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1

What are the five methods of estimating we consider?

>Global/approximate
>Factorial
>Labour-hours
>Unit rate
>Operational

2

What is the cost data required for the global estimating method?

>Overall costs of similar projects
>Inflation indices
>Inflation forecasts

3

What is the cost data required for the factorial estimating method?

>Factorial estimating system
>Quotes for main plant items
>Inflation forecasts

4

What is the cost data required for the labour-hours estimating method?

>Hourly rates
>Productivities
>Overheads
>Materials costs
>Hourly rate forecasts
>Material costs forecasts
>Plant data

5

What is the cost data required for the unit rate estimating method?

>Historical unit rates for similar work items
>Preliminaries
>Inflation indices
>Inflation forecasts

6

What is the cost data required for the operational estimating method?

>Labour rates and productivities
>Plant costs and productivities
>Materials costs
>Overhead costs
>Materials costs forecasts
>Plant capital and operating cost forecasts

7

What is the global estimating method?

The technique relies on a library of archive costs for similar projects related to its overall capacity or size. Quite simply, the cost of a new project is the cost/capacity (historical) multiplied by the capacity (new project) plus allowances for inflation and market trends. It is therefore used at the conception and feasibility study stages to allow the promoter to base decisions on.
Examples of the historical data may be: • cost per linear metre of highway/railway; • cost per tonne of output for process plants; • cost per bed for hospital; • cost per square metre or cost per unit volume for buildings; • cost per megawatt for power stations; • cost per flight capacity for airports; etc.

8

What are the dangers with the global estimating method?

1. What is the cost of a completed project? Does it include:
>final account sums;
>design & engineering fees;
>finance costs;
>land; etc.
2. How is the measurement of the capacity defined?:
>how does linear capacity of linear projects (highways, railways) allow for interchanges;
>how does associated infrastructure be allowed for (access roads, power supplies, etc);
3. Not comparing like with like:
>different ground conditions;
>different site locations (flat terrain compared to mountainous);
>different standards of quality (a motorway compared to a minor road);

9

What is the factorial estimating method?

Some engineering projects, such as power stations or process plants have a large element of fixed plant. The costs of these items can be determined readily from suppliers at a very early stage in the project but nevertheless they will also require a large amount of ancillary engineering work such as pipework, electrical work, structural work (foundations etc.), instrumentation etc. Each of these ancillary items will have a factor associated with it, determined from costs on historical projects. The cost of the ancillary item is therefore simply the product of the cost of the main plant item and its factor.

10

Discuss the reliability of factorial estimating and actors that should be considered.

>The reliability and accuracy of the factors can significantly influence the overall reliability of the estimate. The factors should be built up from extensive experience by the organisation’s estimating department. It should be noted that as the design changes the factors may well change also – for example the factor might be sensitive to slight changes in plant specification.
>The estimate also depends on the reliability of the price of the plant items. The estimators may like to make their own judgements as to the value of these items when drafting the estimate.
>Similarly, the technique should not be applied blindly to all areas of the estimate. The estimators must use their own judgement as to the validity of the estimates they are making – the estimate for item of ancillary engineering should be assessed to see if it is realistic.
>As the technique is based on current costs obtained from suppliers little adjustment for inflation is needed.

11

What is the labour-hours estimating method?

It is suitable for labour intensive operations such as fabrication and mechanical/electrical installations. Potts (1995) indicates that it is heavily used by large American contractors such as Bechtel. The technique is similar to operational estimating, which will be detailed later. However, it assumes that most operations do not vary in their method from project to project. The technique requires that the total labour-hours are estimated for an operation and are then costed at current labour rates (all-in rates, calculated as shown in lecture 2). The final cost is produced by adding on allowances for materials and plant. These extras should be easily identified hence the method’s suitability for operations such as M&E or low material operations. Civil engineering operations usually have a high material element that will vary considerably throughout a project – this is one of the reasons the operational estimating technique is used, which requires the use of a programme and method statement.

12

What is the unit rate estimating method?

Unit-rate estimating is an extension of labour-hours estimating where the cost and output rates are applied to each major resource – that is labour, plant and materials. The term ‘unit-rate’ is used as a rate (cost) is estimated for each unit of an item. For example, if the item is ‘place and compact concrete’ the unit would normally be m3 and the rate would be the amount of money associated with one m3 of concrete – including the cost of labour, plant, materials and other costs. The overall cost of the item is then determined by multiplying the rate by the quantity. The technique is most appropriate for building and repetitive work where the allocation of costs to items of work is well defined. Standard method of measurements (for example CESSM for Civil Engineering works or SMM for building works) define quite clearly the scope for most items of work in such projects and therefore the estimator has no confusion as to what should be included. Whilst in most situations is should be possible to determine all-in rates for both labour and plant, and get adequate rates for materials, poor estimates of productivity will lead to poor estimates. Hence the technique is not likely to be successful in locations where few similar projects have been completed in the past – in general the techniques success depends on the experience of the estimator and the quality of the historical rates for productivity.

13

What are the problems with unit-rate estimating?

The method may not provide the whole picture and may hide associated costs. If this rate were to be used as the basis for a tender, these associated costs may not be recovered.
>As far as materials are concerned it assumes they can be off loaded at the moment they are delivered and at the place where they are needed. This may not always be the case.
As an example, 6.35 tonnes would take 117.6 steelfixer hours. For one steelfixer this is 12 days at 10 hours per day – or three steelfixers for 4 days.
-What happens if during the actual construction only 2 steelfixers are available?
-Or if the programme allows 2 weeks for fixing with just one fixer?
-In addition, this item of work may actually cover all the 20mm rebar for a number of structures – therefore no account is taken for travelling between them.
-Finally there may be another item for bent bars, or some for other diameter bars. Carrying out such fixing concurrently may slow down the output rate for the straight bars.
Perhaps the biggest problem is with plant. No account of plant idleness is allowed for. In this case, 6.35 tonnes of steel will only take 1¼ hours – what does the crane do then? Can it go on to another similar job or does it then have to wait? The main problem with unit-rate estimating can therefore be seen to be that it does not take account of the programme. It assumes that all the resources will be available all of the time. It also cannot take in to account the way in which the activities are to be carried out. Operational estimating, the final method, uses both the programme and the method statements.

14

What is the operational estimating method?

The most fundamental type of estimating, which is compiled from a consideration of the constituent operations and activities that are indicated in the construction programme. It is ideal for civil engineering operations which tend to be unique to the project in consideration. Its main disadvantage is that to be effective it must have programmes and method statements prepared.

15

What are the advantages of the operational estimating method?

>It will allow for idle time which is common in plant dominated work. Instead of costing the plant on an assumed output it will determine the cost for the time that it is on site.
>It can allow for operations where there are significant uncertainties and risks. As it will show the basic sources of costs, rather than the cost derived from an output, the sensitivity of the overall estimate to changes in assumptions and methods can be investigated. The reasons for variations in costs can be investigated.
>The technique, through its requirement for preparation of programmes will help in identifying sources and risks of delay for individual operations.
>Although time consuming, organisations carrying out this technique will soon accumulate a library of operational data which will allow an appreciation of the best way in which to carry out work.