Parametric Cost Estimates

7/29/2019 Parametric Cost Estimates

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PARAMETRIC

COSTESTIMATING

SPEAKER: OTTORINO MAGGIORE VAN BEEST - PMP

SAN DONATO MIL.SE - APRIL 9, 2010

WWW.KEYST1.CH COPYRIGHT KEYST1 S.A. - ALL RIGHTS RESERVED - PARAMETRIC COST ESTIMATING

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TABLE OF CONTENTS

PARA... WHAT?

PARA... WHEN?PARA... WHY?

PARA... START!


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PARA... WHAT?

PMI PMBOK

CHAPTER 7 - PROJECT COST MANAGEMENT

PARA 7.1 - ESTIMATE COSTS

SUB-PARA 7.1.2 - ESTIMATE COSTS: TOOLS AND TECHNIQUES

POINT 7.1.2.3 - PARAMETRIC ESTIMATING (PAGE 172)


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PARAMETRIC ESTIMATING USES A STATISTICAL RELATIONSHIP BETWEEN HISTORICAL

DATA AND OTHER VARIABLES (E.G. SQUARE FOOTAGE IN CONSTRUCTION) TO

CALCULATE AN ESTIMATE FOR ACTIVITY PARAMETERS, SUCH AS COST, BUDGET AND

DURATION.

THIS TECHNIQUE CAN PRODUCE HIGHER LEVELS OF ACCURACY DEPENDING UPON THE

SOPHISTICATION AND UNDERLYING DATA BUILT INTO THE MODEL. PARAMETRIC COST

ESTIMATES CAN BE APPLIED TO A TOTAL PROJECT OR TO SEGMENTS OF A PROJECT, IN

CONJUNCTION WITH OTHER ESTIMATING METHODS.


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PARA... WHAT?

PARAMETRIC COST ESTIMATING (PCE) = STATISTICAL OR STOCHASTIC COST ESTIMATE

PARAMETER = THE COST DRIVER(S)

COST ESTIMATING RELATIONSHIP (CER):

COST-TO-COST: ANCILLARIES F(MAIN ITEM)...

COST-TO-NO-COST: COST F(WEIGHT, MATERIAL, POWER, FLOW RATE, VOLUME,SURFACE, LENGHT, DWS. N, LINES OF CODE, ...)

GENERAL FORM OF CER: Y = F (X)

F: FUNCTIONAL RELATIONSHIP

X: INDEPENDENT VARIABLE OR PARAMETER



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PARA... WHAT?

TYPICAL CURVES USED FOR CERS:

LINEAR

SEGMENTED LINEAR

POLYNOMIAL

POWER LAW

LOGARITHMIC

EXPONENTIAL

RATIONAL

POWER SERIES

WWW.KEYST1.CH COPYRIGHT KEYST1 S.A. - ALL RIGHTS RESERVED - PARAMETRIC COST ESTIMATING 5


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PARA... WHEN?

TIME & PROJECT DETAILS

ANALOGUS

ESTIMATING

AACEI - RP N 17R-97


FOR ENGINEERING & CONSTRUCTION PROJECTS

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PARA... WHY?

CAN BE ACCURATE AS DEFINITIVE COST ESTIMATES



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PARA... WHY?

IF YOUR BOSS TELLS YOU: WE NEED THE PROJECT COST ESTIMATE BY TOMORROW

YOU...



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PARA... WHY?

PARAMETRIC COST ESTIMATING - TOP BENEFITS:


CONSIDERABLY REDUCING COST & TIME CYCLE FOR PROPOSAL PREPARATION,

EVALUATION AND NEGOTIATION

ABOVE BENEFITS CAN BE ACHIEVED WHILE MAINTAINING OR IMPROVING THE

QUALITY OF THE ESTIMATES PRODUCED

COST AND CICLE TIME SAVINGS UP TO 80%


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PARA... WHY?

PARAMETRIC COST ESTIMATING - MAIN ROADBLOCKS:


CULTURAL RESISTANCE

SIGNIFICANT INITIAL INVESTMENT

LIMITED GUIDANCE HOW TO MANAGE PROPOSALS BASED ON PCE


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PARA... WHY?

PARAMETRIC COST ESTIMATING - OBJECTIVES:


PRODUCTION OF MORE RELIABLE ESTIMATES

SHORTER TIME REQUIRED

BETTER DATA UNDERSTANDING

EASIER TO COMPUTE CONCEPTUAL DESIGNS

NO OTHER MEANS TO ESTIMATE EARLY COSTING

BILL OF MATERIAL IS NOT REQUIRED

MUCH EASIER TO HANDLE SCOPE, TECHNICAL AND PERFORMANCE CHANGES

BETTER RISK MODELLING AND UNDERSTANDING


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PARA... WHY?

PARAMETRIC COST ESTIMATING - USE OF OUTPUTS:


PROPOSAL PRICING

ROUGH ESTIMATES

ECONOMIC STUDIES

ACTIVE PROJECT MANAGEMENT - SUPPORTS EARNED VALUE

RISK ANALYSIS


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PARA... OWNER-CONTRACTOR...?


OWNER CONTRACTOR

screening or

feasibility

stochastic or

judgement

concept study or

feasibility

primarly

stochastic

budget,

authorization, or

control

mixed, but

primarly

stochastic

control or / bid /

tender

primarly

deterministic

check estimate

or bid / tenderdeterministic

POSSIBLE

COMMON

UNDERSTANDING

&

INVESTMENTS


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PARA... FORMULA?

EXAMPLES: COST CAPACITY FORMULA

INDUSTRIAL PLANTS

C2 = C1 (Q2/Q1)K

LOG C2 = LOG C1 - K LOG Q1 + K LOG Q2

Y = A + K X

0.2 K

AVERAGE = 0.6


LOG C

LOG Q

COMMERCIAL JET AIRPLANES

LOG C = F (LOG MAX TAKE-OFF WEIGHT) K = 0.85

LOG C = F (LOG NUMBER OF SEATS) K = 1.10

LOG C = F (LOG LENGHT) K = 1.90


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PARA... FORMULA?

EXAMPLES: PLANT EQUIPMENT

SHELL & TUBE HEAT EXCHANGER BEU TYPE - CARBON STEEL

CHE = EXP [A + B LN (W)]

4400


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PARA... FORMULA?

ENTIRE PLANT


CE1 CE2 CE3 CE4 CE5 CE.. CEN

CET1 CET2 CET3 CET4 CET5 CET... CETN

BASE COST =

I CETI

TOTAL COST = BASE COST + ESCALATION + CONTINGENCY


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PARA... FORMULA?

EXAMPLE: OFFSHORE PLATFORM DECOMMISSIONING

PLUG AND ABANDONMENT

C1 = K0 + K1 CT + K2 JOB + K3 NW + K4 RIG + K5 WB + K6 SEASON + K7 WOW

CT = CONTRACT TYPE (=0 X RATE CONTRACT; = 1 TURNKEY CONTRACT)JOB = JOB SPECIFICATION (=0 TEMPORARY PLUG & ABANDON; =1 PERMANENT P&A)NW = NUMBER OF WELLSRIG = RIG DEPLOYMENT (=0 RIGLESS OPERAT.; =1 RIG OPERATION)WB = WORKBOAT DEPLOYMENT(=0 WORKBOAT NOT EMPLOYED; =1 WORKBOAT EMPLOYED)SEASON = SEASON WHEN THE WORK BEGANWOW = WAITING ON WEATHER (=NO WEATHER INTERRUPTION; =1 WEATHER INTERRUPTION)

STRUCTURE REMOVAL

C2 = H0 + H1 ST + H2 WD + H3 CF + H4 MW + H5 TW + H6 REEF + H7 TOW

ST = STRUCTURE TYPE (=0 CAISSON; =1 OTHERWISE)WD = WATER DEPHTCF = COMPLEXITY FACTOR = NC (NUMBER OF CONDUCTORS) + NPL (PIPELINE ATTACHMENTS) + NP (PILES) + NSP (SKIRT PILES ASSOCIATED WITH THESTRUCTURE)MW = MAXIMUM COMPONENT WEIGHTTW = TOTAL STRUCTURE WEIGHT (DECK + JACKET + EQUIPMENT + PILING AND CONDUCTORS)REEF = STRUCTURE DISPOSITION (=0 ON-SHORE REMOVAL; =1 ARTIFICIAL REEF DONATION)TOW = REEF REMOVAL METHOD (=0 TOPPLED-IN-PLACE OR PARTIALLY REMOVED; =1 TOWED TO SITE)

SITE CLEARANCE AND VERIFICATION

C3 = W0 + W1 AGE + H2 WD + H3 ND + H4 N

AGE = AGE YEARS UPON REMOVALWD = WATER DEPHTND = NUMBER OF DAYSN = NUMBER OF ITEMS COLLECTED


STUDY BY MARK J. KAISER


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PARA... POWER FORMULA?

OPTIMIZATION STUDIES


FROM CONCEPT

TO ALTERNATIVE PROJECTS


19/28

PARA... FROM?

PARAMETRIC COST ESTIMATING - BUILDING CERS:

CERS ARE BUILT UPON STATISTICAL DATA ANALYSIS

SIGNIFICANCE OF CERS IS QUANTIFIED BY SEVERAL PARAMETERS; MOST

IMPORTANT:

COEFFICIENT OF DETERMINATION R2 : REPRESENTS THE PORTION OF VARIATION

IN THE INDEPENDENT VARIABLE THAT HAS BEEN EXPLAINED BY THE REGRESSION

LINE

0R21

R2 ACCEPTABLE 0.70



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PARA... WHY?

PARAMETRIC COST ESTIMATING - ARE YOU SURE COST DRIVERS YOUR

ORGANIZATION IS USING ARE CORRECT?

AN EXAMPLE - STUDY ON SAUDI ARABIAN RESIDENTIAL VILLA

COST = F (PARAMETER)

COST DRIVER = PERIMETER TO FLOOR RATIO = WALL AREA (M2) / PLAN AREA (M2)


TYPICAL:

- GROSS FLOOR AREA 600 M2

- EXTERIOR DIMENSION 15 X 20 M

- N 2 FLOORS- STORY HEIGHT 3 M

TYPICAL

STUDY BY A.D. IBRAHIM, A.A. SHASH, S.A. ASSAF, O.A. JANNADI


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PARA... CURVES?


PARAMETRIC COST ESTIMATING - BUILDING CERS:

CURVES USUALLY PROVIDE MORE CREDIBLE

AND ACCURATE RELATIONSHIPS

LINEAR RELATIONSHIPS ARE VERY RARE

AND OF LIMITED VALIDITY


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PARA... PROCESS!

PARAMETRIC MODEL BUILDING PROCESS


MODEL

REQUIREMENTS

DATA

SUPPORT MODEL

REQUIREMENTS?

DATABASE

DEVELOPMENT

NO

YES

MODEL

DEVELOPMENT

CALIBRATION AND

VALIDATION?

NOT

OK

UPDATE REQUIRED?

YES

OKDOCUMENT

RESULTS


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PARA... START!


DATABASE DEVELOPMENT - DATA NORMALIZATION

NORMALIZATION = DATA CORRECTION FROM DISSIMILARITIES, SUCH AS:

SOURCED FROM DIFFERENT ORGANIZATIONS

CHANGES IN ORGANIZATION

LEARNING / FORGETTING EFFECT

CURRENCY FLUCTUATION

ESCALATION

UNUSUAL EVENTS

ETC.

MAIN LIMITATION: UNRECORDERED DATA / INFO UNAVAILABILITY


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PARA... START!



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SOME IDEAS TO WORK ON

OWNER - CONTRACTOR RELATIONSHIP: PCES BASED BIDS

CONTRACT STRUCTURE

CONTRACT SCOPE AND PRICE

OWNER & CONTRACTOR COMMON INVESTMENTS

SHARE INFO & DATA ESTABLISH COMMON TEAM

DEVELOP REAL PARTNERSHIP

...


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PARA... START!


CONCLUSIONS

REQUIRES MANAGEMENT SUPPORT

NEEDS COMPANY CHAMPIONS

REQUIRED CONSTANT SELLING

CONSIDERABLE START-UP COST

TEAM REQUIRES TRAINING

REQUIRED CULTURE CHANGE

IMPLEMENTATION IS A CHALLENGING EFFORT

DATABASE DEV. AND DATA NORM. ARE THE MOST CHALLENGING EFFORTS

EFFORT: 95% DATABASE DEV. & DATA NORM., 5% CALIBRATION

REQUIRED PROJECT FULL UNDERSTANDING


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PARA... START!


CONTACT:

OTTORINO MAGGIORE VAN BEEST

E-MAIL:

[email protected]

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Parametric Cost Estimates