PM Lecture NO 9 Cost Estimating PDF

Course Title: Fundamentals of Project Management Code: CIV280 Lecture No. (9): Cost estimating in the construction projects By: Dr. Eng.: AbdAllah Atef Abdou Assistant professor – Civil Engineering Department – Assiut Universit...

Course Title: Fundamentals of Project Management Code: CIV280 Lecture No. (9): Cost estimating in the construction projects By: Dr. Eng.: AbdAllah Atef Abdou Assistant professor – Civil Engineering Department – Assiut University 1) introduction Construction estimating is the process of calculating all of the required costs for a construction project, including direct costs (e.g. materials and worker wages) and indirect costs (e.g. equipment depreciation and office worker salaries). Professional construction estimators perform this essential step in the preconstruction process, which helps ensure that owners and contractors are able to complete a construction project profitably. Estimating project costs accurately requires detailed knowledge of construction materials, specifications, techniques, codes, and pricing trends. ‫إن المقصود بتقدير التكلفة في مشروعات التشييد هو محاولة معرفة التكلفة التقديرية للمشروع أو للبنود المختلفة أو‬ ‫لكليهما‪ ،‬تمهيدا للتعاقد وقبل البدء في أعمال التنفيذ‪ ،‬وذلك بناء علي التصميمات التي تم تجهيزها‪ ،‬وكذلك بناء علي‬ ‫متطلبات المالك ومتطلبات المشروع‪.‬وحيث إن هذه العملية برمتها ‪ -‬تقديرالتكلفة‪ -‬تعتمد تماما علي التخمين أو‬ ‫الفروض التي تختلف دقتها‪ ،‬وتعتمد علي عوامل كثيرة‪ :‬طبيعة المشروع‪ ،‬الشخص المقدر وخبرته‪ ،‬زمن التنفيذ‪ ،‬تقنية‬ ‫وأسلوب التنفيذ‪ ،‬دقة البيانات المتوفرة‪...‬وهكذا‪ ،‬فإنه من النادر أن تتطابق التكلفة التقديرية مع التكلفة الحقيقية التي‬ ‫ينتهي بها المشروع ‪ ،‬ولكن كلما كان هذا الفرق أقل ما يمكن كلما دل ذلك علي دقة تقدير التكلفة ودرجة مهارة من يقوم‬ ‫بتقدير التكلفة وبصفة عامة فإن تقدير التكلفة يعتبر ممتازا إذا كان هذا الفرق في حدود ‪%10‬‬ ‫وإذا كان هناك تساؤل عن الهدف من تقدير التكلفة قبل البدء في تنفيذ المشروع فإن األهداف كثيرة ومن أهمها‪:-‬‬ ‫معاونة المالك في تدبير الموارد المالية الالزمة للمشروع كل في حينه‪.‬معاونة المالك في سهولة اختيار المقاول الجاد في‬ ‫مرحله العطاءات‪.‬معاونة المالك في أخذ القرار في مرحلة دراسة الجدوى‪.‬تقدير التكلفة ضروري للمقاول لدخول‬ ‫العطاء‪.‬تساعد المقاول في تدبير الموارد المالية الالزمة علي مدار زمن المشرو ع‪.‬تساعد المقاول في تحديد نسبة الربح‬ ‫وأسلوب التعامل المالي مع المالك‪.‬تساعد المهندس المصمم علي اختيار أحسن البدائل للتصميم والتنفيذ‪.‬‬ The Importance of Accurate Estimating Accurate estimating is essential for the success of any construction project. Both owners and contractors rely on cost estimates to move a project from preconstruction to completion. Without an initial understanding of a project’s costs, owners cannot determine whether a project is feasible within the allotted budget. After a preliminary estimate, design or scope modifications may be required to alter project costs. Contractors also depend on accurate estimates to prepare bids that are competitive and profitable. A contractor that underestimates the cost of a project could be forced to cut into their own profit margin to cover project costs. On the other hand, overestimating the actual project costs could lead a contractor to submit a bid that’s too high to be selected. Even in negotiated bidding scenarios, construction estimates need to be accurate in order to strike a balance between the owner’s budget and the contractor’s profit. 8 Steps in Construction Estimating Construction estimators follow the same basic steps whether they work for a general contractor, specialty contractor, or owner. When making a construction estimate, estimators are typically working to come up with an accurate price for a specific project as part of a competitive or negotiated bidding process. 1. Review the bid package..‫مراجعة مستندات العطاءات‬1. 2. Conduct a site visit..‫إجراء زيارة للموقع‬2. 3. Perform a material takeoff..‫إجراء فحص المواد‬3. 4. Solicit pricing from suppliers and vendors..‫طلب األسعار من الموردين والبائعين‬4. 5. Evaluate labor requirements..‫تقييم متطلبات العمالة‬5. 6. Determine insurance and bonding costs..‫تحديد تكاليف التأمين والسندات‬6. 7. Calculate overhead and indirect costs..‫حساب النفقات العامة والتكاليف غير المباشرة‬7. 8. Account for profit and contingency..‫حساب الربح والطوارئ‬8. 1. Review the bid package. The bid package contains all of the documents necessary for bidding: owner-contractor agreements, bond forms, general conditions, supplementary general conditions, and construction specifications. Contractors who bid on a project are bound to complete the work laid out in the bid package, so a professional estimator spends a significant amount of time to ensure they are familiar with every aspect of the project. Drawings are typically subdivided according to their purpose: site, architectural, structural, mechanical, electrical, and more. When reviewing the bid package, construction estimators generally follow a standard process. 1.Ensure that all drawings and specifications are present. 2.Get an overview of the project. 3.With a quick scan through the specs, estimators get a rough idea of the scope of a project, its material needs, and the quality of finishes. 4.Evaluate structural requirements to understand the material and equipment needs of the building. 5.Review mechanical, electrical, and plumbing (MEP) requirements ‫و‬the ways in which a building’s MEP needs will influence the construction process for the building, including potential underground work. 6.Identify any nonstandard items, unusual floor plans, features, or finishes. 2. Conduct a site visit. Estimators can get a better sense about site conditions from a thorough visit rather than simply relying on elevation drawings or photographs of the proposed construction site. The main purpose of a site visit is for the estimator to better understand the conditions of the site and how those are likely to influence the project costs. For example: A site with poor drainage, difficult subsurface soil conditions, or adjacent buildings could add complexity and cost to a project. A site lacking easy access could make it more difficult to maneuver equipment and materials, increasing costs. A site with poorly located utilities (water, electricity, etc.) Could add underground work requirements that raise the cost. During a site visit, an estimator will make notes, take photographs, and collaborate with contractors to determine the potential influence. 3. Perform a material takeoff. Estimators perform a material takeoff (also called a quantity takeoff ) by reviewing the construction documents and counting every item that is required for the project. Material needs are typically listed according to the way they are measured. For example: Quantity (e.g. doors) Area (e.g. drywall or flooring) Volume (e.g. concrete) Length (e.g. wire)………………………….. Estimators may perform a manual takeoff, which involves using paper copies of drawings, rulers, highlighters, digital measuring tools, and pencils to count and measure the required materials using the specifications. Nowadays, most estimators rely on digital takeoffs using construction estimating software, which greatly speeds up the process. Nonetheless, many estimators still double-check the accuracy of the digital takeoff to ensure that their estimate is accurate. 4. Ask pricing from suppliers and vendors. With a definitive list of materials and equipment, specialty contractors begin to work with suppliers and vendors to get pricing information. 5. Evaluate labor requirements. With information from the takeoff, estimators can also determine the labor necessary for a project. In short, the estimator needs to specify: Which roles are required for the project? How many hours of labor will be used to complete the project? How productive the crew will be given data past projects and information about the current project? Estimators must be sure to calculate the loaded labor rate for wages rather than simply multiplying total hours by hourly wage. The loaded labor rate includes: ❑ Wages ❑ Taxes ❑ Insurance (including health, dental, vision, or life insurance as well unemployment and worker’s compensation insurance) ❑ Retirement contributions ❑ Union dues ❑ Sick or vacation leave Estimators must include all of the costs associated with employing someone for the duration of a construction project, otherwise the estimate will not reflect the true cost of labor. 6. Determine insurance and bonding costs. Insurance and bonding mitigate risk for owners and contractors alike, but this benefit comes with a cost that must be included in project estimates. Nearly all construction companies require general liability insurance, and depending on company size, scope, and role, they may also have other policies, including: ❑ Builder’s risk insurance ‫تأمين مخاطر البناء‬ ❑ Errors and omissions or professional liability insurance ‫تأمين األخطاء واإلغفاالت أو المسؤولية المهنية‬ ❑ Inland marine insurance ‫تأمين المالحة البحرية الداخلية‬ ❑ Commercial auto insurance ‫تأمين السيارات التجارية‬ 7. Calculate overhead and indirect costs. In addition to the direct project costs, estimators must also consider the indirect field costs associated with construction as well as the overhead costs required for running a construction business. Indirect field costs could include: Overhead expenses include: :‫قد تتضمن تكاليف غير المباشرة ما يلي‬ :‫تتضمن بعض النفقات العامة ما يلي‬ Permits ‫التصاريح‬ Rent for office space ‫إيجار مساحة المكتب‬ Trailers or temporary offices ‫المقطورات أو المكاتب المؤقتة‬ Administrative salaries ‫رواتب اإلدارة‬ Site cleaning ‫تنظيف الموقع‬ Software subscriptions ‫اشتراكات البرامج‬ Professional services ‫الخدمات المهنية‬ Utilities ‫المرافق‬ Equipment costs (depreciation, Taxes ‫الضرائب‬ insurance, maintenance, taxes, and fuel) Depreciation ‫االستهالك‬ ‫تكاليف المعدات مثل االستهالك والتأمين والصيانة والضرائب والوقود‬ Insurance ‫التأمين‬ Software ‫البرمجيات‬ 8. Account for profit and contingency. After calculating all of the costs for a construction project, the estimator will adjust the total to account for both profit margin and contingency. The profit is the fee that the contractor earns for the contract and that money can be reinvested to continue growing the business. Turning an Estimate into a Bid Proposal Once the sales price is determined, a bid manager will typically create a construction proposal that details everything included in the bid price in clear and concise terms. Because bid reviewers will try to ensure that everything in the scope of work is included in the bid price, it is important to use the same language shared in the construction specifications and drawings. Even when the bid is for a lump sum contract, using a standard format makes it easier to create a schedule of values while also improving the integration between estimating software and accounting systems. The American Society of Professional Estimators (ASPE) details five levels of detail in estimating. Level Name Description Based on data from similar past projects, this type of 1 Order of magnitude estimate provides a very rough idea of potential costs. Typically involves cost per square foot calculations for 2 Schematic design existing buildings with similar scope and finishes. Using a primary design and lists of expected materials and 3 Design development quantities, estimators provide a rough estimate for the project. Using a nearly finished design, estimators establish a realistic 4 Construction documents budget for a project. Contractors use the bid documents to prepare a bid estimate, 5 Bid estimate which is the cost at which they can complete the project. When referring to estimating, most contractors are referring to a bid estimate, which is a precise evaluation of the costs associated with a particular project with a finished design. Types of Cost Estimates The required levels of accuracy of construction cost estimates vary at different stages of project development, Generally, A construction cost estimate serves one of the three basic functions: design, bid and control. 1.Design Estimates. For the owner or its designated design professionals, the types of cost estimates encountered run parallel with the planning and design as follows: 1. Screening estimates (or order of magnitude estimates) 2. Preliminary estimates (or conceptual estimates) 3. Detailed estimates (or definitive estimates) 4. Engineer's estimates based on plans and specifications 2. Bid Estimates. ✓ For the contractor, a bid estimate submitted to the owner either for competitive bidding or negotiation consists of direct construction cost including field supervision, plus a markup to cover general overhead and profits. ✓ The direct cost of construction for bid estimates is usually derived from a combination of the following approaches: 1. Subcontractor quotations 2. Quantity takeoffs 3. Construction procedures. 3. Control Estimates. For monitoring the project during construction, a control estimate is derived from available information to establish: 1. Budget estimate for financing 2. Budgeted cost after contracting but prior to construction 3. Estimated cost to completion during the progress of construction. How Do You Calculate Construction Costs? Once you have the big-picture overview, gather every detail. Make calculations by collecting information like: 1) Direct Costs – Cost of materials, labor, and equipment 2) Indirect Costs – Cost of utilities, legal fees, permits, etc. 3) Labor Costs – Cost of paying your team including wages, taxes, and overtime 4) Subcontractor Costs – Cost of contracted work including labor, materials, and equipment Cost estimating methods: 1) Approximate estimates unit method space method element method 1) Detailed estimates. Unit Rate Method Operational Estimating method a) Approximate estimates methods 1) Unit method This method is considered one of the simplest methods for estimating the initial cost, as it depends on knowing the unit cost of previous projects that have been implemented, and at the same time it is very similar to the project under study. For example, in the case of estimating the cost in school projects, the calculation is based on knowing the cost of one student from previous school projects that serve a known number of students. Likewise, in the case of estimating the cost of hospital projects, it is possible to benefit from knowing the cost of one bed for previous hospital projects. Also, when estimating the cost of constructing a multi-storey car garage, it is possible to use knowledge of the cost of one car from similar garage projects. The following examples illustrate the idea of ​this simple method:  ‫أ‪ -‬طريقة الوحدة )‪(method unit‬‬ ‫وتعتبر هذه الطريقة من أبسط طرق تقدير التكلفة المبدئيه ‪ ،‬حيث تعتمد علي معرفه تكلفه الو حدة لمشروعات سابقة تم‬ ‫تنفيذها‪ ،‬وفي نفس الوقت تشبه إلي حد كبير المشروع تحت الدراسة‪ ،‬فمثال في حاله تقدير التكلفه في مشرو عات المدارس‬ ‫الحساب بمعرفة تكلفه التلميذ الواحد من مشرو عات المدارس السابقه والتي تخدم عددا معلوما من التالميذ‪ ،‬وبالمثل في‬ ‫حالة تقدير التكلفة لمشروعات المستشفيات فيمكن االستفادة من معرفه تكلفة السرير الوأحد لمشروعات المستشفيات‬ ‫السابقه ‪ ،‬وكذلك عند تقدير تكلفه تشييد أحد جراجات السيارات متعددة الطوابق فيمكن االستعانة بمعرفة تكلفة السيارة‬ ‫الواحدة من مشرو عات الجراجات المشابهة‪.‬‬ ‫‪Example :‬‬ ‫‪When wanting to estimate the cost of building a multi-storey car park, which is supposed to‬‬ ‫‪accommodate 450 cars, we used the knowledge of the cost, which amounted to three million‬‬ ‫‪pounds for a similar project that accommodated 500 cars, by following the following steps:‬‬ ‫‪The cost of one car is =3,000,000/ 500= 6,000 pounds per car.‬‬ ‫‪The cost of the new project is = 450 * 6000” and “2,700,000 pounds.‬‬ 2) The unit area or volume method (space method) In this method, those responsible for estimating the cost rely on previous information that can be kept about the cost of projects that have been built in the past, and it is used to determine the cost of the unit area or unit volume of the facility, by dividing the cost by the number of floors, then dividing the result by the area of ​the building, so we get the cost per square meter, or dividing the cost by the size of the building, so we get the cost per cubic meter of the building. method space)( ‫ طريقة وحدة المساحة أو الحجم‬- ‫ب‬ ‫في هذه الطريقة يعتمد القائمون علي تقدير التكلفة علي المعلومات السابقة التي يمكن االحتفاظ بها عن تكلفة المشروعات‬ ‫وذلك بقسمةالتكلفة‬،‫ويستفاد منها في تحديد تكلفة وحدة المساحة أو وحدة الحجم من المنشأ‬، ‫التي قد تم تشييدها في الماضي‬ ‫ أو قسمة التكلفة علي حجم المبني‬، ‫ثم قسمة الناتج علي مساحة المبني فنحصل علي تكلفة المتر المربع‬، ‫علي عدد األدوار‬. ‫فنحصل علي تكلفة المتر المكعب من المبني‬ Example : It is required calculation of the cost of a residential building consisting of five floors and foundations on a building area of 300 square meters, if the previous information shows that the cost of constructing a square meter with a height of three floors similar to that building and on an area of 500 and foundations may cost half a million Egyptian pounds. First: The unit area method: The cost of one floor, assuming that the foundations are considered a floor, = 500,000/4 = 125000 pounds per square meter. Cost of one square meter = 125,000/500 = 250 pounds/m2 The cost of the new building is 250 *300*6 = 450,000 pounds. Second : The unit volume method: assuming that the foundations are considered a floor, the height of the floor is 3 m building height = 3*4 =12 m Building volume = 12* 500 = 6000 m3 The cost of one m3, = 500,000/6000 = 83,333 pounds /m3. Height of the new building = 6*3 =18 m, volume =18*300= 5400 m3 The cost of the new building = 4500*83,333= 449999.99 pounds C( Element method This method depends on dividing the project into several elements such as: excavation work, foundation work, column work, roof and beam work, electrical work, building work, and so on, and the cost of each of these elements is estimated. The cost of these elements is given separately, by any of the previous methods or others, then the cost of the project is collected. element method ‫ طريقة العنصر‬-‫جـ‬ ‫ أعمال‬،‫ أعمال األعمدة‬،‫ أعمال األساسات‬،‫ أعمال الحفر‬:‫وهذه الطريقه تعتمد علي تقسيم المشروع إلي عدة عناصر مثل‬ ‫ ويتم تقدير تكلفه كل عنصر من هذه العناصر تكلفة هذه‬، ‫ وهكذا‬، ‫ أعمال المباني‬،‫ أعمال الكهر باء‬،‫األسقف والكمرات‬.‫ ثم تجميع تكلفة المشرو ع‬، ‫ بأي من الطرق السابقة أو غيرها‬، ‫العناصر يعطي علي حدة‬ b) Detailed methods for estimating the cost The detailed methods for estimating the cost of construction projects are: the methods used to estimate the cost of project items, and then the project with sufficient accuracy that can be relied upon in the contract between the owner and the contractor, and this includes that the contractor is the one who estimates this cost, as those responsible for estimating the cost using detailed methods study the architectural, construction and executive drawings, which are obtained within the tender documents, in addition to visiting the site to ensure the availability of materials, labor and equipment, and then the work is divided into a number of items - activities - depending on the required accuracy, then determining the resources needed for each item of materials, equipment, workers and contractors in tons, and thus the direct cost of each item can be calculated, according to the resources it needs, and the extent to which each of them is related to the time of the item. The total direct cost of the items gives the direct cost of the project Cost Direct, then what is called the indirect cost of the project (indirect Cost) is added to this cost, which is the cost of senior management, site management, profit, risk and guarantee, and this is what is called (Mark Up)  ‫ثانيا ‪ :‬الطرق التفصيلية لتقدير التكلفة ‪Estimates detailed‬‬ ‫والمقصود بالطرق التفصيلية لتقدير التكلفة في مشروعات التشييد هي‪:‬الطرق التي تستخدم في تقدير تكلفة بنود المشروع ‪،‬‬ ‫ومن ثم للمشروع بدقة كافية يمكن االعتماد عليها في التعاقد بين المالك والمقاول ‪ ،‬ويتضمن ذلك أن من يقوم بتقدير هذه‬ ‫التكلفة هو المقاول ‪ ،‬حيث يعمل القائمون علي تقدير التكلفة بالطرق التفصيلية علي دراسة الرسومات المعمارية واإلنشأئية‬ ‫والتنفيذية ‪ ،‬والتي يتم الحصول عليها ضمن مستندات المناقصة ‪ ،‬وذلك باإلضافة إلي زيارة الموقع حتى يمكن التأكد من مدي‬ ‫توافر المواد والعمالة والمعدات ‪ ،‬ومنثم يتم تقسيم العمل إلي عدد من البنود ‪ -‬األنشطة ‪ -‬يعتمد علي الدقة المطلوبة ‪ ،‬ثم تحديد‬ ‫الموارد الالزمة لكل بند من مواد ومعدات وعمال ومقاول بأطن ‪ ،‬وبالتالي يمكن حساب التكلفة المباشرة لكل بند ‪ ،‬طبقا لما‬ ‫يحتاجه من موارد ‪ ،‬ومدي ارتباط كل منهم بزمن البند‬ ‫‪.‬مجموع التكلفة المباشرة للبنود يعطي التكلفة المباشرة للمشرو ع ‪Direct Cost‬ثم يضاف إلي هذه التكلفة ما يطلق عليه‬ ‫التكلفة الغيرمباشرة للمشرو ع ( )‪ indirect Cost‬وهي عبارة عن تكلفة اإلدارة العليا وإدارة الموقع والربح والمخاطر‬ ‫والضمان ‪ ،‬وهذا ما يطلق عليه (‪. Mark Up‬‬ Unit Rate Method Example The following project consists of seven activity items - each of which is shown by the volume of work and the direct cost of labor, materials, equipment, and subcontractors. The table is required to be completed to obtain the indirect cost of the item - the price of the item - the total cost of the unit - and the price of the unit - if the indirect cost is estimated at about 20% of the direct cost. Direct cost No Item Unit Quantity Labor Materials Equipment Subcontractor 1 Excavation M3 300 1500 - 3500 - 2 Plain concrete M3 100 1000 8000 1000 - 3 R. Concrete M3 300 6000 22000 8000 - 4 Birke works M2 2000 3000 26000 4000 - 5 Plaster works M2 3000 - -- - 12000 6 Paintings M2 2500 - - - 18000 7 Backfill M3 300 4000 - 2000 -  Direct cost Quantity Item Unit Unit No Item Sub Direct cost Item price price Labor Materials Equipment contractor 1 Excavation M3 300 1500 - 3500 - 5000 6000 20 2 Plain concrete M3 100 1000 8000 1000 - 10000 12000 120 3 R. Concrete M3 300 6000 22000 8000 - 36000 43200 144 4 Birke works M2 2000 3000 26000 4000 - 33000 39600 19.8 5 Plaster works M2 3000 - -- - 12000 12000 14400 4.8 6 Paintings M2 2500 - - - 18000 18000 21600 8.64 7 Backfill M3 300 4000 - 2000 - 6000 7200 24  References‫المراجع‬.‫ كلية الهندسة جامعة عين شمس‬- ‫ ادارة مشروعات للدكتور ابراهيم عبد الرشيد نصير‬ ‫ مريم قيس الجامعة الوطنية الماليزية‬.‫ أساسيات في إدارة المشاريع الهندسية د‬ “‫ تيسير سليم أبو حجير معهد اإلدارة والتدريب ”تامي‬.‫ إدارة المشاريع م‬.‫ محاضرات إدارة المشروعات م يوسف الفرماوي‬ https://www.northeastern.edu/graduate/blog/project-management-vs-portfolio-management-vs-program-management https://rebelsguidetopm.com/project-performance-domains/ https://unichrone.com/blog/project-management/types-of-stakeholders-in-project-management/ https://www.projectsmart.co.uk/agile-project-management/which-life-cycle-is-best-for-your-project.php http://www.sst5.com/Project_Based_Learning.aspx?ProjDet=8 The Art of Project Management, by Scott Berkun, Publisher: O'Reilly Media (April 22, 2005), ISBN: 0596007868. Software Project Management Readings and Cases by Chris Kemerer, IRWIN ISBN: 0-256- 20495-0 and course overheads. Dr. Abdurrahman Abdullah A Almethen PMP Professional Diploma – 2023 https://www.na5talif.com/2022/07/tender.html