Technical Program Abstracts

(EST) Estimating

(EST-2385) Benchmarking Project Estimate - A Case Study for Process Unit

Authors: Vijay S. Jambhekar

Abstract: The oil and gas industry has since the 1990’s followed a structured process for project development, funding, and management or Stage Gate process. At the end of each project stage and based on a set of engineering deliverables, the project team develops a cost estimate, writes a decision support package and is expected to benchmark project estimate with similar analogs.

This paper will explain the role and function of benchmarking, planning for benchmarking, discuss differences between estimate and benchmark, discuss data collection as well as the common approach used to benchmark a project estimate. It will show how a project estimate was benchmarked against similar projects around the world.

The case study will also highlight challenges faced by a project estimator and the project controls team in benchmarking project estimates. It will show how benchmarking results were communicated to the project review team / project sponsor to gain acceptance of the project scope and estimate and concludes with the importance of benchmarking in the stage gate process.

 

(EST-2391) (Presentation Only) Cost Estimate Review Simulation

Authors: Larry R. Dysert, CCP CEP DRMP FAACE Hon. Life

Abstract: This presentation will involve a simulated cost estimate review between a project owner client (the estimate requester) and an EPC contractor (the estimate provider). It will illustrate several examples of common problems and issues that occur in the estimate review process, as well as provide recommended approaches that help to ensure that both client and contractor obtain maximum benefit from a comprehensive estimate review for a project.

By exploring real-life practical examples and situations, this presentation will be useful to project teams from both owners and contractors.

 

(EST-2447) Estimating Construction Costs in an Emerging and Unsophisticated Market

Authors: Juan P. Malo R.; Gustavo Vinueza C.

Abstract: Construction in Ecuador has been evolving at a speed never seen before.  The growth and stability of the economy, plus a government believing in local spending and consumption has generated a new market condition. The housing market has been propelled by a mortgage increase from both public and private banks, which gave birth to a market worth billions of dollars.

One of the crucial components in real estate business is to accurately estimate the construction costs for each project. Nowadays, companies use several usually unprolific methods in order to generate estimations for feasibility analysis. Speed and precision are keys to succeed in this process. 

Our objective through this investigation is to test and describe a methodology for estimation processes in an emergent market.  These estimations are based on prices per unit combined with a series of local factors for profiling each segment.  Calculations are detailed ahead.

 

(EST-2486) Getting Granularity in Project Life PM and Engineering Costs

Authors: Shoshanna Fraizinger

Abstract: Typically, project management (PM) & engineering costs are estimated as a percentage of the overall direct field construction costs and are developed using a simple set of known estimating metrics and fragnets for engineering phases of work.

This limited approach lacking an interrogative basis, results in cost estimates for PM and engineering functions which are very limited making it difficult for an owner to validate baseline budgets & schedules.

We have recently developed a new estimating tool and approach to developing these functional costs to a situation where development of these costs is based on the activity, tasks, deliverables & resources defined by the client organization’s governance.

This achieves a bottom’s up, granular estimate which quickly approaches an AACE® class III level estimate with a high level of confidence very early on in the project life cycle. It is proposed that articulation of the process, when applied fully, will build confidence in stated AACE® Class and provide assurance of PM and engineering costs as early as the investment appraisal and conceptual engineering phases

In addition, because we are able to develop these costs on a resource-deliverable basis, the data coming from the tool has potential to improve a variety of organizational planning and reporting activities such as owner’s organizational resource validation, confirmation of headcount requirements over project life cycle phases, validation of lace ups between interfacing governance procedures.  It provides the planner with the tools for alignment to the work breakdown structure, is aligned to any stage gate syndrome and through its resource identification provides an early sight of potential performance management issues.

 

(EST-2487) Developing Life Cycle Cost Estimation for a Steering Knuckle

Authors: Marco Antonio Ferrer Castillo

Abstract: During the last two decades, the competitive environment among business has been increasing. Because of this, it becomes crucial importance for leading companies to find the most accurate strategy to making survive its business. Due to this reason, costs have turned into a major business driver in most industries. During the design stage of a product or service over 70% of the total life cycle costs are generated. Engineering designers assume an important role in order to reduce the life cycle costs of the products they design, by taking consideration of materials and manufacturing processes on their design decisions. In this report, the core steps in achieving this aim are described. First, to estimate the cost, the manufacturing processes and materials that were suitable were identified and these processes were then evaluated and the key cost factors identified. The study shows the reasoning used by expert estimators in order to perform a cost analysis with certain design specifications. Following this methodology, the author was able to create 5 rules to select materials and manufacturing process in order to reduce the impact of life cycle costs.

 

(EST-2501) Engineering Estimate Accuracy of Highway Construction Alternative Delivery Methods

Authors: Douglas S. Alleman, PE; Dr. Daniel Tran; Arthur Antione; Dr. Keith Molenaar

Abstract: Early accuracy in highway cost estimating is vital for proper project planning and program budgeting.  The primary audience for this research includes state and federal departments of transportation (“agencies”) using or developing alternative project delivery methods.  This study focuses on examining Engineering Estimate (EE) accuracy across three main alternative delivery methods in highways, including: design-build/best value (D B/BV), design-build/low bid (D B/LB), and construction manager/general contractor (CM/GC).  The main findings are as follows: 1) D-B/BV and D-B-B have no difference in means of EE accuracy; 2) agencies obtain the greatest estimating accuracy for construction manager/general contractor (CM/GC) projects; and 3) agencies tend to overestimate D-B-B, D-B/LB, and D-B/BV. These findings come from analyzing 275 highway construction projects, completed from 2004 to 2015, validated by agency representative interviews. This paper contributes to the construction body of knowledge by presenting one of the first studies that evaluate the accuracy of agency estimates across different project delivery methods in highways and is the first to empirically prove that CM/GC highway construction projects have greater EE accuracy than other delivery methods.

 

(EST-2525) FPSO Bid, the Delicate Choice of Class of Estimate

Authors: Ousmane Aidara

Abstract: In the FPSO Lease and Operate industry, bidding phases are generally short and presales cost often partly or totally paid by the Contractor. When it comes to prepare an offer for such uncompensated tenders, the Contractor always faces the difficult decision to know the sufficient level of project maturity to develop a confident price for a lump sum contract. Although AACE practices recommend having a class 2 or 1 estimate for a firm price, such level of maturity requires a long FEED with high cost. This leads to the development of a customized class 3 estimate sufficiently mature to develop a bid price for an FPSO project with an optimized presales cost.

Moreover, several construction models are involved where different estimating methods can be used. While using an analytical estimating method would require advanced engineering, the gain of accuracy appears to be limited when Contractors use internal standards with strong benchmarks.  

This paper refers to experiences acquired from this development for FPSO products, derived estimating methods, and recommendations that could be applied in other industries.

 

(EST-2573) Comparison of the International Use of Point and Range Estimating

Authors: Robert MacDonald; Mikhaela Gray

Abstract: Deterministic and Probabilistic Estimating provides a “single-point estimate,” a specific cost for a project to be completed. Range estimating, as the name suggests, provides a cost range. This paper looks at the use of both deterministic and range estimating by roads authorities in four countries: Australia, New Zealand, the UK and the USA. The paper will determine the technique they adopted, and ask their opinion whether it is effective and sufficiently accurate. The results are compared with the AACE best practices for cost estimating in order to determine whether the best practice is actually being implemented in these countries. The findings will assist in recognising whether roads authorities are adopting the best cost estimating techniques and attempt to uncover any deficiencies with the current approaches.

 

(EST-2578) Estimating in Step with Advanced Work Packaging (AWP) for Enhanced Project Control

Authors: Lakshmanan Simhadri; Yogesh Srivastava; Glen Warren

Abstract: Advanced Work Packaging (AWP) is a structured mechanism that was co-developed by Construction Industry Institute® (CII) and Construction Owners Association of Alberta (COAA) as best practice for project planning and execution. However, predictability and closer cost control are contingent on producing a good quality funding estimate.

This paper proposes the concept of enhanced estimating work process implementation to provide estimate quantities, cost and man-hours as close as possible to actuals when the project is completed. In addition, providing estimated man-hour inputs by construction work packages (CWP) and by contract to project controls will enable far superior construction planning, scheduling and control in the field.

Estimate details will align with the AWP boundaries of engineering work packages (EWP) and construction work packages (CWP) so that budget information is available at the same level which will facilitate data integration in various project software that is used on a given project. It is of paramount importance that estimated material/equipment quantities also be tracked and reported at the EWP/CWP level commencing in the front end vs. the common traditional tracking by commodity level for the overall project.

Predictability of cost and schedule are among the most important KPIs by which success of a project will be judged.

 

(EST-2586) Estimating General Conditions for Public, Union Projects

Authors: Josh Land

Abstract: Estimators should always analyze general conditions. A proper general conditions estimate should review some basic categories: direct, indirect costs labor, existing, and unforeseen conditions. This paper shall focus on division 1, understanding that this is union labor, and establish estimating techniques in an effort to competitively bid on, and win public work projects.

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