Mei 2012

PROJECT COST ESTIMATION

PROJECT MANAGER S JOB Plan the project Manage it- To the schedule - Within budget. Estimate the cost Establish the budget

Identify and acquire necessary resources. -People --Equipment -- Machineries etc, etc.

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PROJECT MANAGER DILEMA

Cost is usually the boundary that cannot be crossed

Able to determined the cost By how much ( labour, material, Etc. Plus how long ( schedule ) But often lack of accuracy.
Unable to figure out What it will take on the cost before have done it.

Project construction

1. Capital Cost

2 Operation Cost 3. Maintenance Cost

Land acquisition Planning and feasilities studies. Architecture and engineering design. Constuction + material + equipment + labour. Field supervision. Insurance, bon , tax during construction. Client general office. Equipment and furnishing. Inspection and testing

- Operating staff - Labour and material for maintenance and repair. - Insurance / tax . - Utilities.
+ Contigencies
Refer to the note

CONSTRUCTION INDUSTRY
- Cost estimate involve the following entity s role

Owner / Client

Designer

Constructors / contractors

Suppliers

Field manager

Craftmans Sub Contractors

PROJECT CONSTRUCTION
NOTE:

Allowance for contigencies / unexpected cost: 1.Change in design development. 2. Adjustment of schedule. 3. Other requirements from government agencies / local Authority.

Understanding whats in the cost

1 . Elements of cost - Direct Cost attribute to the project salaries - materials. - Payment to the sub contractor/ Consultants - Project related travel - Indirect Cost Overhead Necessary business expenses General admin cost. - Facilities. ( utilities, insurance. ) - Marketing. Basic equation Cost = Labour x Time + other direct cost + Indirect cost

COST ESTIMATION Definition ...( Generic )

-The expected cost to perform a task or to acquire an item

-In another word .... -An important output of project cost management is a -cost estimate COST ESTIMATOR -- Collect and analyse data to estimate the time, money, resources and labour. NOTE: Cost is a resources sacrificed or foregone to achieve a specific objective or something given up for in exchange. Costs are usually measured in monetary units eg ringgit, dollar

COST ESTIMATING generally......

It is one of the most important steps in project management process.

It is one of the most fundamental component.

It represent a prediction by the estimator on the basis of available data.

If not accurately measured, project riddle with budgetary constraint.

Effective estimating is a key to the success of a project. Accuracy of the cost estimate reflect the information available at the time of estimation. Cost estimate made at the earlier stage of a project is expected to be less accurate. The accuracy of project estimation can have a dramatic impact on profitability.

COST ESTIMATION TOOLS AND TECHNIQUES 3 basic tools and techniques for cost estimates 1. Anologous or top down

- Use the actual cost of a previous, similar project as a basis for the new estimate.
2. Definitive or Bottom up - Estimate individual work items and sum them to get total estimate . In other word based on complete detail of quantity, specification and condition . 3. Parametric or top down estimate

- Use project characteristic in a mathematical model to estimate cost.

OTHERS...... Appropriation estimate -Prepared from best available information to establish a budget submitted for funding approval. ( i.e an appropriation ) Also known as budget estimate. Rough Order of Magnitude estimate -An approx estimate made without detail info
BEST PRACTICE TO MANAGE THE PROJECT AT SITE- COST CONTROL

BEST TECHNIQUES FOR COST ESTIMATION

Project manager

CONSTRUCTION COST 6 FACTORS

Offer by tender is a general way used by government, local authority and private sector to implement a construction project. The construction cost for a project depend on several factors: 1.labour cost 2.material cost include transport + wastage

3. equipment and machineries cost.

4. Insurance. 5. Management cost 6.Profit NOTE: Each project varies in their construction cost ( scale and size, duration. Design etc )

ESTIMATING METHOD
The following are some of the rough estimating method that can be selected to anticipate a project cost before it being constructed ( there is already design but contract information has not been prepared ) :1. Cubic Content Method 2. Floor Area Method 3. Unit Valuation Method 4. Appropriate qualities method 5. Bill of Quantities Method

Factors that influence the method to be used : -

1. The time ( duration ) that is available to prepare the estimate.

2. Accuracy that is required ( Nearest to the tender price )

3. Availability of information ( Design stage, drawings, specification ) 4. Estimator experience and skill. 5. Availability of data and cost of previous similar project.

1. CUBIC CONTENT METHOD

1. Frequently used to calculate building cost. 2. Unit according to the building cubic meter ( m 3 ) 3. The length and width of the building should be taken from the external building surface.

2. FLOOR AREA METHOD

1. Unit used base on the building internal floor area. 2. This method is widely used. 3. Easy to apply and there is a lot of construction data. 4. Easy to understand too, normally building construction is referred to the floor area. 5. Reliable estimate as long as the building lan and height is considered.

3. UNIT EVALUATION METHOD

1. Used for early estimation. 2. Less accurate as compare to other method. 3. Can be used before the preparation of drawings and budget.

4. Comparison being made with building of the similar design, function, characteristic etc.
5. This method provide limited application.

- for budget preparation

- To determine the project ceiling cost. - To determine allocation for project.

4. APPROPRIATE QUANTITIES METHOD

1. Good and almost accurate. 2. A few items will be group as one collective unit. 3. Work, material will be removed roughly from the drawing for calculation purposes.

5. BILL OF QUANTITIES METHOD

1 The most accurate and good method.

2 Items being measured in details and each item are bill according to the element or workmanship 4. The estimator is required to fill the price rate and its total. 5. The quantity of each element is gathered and multiply with the price rate.

PRICE BUILT RATE

The following section of the tender document that required pricing : 1. Preliminaries work - indirect cost that is taken into consideration at the early stage. Eg insurance, performance bond. 2. Measured works. BQ / Breakdown cost of each item. 3. Total prime cost and temporary allocation cost for special work eg. electricity., air condition, lift carried out by nominated sub contractor or named supplier.

UNIT PRICE ( COST )

The price of the building / landscape material include pricing for 1. L abor. 2. Materials. 3. Usage of machineries and equipment. 4. Profit.

UNIT PRICE - LABOUR

Rate for execution of the job task is divided into :-

a ) skill labour / carpentry - RM 60 / Day

b ) Head of general labour monthly salary basis c ) General labour daily wage of RM 30 / Day Note : The labour rate is based on the time taken by one labour to carry out the job task until completion. ( hr/m3 or hr /m2 ) Eg : Digging of drain not exceeding 1.5 m deep 1.5 hr /m3 To dispose the digging earth material to a distant of less 50m - hr/m3

UNIT PRICE MATERIAL COST

Factors that determined the material cost 1. The original material price. ( Price that does not consider profit rate, transportation & others ) 2. Transportation cost ( Additional cost imposed to transport materials from factory to the determine site ) 3. Storage cost ( Cost for material storage such as cement, timber and combustible material )

4. Wastage ( Damage material or surplus material estimated 10 % - 15 % of building / landscape material will result in wastage )

UNIT PRICE - USAGE OF MACHINARIES AND EQUIPMENTS

Divided into 2 types 1. Non Motorise or engine ( manual prunner, ladder, spade etc ) 2. - Motorised or machinaries ( Lorries, bull dozer, excavator, crane ) - Motorised equipments ( prunner, chain saw etc ) Factors that should be taken into consideration Renting cost Deficiting cost Maintenance cost Usage of petrol and water for machinaries

UNIT PRICE PROFIT

-Rough profit consist of -A ) Net cost -B ) Overhead cost - staff / director salary - office rental - furniture - electricity, water and telephone bill - transport allowance - Road tax - supervisor, agent etc

BUILT PRICE FOR MACHINERIES / EQUIPMENTS -Prior to the purchasing or rental of machineries, its good to consider the following :1. Able to generate bigger profit or not. 2. Machineries / equipments to be rented / purchase is able to be handled by labour or not 3. Does it can benefit on other project to be carried out later.

Price analysis for machineries / equipments usage.

- Capital cost - Overall cost consisting of original price and maintenance cost - Operating cost

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PRICE FOR MACHINERIES / EQUIPMENTS

Capital cost include -Original price of the machineries / equipment. -Machineries / equipment interest ( 5 % - 10 % ) -Life span of the machineries / plants. -Repairing cost ( 1/10 of the original price ) -Transportation cost ( 1 /20 of the original price ) -Operating cost include -Warranty of the machineries / equipments -Machineries loading capacity -Using of the combustible material and others related -Labour / workers wages

BUILT PRICE FOR DIGGING

-Digging method is divided into : -a ) Manual ( spade, scoop, etc ) -b ) Machines ( excavator, back hole etc ) -Note : Digging work are measured in m3 / hr -TYPES OF SOIL AND ADDITIONAL % OF COST TO BE ADDED TO THE STANDARD RATE FOR DIGGING -Sand 10 % -Clay 20 % -Natural earth 25 % -Rockery/stones / boulders 50 %

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