CONSTRUCTION COST ESTIMATING SEPTEMBERwashington.apwa.net/Content/Chapters/washington.apwa.net...Owner Cost Estimate Topics • The estimate Life Cycle inside the owner’s upper management

CONSTRUCTION COST ESTIMATING

Michael Dyer, CCM, CPE, AVSPort of Seattle

SEPTEMBER 2017

Mike Myette, PEMM Construction Consulting, LLC

Owner Cost Estimate Topics• The estimate Life Cycle inside the owner’s upper

management business process – slides• How to hire an estimating consultant• Handout tool reviews of the following:• New project estimate checklist• Sample capital planning estimating template• Soft costs Included?• Estimate assumptions and qualifications• When to Bid Matrix

Estimate Process

Estimates are made up of 3 components• Known Scope – Facility concept/plans /final product / business

objective• Contingency - know changes will occur but cannot quantify

o Items that will be defined as design progresses• Risk - unknowns market conditions, subsurface conditions,

labor quality and availabilityThe ideal estimate would have a balance of these three components and be to predict the final project cost at any stage of the life cycle

Business Plan Prospective• Scope at concept level • Contingency and risk at maximumsInvestment committee• Scope may be more advanced from Business Plan Perspective• Contingency and risk still highRequest design funds from Upper Management• Scope is defined a preliminary design level• Contingency better quantified as the defined building parameters

definition increases• Risk being reduced as the more the scope is defined

Estimating Life Cycle Time Line

How to Hire an Estimating Consultant• What to put in your RFQ• How to interview and select an estimating

consultant• Once hired, when should the estimating

consultant work on what stage of the project.

• New Project Estimate Checklist

• Sample Capital Planning Estimating template

• Soft Costs Included?

• Estimate Assumptions and Qualifications

• When to bid Matrix

Interactive Discussion of Handout Tools

MYSTIQUE OF CONTRACTING

WHAT IS HAPPENING IN THEIR OFFICES?

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Contractors the Misunderstood?

• Contractors-are we misunderstood or do we create an air of misunderstanding?

• Why are we secretive and to what end• Should we be transparent• What should we expect from the Owner/Consultant• Should they be transparent• Same goals• Goals of a project from Owner/Contractor/Designer

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Why we appear Tense and Uptight!

Work Long days Have deadlines with the threat of LD’s Concerns about bonding Concerns about Insurance losses/No Insurance Concerns about lines of credit Concerns about meeting production rates Concerns about unknown conditions


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Why we appear Tense and Uptight!

Concerns about Equipment breakdowns Staffing/Unions/Non-Unions/Training ProgramsNotice Provisions and making owners upset Provide safe work environment for employees &

subcontractorsMeeting Minority/DBE subcontracting

requirements

The Process For Bid-The Sources

The Daily Journal of CommerceConstruction Business JournalsContacts From Our Industry Trade Magazines Plan CentersWebsites/MarketingNetworking With Associates and Industry Experts


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“Go/No Go” DecisionDoes this project fit our company?

Definition of a construction contract:

“A TRANSFER OF RISK FOR AN AGREED FEE” How do you determine what risk is realistic/perceived, acceptable, and

manageable? Can it be defined and quantified? Does the client view the risk the same way? Are we looking at it from a

similar vantage? Is the risk worth taking on, and for what fee; or are we just gambling? Do we have the experience and foresight to manage this risk? Owner, our experience with him and his attitude Yes

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“Go/No Go” DecisionProject size and value, managerial complexityRegional market conditionsCurrent and projected workloadType of clientType of project.


“A Go Decision”Plan/Item Review for Resources.Calls to Prospective Subcontractors.Call to Prospective Material Suppliers.WAIT FOR REPLIES(Week or Two Depending on

Size of Project.)


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The Construction TeamSize of Project determines Team.

Project Manager/Estimator Project Manager/Estimator/Quantity Determinations. Office Assistance (Bonding/Insurance) Project Specific Personal(Subs, Material Quotes, Material

Suppliers, Other Team Assembles As Material Resources are Obtained.


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Project Assignments for Team.Project ManagerSite Visit (Mandatory)Subcontractor Contacts (Bonding)Construction Team Building Construction Work PlanProject Schedule AnalysisProject Engineer/Estimator


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Project Assignments for Team.

Site VisitsSupplier/Vendor ContactsSpread SheetsBid BookRead Documents Underlining and Outlining

Unique ProblemsGeotechnical Reports

Construction Team Meeting Assembling of Construction Bid Documents Review of Appropriate Bid Documents Review of Deadlines and Drop Dead Dates Discussions of Pinch Points or Problems Areas Discussions of Specialty Contractors Special Construction Techniques Schedule Analysis Special Considerations( Access, Traffic, Interferences, Other

Contractors, Fish Windows, Utility Delays/Windows) Insurance/Bonding/Tax-Discussions


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Construction Bid Documents IMPORTANT”

Schedules Restrictions Special Conditions Utility Conflicts DBE Requirements Other Projects Staged Construction

Sequencing

Long Lead ItemsOwner Supplied Items

BidAdvert

TIMEPERIOD

Task Task Task

Week 1 Bid Advertized Order Plans Provide to Bonding/Ins/Legal(if necessary)

Plan

Week1/2

NO GO TALK

Call to or From Prospective Subs and Material Suppliers

Subcontractor, Material Supply(Bid Data)

Visit ProjectSite(Require)

Spread Sheet/Data Entry. Take-Offs by Suppliers and Understanding by Subs(SameProcedures by Them>

Week 3 Receiving Data Spread Sheet, Calls to Above

Beginning ofData Entry

ProductionRate Analysis

Week 4 Assemble Team for Bid

Bid Assembled Production Rate Analysis

Confusion,Cuts, Rationalization, Submit Bid.8/27/2018

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RCW 39.04.340Bidder Responsibility (Mandatory)Bidder Responsibility (Supplemental)Basis for evaluation/deadline for appealCPARB created RCW 39.10.220 suggested guidelines to

assist state and municipalities in developing supplemental criteriaContractor’s Toughest Criteria already in place and very

restrictive for contractors (BONDING AND INSURANCE)

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What it takes to “ask” for a bond? (Bond Prequalification) The last 3 years of your CPA produced financial statements.

Preferably reviewed. (This statement can cost anywhere from $8K to $35K. This may not be required for jobs under $500K.)

Current in house financial statement year to date. Balance Sheet/ Income Statement.

Corresponding Work In Progress statement. Resumes of owners and key personnel. Bid Request Form.


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What it takes to “ask” for a bond?

Personal financial statement, accompanied by the willingness of you and your spouse to indemnify (guarantee) that the said insurance company will never have to pay out, and if they do…..your stuff is their stuff.

Bank Information {A BANKLINE OF CREDIT MAY BE NEEDED}


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What it takes to “ask” for a bond?

After the above is completed the surety still will not guarantee that you will be awarded a bond if you ask. This simply means that you qualify to apply. This information is digested by an underwriting team whose job is to view each case individually and with an open mind, but still maintain a zero loss ratio. {CHARACTER/CAPACITY/CAPITAL}

Much of these underwriting decisions can be streamlined and heavily influenced by having a qualified broker that is an expert in the process represent you.

Bonding Projects

Sources of Bonding{Construction Broker}Types of Bonding {Bid/P&P/Release of

Retention/Release of Lien/Supply Bond Bond CalculationWhen To Apply {Very Early}


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Insurance2nd or 3rd largest Overhead Items

Sources of Insurance (Where to go for insurance)Contractors can work with either a captive agent or

independent broker. Captive agents only represent one company while an independent broker represents you to multiple companies. Qualifications to look for:Look for representatives who insure other contractors

and have industry experience, educational credentials such as the CPCU/CRIS/EHH


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Insurance Types of Insurance – At a minimum Commercial General

Liability is required. In addition the General Liability policy typically must include the following forms to be compliant with contractual specifications.Additional Insured Status (for both on-going &

completed operations).Waiver of Subrogation


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InsurancePrimary & Non-Contributory LanguageAlso, contracts may require: {All Separate Policies}Pollution or Professional liabilityExcess or Umbrella LiabilitySpecial case work comp coverage such as USL&H.Builder’s Risk


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Insurance Underwriting – Contractors typically must show the following to

be acceptable risks: Industry Experience Sound financialsActive safety and quality control policies for both job site and

commercial fleet operations.Good loss history (past 3- 5 year review at a minimum).Use of contractual risk transfer to subcontractors performing

work on their behalf.Receive positive marks from periodic loss control

inspections.


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PricingBase Rate - Decided by the insurance industries overall

experience with a specific classification of business to which the carrier adds their overhead and profit. All rates must be justified to, and approved by the Office of the Insurance Commissioner if an admitted carrier. Non-admitted carriers are not subject to approval.

Experience Rating -A ratio applied to the base rate of losses & reserves divided by premium.

Insurance


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Pricing

Scheduled Rating – Discretionary debits or credits applied by the underwriter to the rate based upon impression of the contractors safety programs, management attitude and commitment to safety, maintenance and housekeeping.

Policy Limits – Coverage limits stipulated in the contract will affect insurance charges to the project. Specific policies like Builder’s Risk will often be a direct cost to the project. Understand what you are requesting.

Insurance


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The Thought-The Plan-The Bid Unit Item and Lump Sum Items Incidentals Fixed Price Contracts- If using lump sum items adequate information must be

provided in the contract documents for the contractor to quantify the work, IE: topo information for lump sum earthwork or other type Lump Sum Items.

Please be informative (Tell us your concerns and your limitations)

Bid IngredientsLabor/Equipment/Material/subs/bonding/insurance

Project Labor Agreements Apprenticeship Requirements Planned Equipment for Project Establishing Equipment Rates for Work Rental Equipment Material Vendors Specialty Contractors Subcontractors Bonding Insurance


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Wage DevelopmentSingle most important Item in Bid

Review the existing prevailing wage requirements Union wages Non Union Wages Supplier wage requirements


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Equipment Rate Development

In-House Rates-normally not with a fuel factorDeveloped rates –types of work (Hard vs.

Easy)Availability of equipmentDo with less-Adjust at bid time (Cuts are usually made

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Material and Supplier Quotes How were their numbers developed Do they match the units in the contract (Ton vs. Cy) Are there stipulations and/or limitations for their use

(Embankment in place in bid Payment requirements Delivery time schedule Local Supplier Minority/DBE requirements: Is there a premium to meet

these?


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Subcontractor Quotes Returning your calls (Did they do it in time) What are their scopes (Are they full work or partial work) Are they clear on exclusions and inclusions Time schedules to do the work Bonding/Insurance ******Familiarity with them and their work History in doing the type of work they are quoting Are they financial secure with a bond and Insurance Minority/DBE requirements: Is there a premium to meet these?

Building the bidAnalysis of Construction ItemsAvailability of PersonnelExperience Factors for CrewingSupporting our SubsSupporting our VendorsLay Down AreasSupport from Outside of Onsite Office


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WHAT IS OUR FAVORITE MEHTOD OF BIDDING?

Unit PriceLump SumCost not to ExceedCost plus a Fee PriceGuaranteed Maximum PriceWorst method- FA-Bad for Owner/Contractor


Review of items

Look at big tickets items-What controls bid Incidentals (Price incidentals)-maybe/maybe notCheck Owners/Designers QuantitiesHard work/Easier WorkWeighted averages for Pricing What can we self-Perform?


Production analysis

Historical-Similar projects onlyMeans/Cat/Euclid handbook/Civil HandbookOther sources-( PW published data)Example of project-Data from project

documents (Geo-report/notices of estimators)Staff inputProject field review and sample testing8/27/2018 MM Construction Consulting LLC Mike

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Bidding the Project

Item analysis-Production AnalysisProduction analysis-sets ingredientsLabor/Equipment/Materials/Subs/taxe

sSpread sheets/other bidding formsOverhead and Profit ??????


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Productivity a guess or a fact! transparency

Productivity is the leading risk factor in a construction estimate

Historical DataNo two projects the same/Not

current/Accurate data from job site/inefficiencies are included


Productivity a guess or a fact! transparency

Work Study Select the work to be studiedBreak work down (PRODUCTIVE AND NON-

PRODUCTIVE)Record Facts(EXAMINE THE FACTS CRITICALL)Develop new methods


Productivity the key for the Estimate

DETERMINE THE QUANTITY OF WORKSELF-PERFORMING OF WORKIDENTIFY THE PRODUCTIVITY RATES TO BE USEDCALCULATE THE UNIT COST OF THE RESOURCESFACTORS IMPACTING PRODUCTIONClimateSchedule-tight schedules foster low productivity as

progress trumps efficiency


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Productivity is the key to the estimate

JOB LOCATIONSUPERVISIONACCESS TO SITEGEOTECHNICAL DATAEQUIPMENT/CREW EXPERIENCEHOURS OF WORK –WEIGHTED AVERAGES $/HOURSELF –PERFORMING WORK

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Productivity is the key to the estimate

BID SHEET (Takes many forms)

QUANTITY/PRODUCTION RATE/CREW/EQUIPMENT

COSTS

WAGES/HOURS WORKED/TAXES/O AND P

MATERIAL COSTS/SUBCONTRACTORS-O AND P

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EXHIBIT A Review and Analysis of Work Plans 800lf/day Page 1 NISQUALLY TO PARADISE ROAD PAHSE 1

Catepillar Performance Handbook Edition 42Source Document **

Beginning work station 25+80 Plan Sheets End work station 346+00Length of project 32, 020 by station Length of trench by Bid item 32,700

SourceStation of dump site 190+00 construction inspector report 3/17/2014

Cycle time Analysiscycle time at excavation site ** 42-203 Distance Sec MinHard digging and asphalt removal Load bucket **8

Ft/sec swing **0.1MPH paved 15mph 22.5 dump **0.1MPH Gravel 10mph 15 swing **0.1Within Site 5mph 8 To 190+00 16,420 729.7778 731 1225+80 to 190+00 in Gravel to dump 1500 100 100 2

in Travel within Site 400 slow 50 1out dump Stopped and dump 120 2

Travel within Site 400 slow 50 1Gravel to 190 1500 100 2190 to excavation 16440 731 12

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total project length bid item 32,700Depth of trench 3.524" HD 2Cy in trench 8500 bank cybcy/lineal ft. 0.26

Cy/lineal ft. 800LF/DAY 208 CY/day

One truck cy/day use 8lcy/truck 8hours/day 480 minload/day/truck 12 96 lcy/truck/

dayContractor work plan 800 lf/day lCy/day Trucks/haulContractor work plan 208 bcy 250 2.604167 say 3 trucks on excavation

20%May consider (1) spar 4 trucks

Contractor work plan 4 trucks As we move through out the site trucks are either added orremoved based on proximity to dump area-Exhibit A page 2

The contractor approximated in Work Plan 4 solo's. The cycle time study aboveindicates 3 trucks with a normally planned spare.

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Bid Item Quanity Unit Duration Unit ProductionRoadway Excavation 6000 cy Neat line 5 days

Shift 8 hrs/day 66.66667Load 2 min 1000 ft

Equipment # Shifts # of shifts Rate Amount Haul 2 min 10 miles/hourBackhoe 1 8 5 100.00$ 4,000.00$ Dump 3 min 15 ft/secCompactor 1 8 5 55.00$ 2,200.00$ Haul 2 minTks 2 8 5 45.00$ 1,800.00$ 9 min/load 7 use 7Grader 1 8 5 85.00$ 3,400.00$ 7trips/hr/trcat 2 8 5 65.00$ 2,600.00$ Truck 12Pick-up 2 8 5 20.00$ 800.00$ Trips 7 84 cy/hr/tr

14,800.00$ Truck 672Labor 2truck 1344Operators 6 8 5 65.00$ 2,600.00$ Overhead/Profit ?????Grade Checker 1 8 5 50.00$ 2,000.00$ Foreman 1 8 5 75.00$ 3,000.00$ teamsters 2 8 5 75.00$ 3,000.00$

10,600.00$ Unit price 4.23$

Another look at - do we bid?

ANALYSIS OF ITEMS LABOR/EQUIP/SUBS/MATERIALS WITHOUT MARKUPSHOW MUCH DO I GIVE TO OTHERS?HOW MUCH DO I TAKE HOME?IS MY LABOR REASONABLE BASED ON THE TOTAL?IS MY EQUIPMENT REASONABLE BASED ON THE TOTAL?


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Another look at - do we bid?

ANALYSIS OF ITEMS HOW DO I DO BETTER? (SUBS/MATERIAL QUOTES)DO I RECALL TO GET THEIR FINAL NUMBERS?DO I RELOOK AT PRODUCTION RATES?REMEMBER THIS IS A GUESS CARRIED TO TWO PLACESWHERE DO I CUT FOR MY FINAL NUMBER?


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Handouts• When to Bid Matrix• Constructions Cost Estimate Qualifications Exclusions• New Project Estimate Checklist• Owner’s Total Project Cost Estimate Summary Checklist• SPM_ Managed Historical Percentage 2008-2015

Handouts available in native format upon request.

Questions? Contact…Michael Dyer CCM, CPE, AVSCapital Project EstimatorPort of SeattlePhone: 206-787-3839Email: [email protected]

Mike MyettePresidentMM Construction Consulting, LLCPhone: 206-510-6536Email: [email protected]

mailto:[email protected]

mailto:[email protected]