selection and Control of Subcontractors ensure that subcontractors are fully aware of their safety obligations and are in fact meeting them 10. Safety Committees identify, recommend and keep under review measures to improve the safety and health at work. 11. Job Hazard Analysis evaluate job related hazards or potential hazards and development of safety procedures 12. Safety and Health Awareness promote, develop and maintain safety and health awareness in a workplace. 13. Accident Control and Hazard Elimination for accident control and elimination of hazards before exposing workers to any adverse work environment. 14. Occupational Health Assurance Program protect workers from occupational health hazards 7.2.2 Safety Training In Hong Kong, the Contractors supervisory staff and workers are required to undergo a Labour Department Recognized Green card (LDRGC) general safety induction training. The attendance to LDRGC course must be arranged within two working days after they commence work on site. 7.2.3 (Weekly) Tailgate Safety Meetings Different from safety committee meetings. Tailgate safety meetings should be short (10 to 20 minutes) and focused. They are usually conducted by the superintendent, assistant superintendent, or job foreman. Meeting with workers to emphasize safe work habits, to remind everyone to keep a sharp eye out for any potential hazards, and to take any necessary corrective action immediately. The topics should relate to the type of work being performed at the time of meeting.

7.2.4 Safety Record Keeping Every employer should keep occupational injury and illness records for his employees. The records should be kept up to date and be available to government representatives. Where practicable, photos should be taken. The records may be used to compile annual accident report. OSHA reporting at the job site level breaks into six reporting levels: 1. First aid log 2. First report of injury log 3. Supervisors accident investigation report 4. Monthly project accident report 5. OSHA required Injury Report (OSHA 300) 6. Fatality or major accident report 7.3.1 Site Layout for Workplace Safety Safety Guard, Firefighting equipment, Access roads, Lighting at entrance, Perimeter fencing where appropriate, warning signs, Area for loading, unloading and car park, Fire escape routes, Storage area, Wheel-washing hose, warning signals, speed limit, safety helmet, clear vehicle direction, arrange storage for fuel, flammable materials, explosive, NO smoking, clear sign for fuel flammable, explosive, ventilation for storage areas If the work is being subcontracted, the superintendent has to make sure that the subcontractor is providing personal protection for their own workers. Every person who comes on the job site must be made aware of the rules and be expected to follow them even visitors. There are nine types of personal protection equipment: 1. Body protection e.g. special suits or coveralls 2. Head protection e.g. hard hats / safety helmets 3. Respiratory protection e.g. respirators 4. Face protection e.g. face shields, masks 5. Eye protection e.g. safety glasses or goggles 6. Hearing protection e.g. ear plugs 7. Hand protection e.g. gloves 8. Foot protection e.g. steel-toed shoes or boots 9. Fall protection e.g. safety belt 7.3.3 Construction Site Falls Statistics indicate that nearly one-third of the deaths of construction workers resulted from construction falls. Common construction site falls include roof falls, crane falls, scaffolding falls, elevator shaft falls, falls resulting from holes in flooring, and falling objects. Scaffolding is a temporary framework used to support construction workers and their materials during the construction or repair of large structures at considerable heights. Scaffolding falls can occur for a variety of reasons, but commonly due to faulty scaffolding construction. When holes in flooring are not properly marked, they become a serious safety hazard for even the most experienced construction workers. Video Summary: Fall Protection What are the 4 major components in Fall Protection Work Plan? 1, Recognize hazards, 2, Provide solutions, 3, Identify procedures, 4, Define training What are the three main types of fall protection? 1, Fall restraint systems (prevent working from falling) 2, Fall arrest system (stop the falling) 3, working procedures Examples of fall restraint systems are: Temporary or permanent guard rails, tie to materials, safety belts, pole belts, elevated platform (e.g. bucket truck, suspended stages, scaffolding) Three elements of a fall arrest systems are: A: anchor point B: body holding device C: connecting means For jobs like erecting scaffolds, work procedure need to be strictly followed for fall protection. Safety officer are required to monitor and supervise the job. Planning and training are also required, to let workers know the correct work procedure Points to Note for Trench and Excavation: Mark underground utilities (water pipe, gas pipe) Avoid placing loads, plants, or materials near the edge Ensure angle of repose Provide excavation support, e.g. trench box, jacks, bracing, shoring Provide suitable ladders Fencing and warning at edges of excavation Daily inspection by competent person Provide stop block for vehicles when excavation 7.3.7 Safe Operations of Cranes Enough clearance above and near the crane Loads less than capacity of crane Supervision Solid ground Video Summary: Material Handling and Storage Strains: due to improper lifting, large heavy loads Factures / bruises: due to struck by material, caught in pinch points Cuts / bruises: falling material, improper tie cutting or other securing devices Steel-toed shoes, weight capacity of equipment, gloves, eye protection, stacked material safety Nails removed from used lumber, stacked bricks, masonry blocks, structural steel, etc. Material handling equipment: worker training and certification Keep aisles and passageways clear, marked appropriately

7.4 Responsibilities of Construction Safety The Contractor takes responsibility for ensuring the safety of both workmen and the general public Contractor is responsible for the design and stability of all temporary works. Any unsafe working practice that could result in injury or be detrimental to the permanent Works shall be reported to the Engineer who will consider whether to issue a suspension order or whether to arrange the Factory Inspectorate of the Labor Department to be notified. The Engineers Representative (ER) is required to examine the Contractors design details concerning the design, erection, use and removal of the temporary works and shall satisfy himself that it contains no obvious deficiency. For complex temporary works an independent checking engineer shall be employed. In some circumstances a trial run or test loads of temporary structures may be a practical way to prove suitability. Safety Officer, assisted by safety supervisor and foreman, should: Assist his employer in implementation of the safety policy and the safety and health requirements Assist in ensuring that all plant, machinery, equipment and tools are maintained in safe working order Ensure that all fire services installations and fire escapes are maintained in good working order Conduct safety inspections to project sites and plant, and prepare inspection reports Conduct accident investigation and prepare investigation reports, and recommend preventive measures to avoid recurrence. Organize safety training courses and seminars Clearly identify himself on site by wearing an armband or a safety helmet appropriately marked in Chinese and English In Hong Kong, a Safety Officer needs to be registered as a safety officer in accordance with the Factories and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations (FI&U (SO&SS) R) and employed by the contractor to carry out the duties of a Safety Officer as specified in the Contract and duties specified in the FI&U (SO&SS) R. According to FI&U (SO&SS), a contractor shall employ one full time Safety Officer when the total number of persons employed at one or more than one construction sites is 100 or more. In general for public works contracts, one full time Safety Officer is required where total number workers employed is between 50 and 200 Employer should: Formulate a safety and health policy Provide a safe and healthy working environment to his employees Provide adequate and appropriate safety information, instructions, training and supervision to his employees Set out safety and health standards and procedures Appoint responsible personnel to ensure that the safety and health policy is fully implemented Provide adequate and proper personal protective equipment for his employees Employees should: Co-operate with the employer in administering the safety policy and follow the safety and health requirements as stipulated under the law and the works contract Work safely, avoid to take dangerous shortcuts Use personal protective equipment as required Report any unsafe tools, equipment and plant immediately to their supervisors Report all accidents to the supervisors immediately after their occurrence.