FACTORS THAT
DETERMINE VARIATION
IN ESTIMATIES
Prof Awad S. Hanna
Purpose of An Estimate
 To know in advance the expected cost in
varying degree of accuracy, at different
phases of the project.
Prof Awad S. Hanna
Owner's Purpose of Estimate
1.Making investment decision in the
conceptual stage.
2.Negotiate and finalize the contract at
the implementation phase.
3.To implement cost control measures.
Prof Awad S. Hanna
Contractor s Purpose of
Estimate
1.Determine project cost and profit.
2.To Implement cost control measure.
3.To develop data base for that can be
used for future project.
Prof Awad S. Hanna
Engineer s Purpose of
Estimate
1.Provide the owner with probable
estimate.
2.Evaluate alternatives.
Prof Awad S. Hanna
Comparison of
Contractor s and Engineer s Estimator
 Contractor’s Estimator
Determines actual cost of
project for bidding
purposes.
Has detailed company
cost data for labor and
equipment.
Knows which
construction methods are
to be used.
Has knowledge of actual
materials suppliers to be
used and quantity
discount prices.
 Engineer’s Estimator
Determines expected
cost.
Does not know who will
receive award, therefore
does not know
contractor’s exact
resource costs. Does not
know actual labor rates.
Must assume probable
construction methods to
be used.
Does not know who
project supplier will be.
Prof Awad S. Hanna Must use local list prices.
TYPES OF ESTIMATES
1. Preliminary
2. Unit price
3. Assembly or Conceptual Cost
4. Detailed estimate
2 Million dollars building
Accuracy
within
20%
15%
Preliminary
Unit Price
10%
Assembly
5%
Detailed
Time
5min 1hour 1day
3 weeks
 Each phase of a project life cycle requires a different
type of estimate--each estimate requires different types
of information.
Prof Awad S. Hanna
1. Preliminary Estimate
“Order of Magnitude”
 A cost prediction based solely on size and/or
capacity of a proposed project.
 Before any engineering or design is
completed.
 Rely on broad data from already executed
similar project
relate cost in dollar to the main capacity/size
parameter
number of beds in hospital
square feet of office space
number of students in school
Prof Awad S. Hanna
Preliminary Estimate (cont )
 Advantageous
Allows a quick determination of the feasibility of a
project
A quick screening on alternatives, etc. (e.g.,
should it be a concrete building or a steel building
!).
 Purpose:
1. Ranking alternatives
2. Evaluate economics and financial feasibility
3. As a check on more detailed estimates
Prof Awad S. Hanna
Example of Preliminary
Estimates
 Parking Garage
$15.0/sq. ft or $4500/parking space
 High School
$80 to 110/sq. ft or $40,000/ student seat
 Medical Centers
$90 to 130/sq. ft
Prof Awad S. Hanna
2. Unit Price Estimate
 Unit prices are obtained from data on
projects already performed.
Cost of labor, material, and equipment for all
units of work are added together and divided by
the number of units involved.
Prof Awad S. Hanna
Example of Unit Price Estimating
Technique for Heavy Construction
______________________________________________________
______
Work Item
Estimated Quantity
Unit Price
Total
______________________________________________________
______
Site Preparation 50,000 sq. yd
$7
$ 350,000
Earth Excavation
100,000 cu.yd.
$ 12
$
1,200,000
Paving
50,000 sq.yd.
$8
$ 400,000
Total bid price
$ 1,950,000
______________________________________________________
______
Prof Awad S. Hanna
3.
Assembly or Conceptual Estimate
 Performed when conceptual design decisions are
being made.
 Work package concept can be used to determine
the element or assembly to be studied
 We need a breakdown of cost of a completed
project into its functional elements to:
1. Find the relationship between element cost and project cost
2. Distribution of cost between constituent elements (sq. feet of
_____)
Prof Awad S. Hanna
Elemental Estimate Analysis
Gross floor Area = 250,000 ft2
Prof Awad S. Hanna
4.
Detailed (Definitive )Estimate
 Prepared after drawings and specification
are completed.
 Requires a complete quantity takeoff based
on drawing and the complete set of contract
documents
 Need information on labor rate
"productivity", material cost, cost of renting
or purchasing equipment
Prof Awad S. Hanna
Variation Factors in Estimating
1. Time
 We base our estimate on the cost of existing
projects that were built in the past
 Price-level changes over time
 We need to project costs of future projects
 Many organizations publish construction cost data
on regular basis:
US Department of Commerce
US Department of Labor
ENR
Turner Construction Company
Handy-Whitman Utilities
Prof Awad S. Hanna
1. Time (Cont.)
Cost Indices
 Published by R.S. Means and ENR
 Used to update old cost information
Uses
1. To update known historical costs for new estimates
2. To estimate replacement cost for specific assets
3. To provide for contract escalation
Limitations
1. They represent composite data, average of many
projects.
2. They fail to recognize technological changes.
3. There is a reporting time log.
Prof Awad S. Hanna
To update old cost information to current date
cost of new facility = cost of old facility xnew cost index
old cost index
To predict future cost
F = P (1 + i)n
F = future cost
P = present cost
i = predicted rate of cost escalation per period
n = number of periods (years)
Prof Awad S. Hanna
2. Location
 Some factors affecting cost in different
locations are:
1. Transport cost
2. Taxes
3. Labor supply and local productivity
4. Codes and local inspection
 Construction costs also vary in different
regions of the USA.
 ENR and Means publishes periodically the
indices of local construction costs in the
major cities.
Prof Awad S. Hanna
2. Location (Cont.)
ENR Regional Index
City
Cost Index
Boston
1120
Chicago 1400
New York 1700
Prof Awad S. Hanna
3. Size
 As the quantity built increases, the unit
cost decreases,
Size Factor
Proposed Size
=Comparison Size
 UCM = Unit Cost Multiplier
E-1
UCM = SF
Prof Awad S. Hanna
Use This Side for
Unit Cost Mult ipliers
(UCM Met hod)
Table for
Unit and Total
Cost Multipliers
Buildings
1.175
1.128
1.096
1.072
1.052
1.036
1.023
1.011
1.000
0.991
0.982
0.974
0.967
0.960
0.954
0.948
0.943
0.938
0.933
0.928
0.924
0.920
0.916
0.912
0.909
0.905
0.902
0.899
0.896
0.893
0.890
0.887
0.885
0.882
0.880
0.877
0.875
0.873
0.871
Complex
Project s
1.904
1.619
1.443
1.320
1.227
1.153
1.093
1.043
1.000
0.963
0.930
0.900
0.874
0.850
0.829
0.809
0.780
0.774
0.758
0.743
0.730
0.717
0.705
0.693
0.682
0.872
0.662
0.653
0.644
0.636
0.628
0.620
0.613
0.606
0.599
0.593
0.586
0.580
0.574
Prof Awad S. Hanna
Use This Side for
Tot al Cost Mult ipliers
(TCM Met hod)
Project
Size
Fact or
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Buildings
0.235
0.338
0.438
0.536
0.631
0.725
0.881
0.910
1.000
1.090
1.178
1.266
1.354
1.440
1.527
1.612
1.697
1.782
1.866
1.950
2.033
2.116
2.199
2.281
2.363
2.445
2.526
2.607
2.688
2.768
2.849
2.929
3.008
3.088
3.167
3.246
3.325
3.404
3.482
Complex
Project s
0.381
0.486
0.577
0.660
0.736
0.807
0.875
0.939
1.000
1.059
1.116
1.170
1.224
1.275
1.326
1.375
1.423
1.470
1.516
1.561
1.605
1.648
1.691
1.733
1.774
1.815
1.855
1.894
1.933
1.972
2.010
2.047
2.084
2.121
2.157
2.192
2.228
2.263
2.297
Chart to Convert Unit Prices
Unit Price Cost Multiplier
(UCM)
2.000
1.500
1.000
0.500
0.000
0.1
1.0
Size Factor
Buildings
Complex Projects
Prof Awad S. Hanna
10.0
Total Project Cost Multiplier
(TCM)
Chart to Convert Total Project Cost
4.000
3.500
3.000
2.500
2.000
1.500
1.000
0.500
0.000
0.1
1.0
Size Factor
Buildings
Complex Projects
Prof Awad S. Hanna
10.0
4. Shape
40’
Bldg B
Area
=1500ft2
Perimeter
= 150ft
10’
Bldg A
Area
= 15ooft2
Perimeter
= 160ft
40’
30’
50’
15’
Wall height = $10 x 160 x 10
= $16,000
= $10.00 of floor area
Bldg. A
Wall cost = $10 x 160 x 10 = $16,000
= $10.00 of floor area
Bldg B
Wall cost = $10 x 180 x 10 = $18,000
= $11.25 of floor area
Prof Awad S. Hanna
15’
5. "Learning Effect"
 Increased productivity by doing
repeated work.
Detailed analysis will be discussed later.
Prof Awad S. Hanna
6. Other Factors
 Hard to quantify but should be
evaluated
Quality
Soil condition
Weather Condition
Competition
Productivity
Prof Awad S. Hanna