Estimating

in

Disaster Recovery

Prof. Ralph V. Locurcio, PE

Director, Construction Management Program

Florida Institute of Technology

The 1991 Gulf War had just ended…

Debris was everywhere…

750 Oil Fires blackened the skies…

The Scope of Work…

Key Facilities…

3 Major Power Plants partially destroyed…

Electrical systems…

750 Oil Fires blackened the skies…

5000km of 300KV Power Lines…

Water systems…

2 Water Pumping stations & distribution lines…

Debris…

Roads & Bridges to be cleared…

Roads & Bridges…

Repave a major hiway…

Ports & Harbors…

2 Harbors mined & destroyed…

Fire damage…

Major facilities were torched…

Terrorist actions…

International Airport bombed & burned…

300 Schools were severely damaged…

Unknowns…

Construction Methodology…

• Hired 11 Contractors

� Based on conceptual estimates

• Used Cost Plus Contracts

� No time for design

� Pre-qualified Contractors

� Made selection based on quals

� Mobilized with contingency

The Estimating Process…

• 1200 Damage Survey Reports

� Prep Govt Estimate

� Excel Data Base

� Prioritize DSRs

• Issue Work Order to Contractor

� Compare estimates

� Negotiate differences

• Issue NTP

� Inspect labor & materials

� Difinitize at 50%

55 January 20, 2010

Estimating Class at FIT

My Background

� Corps of Engineers – 30yrs• Hurricane Eloise - PA 1975

• Hurricane Hugo - SC 1989

• Kuwait Reconstruction - 1992

• Hurricane Iniki - HI 1993

• Pinatubo Recovery - 1993

• Atlantic Hurricanes – 1994 to 1996

� Private sector engineering 1996-2004

� Florida Tech 2004 (4 Hurricanes)

Estimating defined…

� A complex process involving the collection of available information on the scope of a project, the expected resource consumption, and future changes in resource costs.

� This information is synthesized in a visualizationof the construction process and translated into an approximation of the final cost.

Qualifications of an estimator…

� Extensive knowledge of:� Construction processes & methods

� Materials & methods

� Contracts & work practices

� Construction documents & details

� Background business factors

� Design & code requirements

� Verbal & written communications

� Good common sense & judgment

Estimating & Bidding

Kickoff

MeetingWork

Plan

Establish

Standards

Update

Database

Prepare

Estimate

Document

Estimate

Review

Estimate

Adjust

Estimate?Submit

Bid

Project

Execution

Project

Completion

Yes

No

Revise

Lessons Learned

Feedback to improve data base

Reality Check Yes

No

Key Estimating Activities

Read the Plans,

Specs & Contract

Conduct

Site Visit

Decide

Construction

Method

Prepare Schedule

Plan for

SubcontractsPlan for EquipmentMaterial Take-Offs

Estimate costs

Determine

contingency

Analyze Risk

Factors

Finalize Bid

Components of an estimate…

� Project components

� Equipment needed

� Construction methods

� Temporary work items

� Support activities

� Externalities

Two broad types of estimates…

� Conceptual� Used for early decisions & feasibility

� Rough estimate using minimal data

� Relies heavily on past data

� Level of accuracy about 70%

� Detailed� Used for major decisions; i.e. bids & budgets

� Based on final design documents

� Level of accuracy up to 95%

Accuracy increases over time…

% Accuracy

% D

esign

0 25 50 90 100

100

90

60

30

Conceptual types:

� Based on prior experience:

� Weight check… weight of equipment

� Cost-capacity factor- ratio of Q/$

� Comparative cost of structure – $/unit

� Feasibility estimates

� Appropriations estimates

� Time & location adjustments

Comparative cost of structure…

� Basis is cost per unit based on past experience with similar units.

� Compare structures of like construction, (e.g. school: steel, concrete, quality, local labor, weather)

� Develop cost per unit, e.g.

A$/pupil = A Cost/A pupils

� Apply to new construction:

B Cost = B pupils x A$/pupil

Examples:

� Schools: $/pupil

� Bridges: $/feet of span

� Stadium: $/seat

� Hospital: $/beds

� Offices: $/ft2

� Warehouses: $/ft3

Variations of comparative cost…

� Plant cost ratio… process plant ratio

differentiates machine ft2 from admin ft2

� Floor area… cost/ft2 … but

� Total horizontal area… all floors equal

� Finished floor area… $ based on type finish

� Cubic foot of volume… floor height varies

Parametric estimates…

� Used for capital budgeting

� Expect 80-90% accuracy

� Based on historical data base

� Methods:

� Panel… hist data on “typical” panels

� Bay… hist data on “typical” bays

� Plant component… equip cost + other

TPC = ET/(1-PT)

Where ET=tot equip cost/(1-% all other cost items)

ET = $$$ equip/(1-70%)

Time & Location adjustments…

� Cost indexing

� Based on similar “group” of key items

� Compare “group” over time or location

� Final cost based on ratio x calculated cost:

Est Cost = T2/T1 x Calc Cost

Est Cost = (T2/T1)(L2/L1) x Calc Cost

Cost forecasting…

� “The future ain’t what it used to be”…

Yogi Berra

� Need to project costs to mid-point of the

construction year for budgeting

� Generally average past 3-5 years cost data & project

forward

Detailed estimates…

� Based on three primary factors:

A. Scope… quantities

B. Constructability… methods

C. Risk… externalities

A. Scope factors…

� Technology in project - complexity

� Milestone deadlines for work - timing

� Material & equipment - availability

� Staffing needed – skill & availability

� Contract terms – allocation of risk

� Amount of competition - markets

B. Constructability factors…

� Construction quality – skill required

� Allowable tolerances – productivity

� Complexity of design – learning curve

� Flexibility of methods – special terms

C. Risk factors…

� Unspecified material or workmanship

� Differing site conditions

� Error in bidding

� Changes in cost over time

� Subcontractor error or failures

� Weather & environmental issues

� Strikes & labor issues

� Utilities & support issues

Estimating process…

1. Determine project characteristics:

Scope, constructability, risk

2. Examine the project design & site

3. Structure the estimate

4. Determine elements of cost

5. Calculate estimate

Examine Project Design…

� Technical specifications

� Referenced standards

� Project drawings

� Testing and performance

� Special methods or procedures

� Physical elements & site characteristics

� Errors & omissions

Structure the estimate…

� Structure often follows specification template

� Ensure nothing left out

� Need a plan for completing the project

� Logical flow of resources & materials

� Productivity factors

Determine elements of cost…

� Labor- craft & skill resources; sub-contractors; union

labor; wage rates; training; “effective” labor rates;

productivity factors (weather, complexity, experience,

management)

� Material- price, shipping, availability, storage, relation

to specifications

� Equipment- purchase vs. lease, single use, down time,

cost of maintenance

� Capital- interest rates, payment flow, retainage

� Time- overhead costs, required completion date,

Calculate the estimate…� Material take-off from plans

1. Quantities of all construction materials

2. Compare with specifications

� Labor cost for construction or installation

1. Effective labor rates

2. Team composition & duration

� Construction equipment schedule

1. On hand vs. lease or purchase

2. Time on job

� Follow elements of cost

1. Ensure all items are covered

Some Example Problems

� Calculate the estimated cost

� Solution in class

Conceptual Estimates

� Based on historical data

� Accuracy = +30%

� Used for planning purposes when no design exists

� Used to check validity of detailed estimate

Cost of equipment method…

� Assumes cost of equipment is dominant factor in plant cost

� Estimate based on % of cost allocated to equipment relative to total cost of facility

� Estimated cost is proportional to known cost

� Must adjust for time & location

Example 1… 5 min.

� Assume that the equipment portion of a chemical processing

plant constructed in 2006 cost $1.2M and the total plant cost was

$2.5M. Therefore the equipment portion of the total cost was

46%. Estimate the cost of a new plant with the same processes if

the equipment for the new plant has been determined to cost

$2.7M. Assume time and location factors are negligible in this

case.

� Solution:

Example 2…

� Assume that the equipment portion of a chemical processing plant constructed in 2006 cost $1.2M and the total plant cost was $2.5M. Therefore the equipment portion of the total cost was 46%. Estimate the cost of a new plant with the same process if the equipment for the new plant has been determined to cost $2.4M. Assume time and location factors are negligible in this case.

� Solution: C2/E2 = C1/E1 … solve for C2

C2 = [C1/E1] x E2

C2 = [$2.5M/$1.2M] x $2.4M

C2 = [2.08] x $2.7 = $5,625,000M

Volumetric unit measure…

� Similar to comparison of $/sf unit measure

� Used when facility has differing ceiling heights

� Calculate the $/cf of known facility

� Determine $/cf of known facility

� Calculate total cf of new facility

� Using known $/cf calculate cost of new facility

� Adjust for time and location

Example 2… 10 min.

� Determine the cost of a new warehouse which will have 3 distinct storage areas with differing ceiling heights. Area 1 = 12’; Area 2=14’ and Area 3 = 10’. The floor area of all three areas is 4000sf. A similar warehouse was constructed earlier this year for $2.4M. In that building the floor area was 8000sf and the ceiling height was a uniform 14’. Assume time and location factors are negligible in this case.

� Solution:

Example 2… � Determine the cost of a new warehouse which will have 3 distinct storage

areas with differing ceiling heights. Area 1 = 12’; Area 2=14’ and Area 3 = 10’. The floor area of each area is 4000sf. A similar warehouse was constructed earlier this year for $2.4M. In that building the floor area was 8000sf and the ceiling height was a uniform 14’. Assume time and location factors are negligible in this case.

� Solution: Existing Building A = 8000sf x 14’ = 112,000 cfCost/cf = $2,400,000 / 112,000 cf = $21.43/cfNew BuildingA1 = 4000sf x 12’ = 48,000 cfA2 = 4000sf x 14’ = 56,000 cfA3 = 4000sf x 10’ = 40,000 cfTotal = 144,000 cfCost = 144,000 cf x $21.43/cf = $3,085,714

Adjusting for time…

� Prices “escalate” over time due to inflation

� Must adjust estimated cost to “mid-point” of construction.

� Determine period of construction

� Determine start date of construction

� Determine mid-point of construction = average cost

� Determine “escalation rate” = given index

� Multiply estimated cost by “escalation rate”

� Note: escalation is compounded, ie. increase is cumulative over

number of years of escalation

Adjusting for location…

� Prices differ by region of the country

� Must consult a reliable index to determine “relative” cost of

construction between regions

� RS Means Cost Data or Engineering News Record are examples

� Adjustment is a simple ratio multiplied times the estimated

construction cost.

� So… C2/C1 = L2/L1 X Estimated Construction Cost

and C2 = C1 x L2/L1

Example 3… 15 min.

� You have been asked to prepare a conceptual cost estimate for the construction of a new university dormitory at Florida Tech to open in 2010. You have 2005 RS Means data that provides a cost of $30,000/bed for similar dormitories in the northeast of the US, and a construction period of 2 years. The Means data states that construction costs escalate at 10% per year in the southeast. If the dorm is to house 200 students at Florida Tech and the Means Cost Comparison Index between the northeast and southeast is 0.80, what is the estimated cost for the new library at Florida Tech at the mid-point of construction?

� Estimated Florida Tech cost:______________________

Solution to pop quiz…

1. $30,000 per bed x 200 beds =

$6,000,000… in the northeast in 2005

2. In the southeast in 2005…

$6,000,000 x 0.80 = $4,800,000

3. Construction start is…

Occupancy – 2 years = 2010 – 2 = 2008

4. Mid-point of construction is =

2008 + 1 = 2009

5. Years of escalation…

2009 – 2005 = 4 yrs

Solution to pop quiz…

6. Escalation:

$4,800,000 x 1.10 = $5,280,000 (2005-06)

$5,280,000 x 1.10 = $5,808,000 (2006-07)

$5,808,000 x 1.10 = $6,388,800 (2007-08)

$6,388,800 x 1.10 = $7,027,680 (2008-09)

Solution…

Therefore… the estimated cost of the new dormitory for

Florida Tech at the mid-point of construction in 2009 is:

$7,027,680

Cost Engineering Class

� Intro problem… garden shed

� Processes covered

� Conceptual estimating… 3 classes

� Detailed Estimating… 25 classes

� Materials covered… steel, masonry, wood

� Topics… foundations, walls, floors, roofing

� Industry professionals… 4 classes

Semester Project

� Groups bid on actual project

� Lite commercial office = 3000sf

� Typical Residence = 2400sf

� Bids presented to panel of professional judges

� Mystery guest invited

96 January 20, 2010

Industry Participation at FIT

97 January 21, 2011

Harry Johnson explains BRPH estimating…

98 January 21, 2011

Phillip Jarvis explains how estimating is done

at Burgoon-Berger

The class bids on real projects

99 January 21, 2011

100 January 21, 2011

We appreciate industry support!

That’s all folks!!!!That’s all folks!!!!That’s all folks!!!!That’s all folks!!!!

Thank you….Thank you….Thank you….Thank you….