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LADOTD LADOTD CONSTRUCTIONCONSTRUCTION
COST ESTIMATINGCOST ESTIMATING
Charles Nickel, P.E.
Cost Estimate &
Value Engineering DirectorOffice: (225) 379-1078
E-mail: Charles.Nickel@la.gov
Cost Estimating ProcessCost Estimating Process
GOAL:GOAL:
To provide guidance in To provide guidance in developing and maintaining developing and maintaining accurateaccurate, , consistentconsistent, and , and reliablereliable project cost estimates.project cost estimates.
Project Management Body of Project Management Body of Knowledge (PMBOK)Knowledge (PMBOK)
Cost Management Involves 3 Cost Management Involves 3 Processes:Processes:
1)1) Cost EstimatingCost Estimating
2)2) Cost BudgetingCost Budgeting
3)3) Cost ControlCost Control
Project Management Body of Project Management Body of Knowledge (PMBOK)Knowledge (PMBOK)
Cost Management Involves 3 Cost Management Involves 3 Processes:Processes:
1)1) Cost EstimatingCost Estimating2)2) Cost BudgetingCost Budgeting
3)3) Cost ControlCost Control
Cost Estimating ProcessCost Estimating Process
Types of Project Cost Estimates:Types of Project Cost Estimates:
1.) Engineering1.) Engineering2.)2.) ConstructionConstruction3.) Right-of-Way3.) Right-of-Way4.) Utilities4.) Utilities5.) Mitigation (Permits, Approvals, etc.)5.) Mitigation (Permits, Approvals, etc.)
Cost Estimating ProcessCost Estimating Process
Types of Project Cost Estimates:Types of Project Cost Estimates:
1.) Engineering1.) Engineering2.) Construction2.) Construction3.) Right-of-Way3.) Right-of-Way4.) Utilities4.) Utilities5.) Mitigation (Permits, Approvals, etc.)5.) Mitigation (Permits, Approvals, etc.)
Cost Estimating ProcessCost Estimating Process
Some common methods of Cost Some common methods of Cost Estimating:Estimating:
Historical Bid BasedHistorical Bid Based Cost BasedCost Based ParametricParametric Risk BasedRisk Based
Cost Estimating ProcessCost Estimating Process
Some common methods of Cost Some common methods of Cost Estimating:Estimating:
Historical Bid BasedHistorical Bid Based Cost BasedCost Based ParametricParametric Risk BasedRisk Based
Historical Bid Based EstimatingHistorical Bid Based Estimating
Uses previous bid data as a basis for Uses previous bid data as a basis for cost estimating.cost estimating.
Items with little or no bid history are Items with little or no bid history are much more difficult to estimate with much more difficult to estimate with this method, if not impossible.this method, if not impossible.
Historical Bid Based EstimatingHistorical Bid Based Estimating
Long Range EstimatesLong Range Estimates
Detailed EstimatesDetailed Estimates
Historical Bid BasedHistorical Bid BasedLong Range EstimatingLong Range Estimating
Estimating UsingEstimating UsingMajor Item Cost GroupsMajor Item Cost Groups
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
AsphaltAsphalt BaseBase ConcreteConcrete DrainageDrainage EarthworkEarthwork Erosion Erosion ControlControl
Cost groups are based on line items Cost groups are based on line items classified into major item categories classified into major item categories such as:such as:
Gates & FencesGates & Fences GuiderailGuiderail LandscapingLandscaping MobilizationMobilization Pavement Pavement markingmarking etc.etc.
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
Item Group Cost = XX% Project CostItem Group Cost = XX% Project Cost
Project Cost = Item Group Cost / XXProject Cost = Item Group Cost / XX%%
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
For example, for a particular type of For example, for a particular type of roadway project, historically; roadway project, historically;
Asphalt Items:Asphalt Items: 58% of Project 58% of Project CostCost
Base Items:Base Items: 12% of Project 12% of Project CostCost
Mobilization:Mobilization: 10% of Project 10% of Project CostCost
Other Items:Other Items: 20% of Project 20% of Project CostCost
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
Item Group Cost = Quantity ∙Item Group Cost = Quantity ∙ Unit Price
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
Quantities for cost groups can be Quantities for cost groups can be estimated based on early project estimated based on early project measurements such as:measurements such as:
Length of roadwayLength of roadwayWidth of roadwayWidth of roadwayDepth of pavementDepth of pavementNumber of intersectionsNumber of intersectionsEtc.Etc.
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
Once the quantities are estimated, Once the quantities are estimated, Unit Prices can be determined based Unit Prices can be determined based on historical bid data.on historical bid data.
Historical Bid Based:Historical Bid Based:Long Range EstimatingLong Range Estimating
Estimate of Asphalt Group:Estimate of Asphalt Group: $1.5 M$1.5 M
Estimate of Base Group:Estimate of Base Group: $1.2$1.2 M M
$2.7 M$2.7 M
$2.7 M / (58% + 12%) = $3.8 M$2.7 M / (58% + 12%) = $3.8 M
Construction Cost = $3.8 M + Construction Cost = $3.8 M + contingenciescontingencies
Detailed EstimatesDetailed Estimates
Historical Bid Based:Historical Bid Based:Detail EstimatingDetail Estimating
Involves past item level Involves past item level relationships between the unit price relationships between the unit price and other measurable parameters and other measurable parameters of the item such as:of the item such as:
QuantityQuantity Letting DateLetting Date Number of Number of BiddersBidders
LocationLocation SizeSize Type of WorkType of Work
Etc., Etc., Etc., Etc., Etc., Etc., ……
Historical Bid Based:Historical Bid Based:Detail EstimatingDetail Estimating
Modeling Unit Price relationshipsModeling Unit Price relationships
Simple Linear Regressions
Not so Simple Linear Regressions
Simple Linear Regression ModelsSimple Linear Regression Models
For example:For example:
Unit Price = Unit Price = 00 + + 1 1 ∙∙ (Bid Date)(Bid Date)
Log(Unit Price) = Log(Unit Price) = 00 + + 1 1 ∙∙ Log(Quantity)Log(Quantity)
Historical Bid Based:Historical Bid Based:Detail EstimatingDetail Estimating
More Complex Linear Regression More Complex Linear Regression ModelsModels
For example:For example:
Log(Unit Price) = Log(Unit Price) =
00 + + 1 1 ∙∙ Log(Quantity) + Log(Quantity) + 2 2 ∙∙ (Bid Date)(Bid Date)
Historical Bid Based:Historical Bid Based:Detail EstimatingDetail Estimating
Historical Bid Based:Historical Bid Based:Detail EstimatingDetail Estimating
Adjust the bid points to reflect only Adjust the bid points to reflect only one relationship at a time.one relationship at a time.
Historical Bid Based:Historical Bid Based:Detail EstimatingDetail Estimating
The more relationships that can be identified and modeled, the closer the adjusted bid points will be to the trend lines.
The amount of time and resources spent identifying and modeling these relationships will determine the level of accuracy achievable.
Estimating Tools:Estimating Tools:
Excel SpreadsheetsAccess Database ApplicationsTrns*port CES
All these tools rely on the EXPERIENCE of the ESTIMATOR to use them wisely to develop the Construction Cost Estimate.
QUESTIONS?QUESTIONS?Charles Nickel, P.E.
Cost Estimate &
Value Engineering Director
Office: (225) 379-1078
E-mail: charles.nickel@la.gov
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