Project Cost Estimating, Budgeting and Value Engineering Skills

Module 1:

Project Cost Estimating Skills

Cost Estimating Basics

• The estimating life cycle

• Phases of the Design Process

  • Programming phase

  • Schematic design

  • Design development

  • Construction documents

• Estimating accuracy by phase

• Conceptual Cost Estimates

• Rough Order of Magnitude Estimates (Broad Scope Estimates)

• Assemblies cost estimates

• Cost indices

• Semi-detailed Estimates (Narrow Scope Estimates)

• Definitive Estimates (Detailed Scope Estimates)

• Basic procedures

• Lump-sum contracts

• Unit-price contracts

• Cost-plus contracts

• Cost-plus contract with a guaranteed maximum price (GMP)

• time-and-materials contracts

• Bid method

• Negotiated method

• Quantity take-off

• Types of construction contracts

• Procurement methods

• Pre-construction services

• Risk analysis and contingencies

Broad Scope Cost Estimating Techniques

• Adjustments to Project Cost for Broad Scope Estimates

• PERT Project Cost Analysis

  • PERT Unit Cost Estimates

    • Formulae for Cost Estimating

    • The Normal Distribution Curve

    • Z-Value Table

    • The Probability of Project Completion within Budget

    • Estimating Project Unit Cost by Using the Standard Deviation

    • Estimating the Project Unit Cost at a Required Probability

    • The Probability of Completing the Project at a Required Cost

    • PERT vs. Standard Deviation & Z-Values

    • Adjustments to Estimates Based on Previous Projects

  • Adjustments for Time

  • Review: Future Value of Money

  • Review: Present Value of Money

  • Equivalent Annual Interest Rate

  • Index to Adjust for Time

  • Equivalent Compound Interest

  • Location Index for Construction

  • Adjustments for Location

  • Adjustments for Size

  • Combined Adjustments

  • Economic Price Adjustment

  • Estimating Durations based on the Learning Curve Effect

  • Estimating Costs based on the Learning Curve Effect

  • Unit-Cost Adjustments

  • Learning Curves

Budget Estimating Process

• Estimating by a design phase

  • Programming budget estimates

  • Schematic design budget estimates

  • Design development budget estimates

• Estimating pre-construction services

• Request for proposal

• Development of pre-construction services estimate

• Pre-construction services contract

• Budget control log

Bid Contract Estimating Process

• Pre-estimate activities

  • Estimating process

  • Solicitation of lump-sum bids

  • Order-of-Magnitude estimates

  • Work Breakdown Structure

  • Estimating team

  • Scheduling the estimating work

  • Subcontractors and major suppliers

  • Estimating forms

  • Accuracy and error prevention

• Pricing self-performed work

• Recap sheet

• Materials

• Labour

• Applying pricing factors

• Summary recap

• Subcontractor work

• Project summary schedule

• Alternative techniques

• Elements of the estimate of the general condition

• Final document review

• Completing the bid summary

• Final mark-ups

• Sales tax

• Validating the estimate

• Estimating subcontractor work

• Estimating General Conditions

• Completing the estimate

Unit Price Estimates

• Unit price bid forms

• Direct cost estimation

  • Materials

  • Labour

  • Indirect labor

  • Subcontractors

  • Recap summary sheet

  • Direct-to-indirect cost factor

• Mark-up determination

• Variation-in-quantity contract provision

• Risk analysis

• Bid finalization

Negotiated Contract Estimating

• Guaranteed Maximum Price Estimates

  • Contract procurement process

  • Documents

  • Strategies

  • Estimating process

  • Contingencies

• Fee determination for negotiated contracts

• Reimbursable versus Non-reimbursable costs

• Home office overhead

• Risk evaluation

• Fee structure

• Cost savings split

• Strategies for responding to the Request for Proposal

• Documents to be included with the Request for Proposal

• General Contractor interview and selection process

• Negotiated subcontracts

• Cost proposals for negotiated contracts

Contract Types and Compensation Arrangements

• Risk distribution in contracting

• Project risk profiles

• Contract types according to risk distribution

• Fixed Price Contracts

  • Firm Fixed Price

  • Fixed Price with Economic Adjustment

• Incentive Contracts

• Fixed Price Incentive

• Cost Plus Incentive

• Cost Reimbursement

• Cost Plus Award Fee

• Cost Plus Fixed Fee

• Cost-Plus Contracts

• Time-and-Materials

Narrow Scope Cost Estimating Techniques

• Power-sizing techniques (Capacity Ratios)

• Factor estimates

• Cost estimating relationships (CER)

• Design-to-cost-estimates

• Target cost estimates

• Adjusting for Project Type and Quality Level

• Features Determining the Quality Level (Grade) of a Structure

• Adjusting for Quality Level by Using a Costing Publication

• Economic Constraints

• Parametric Cost Estimating

• Analysis of Estimating Accuracy

Module 2:

Value Engineering Skills

Framework for Applying Value Engineering in Projects

• What is Value Engineering? Why is it important?

• Defining Value Engineering concepts and principles

• Purpose of Value Engineering and Value Analysis

• Strengths and Weaknesses of Value Engineering

• How and When is Value Engineering applied?

• Project definition and initiation

• Project scope and charter development

• Life-cycle costing techniques

• Project stakeholders analysis and management

• Identifying relationships between Value, Cost, and Worth

• Initiating Value Engineering Process

• Overview of Different Value Engineering Phases

• The Information Phase – steps and procedures

• Developing Value Engineering Job Plan

The Function Analysis Phase - Expressing Project Functional Needs and Constraints

• The need for Function Analysis in projects

• Defining project constraints – relationships and tradeoffs

• Conceptual project cost estimating techniques

• Function-Cost-Worth Analysis

• Developing FAST Diagrams to identify critical project components

• The Technical FAST Model to perform project value analysis

• Case Study

• Cross-Functional Project Team Approach

The Creative Phase - Inspiring Creativity in Your Project Team

• Creativity and Creative thinking within the project environment

• Individual vs. Group thinking to improve the quality of project decisions

• Creativity techniques as applied to optimize project value

• Blocks to creativity within the project team

• Brainstorm project solutions

• Reaching consensus and leveraging the power of project team collaboration

• Project risk perception and identification

• Project prioritization process using the Delphi technique

• The use of Force-field analysis in project problem solving

• Output of the Creative Phase

The Evaluation Phase -Making Informed Project Decisions

• Project ideas screening

• Project evaluation methods

• Quantitative evaluation using objective data

• Subjective evaluation – project-related criteria weighting

• Revisiting project life-cycle costing analysis

• Incorporating inflation in project economic analysis

• Performing project risk and scenario analyses

• Risk Life-cycle simulation modeling - best and worst project cost scenarios

• Pitfalls associated with the use of existing economic models

• Incremental benefit-cost analysis for project evaluation

• Effective Decision-making in project environment

• The output of the Evaluation Phase

The Planning and Reporting Phases -Getting Results through Effective Communication

• Develop and assess VE proposals to optimize project value

• Develop action plans and assign project roles and responsibilities

• Reporting VE findings to Senior Management and project stakeholders

• Mastering oral presentation techniques & interpersonal skills

• Strategies for project plan execution

• Incorporating VE into the early project phases

• Integrating VE with Continuous Improvement Techniques

• Wrap-up