Budgeting CE 320 PDF

http://keydifferences.com/difference-between-fixed-budget-and-flexible-budget.html Budgeting CE 320 College of Engineering University of Saskatchewan Brad Schmid CE 320 Project Engineering - Prof. Schmid -...

http://keydifferences.com/difference-between-fixed-budget-and-flexible-budget.html Budgeting CE 320 College of Engineering University of Saskatchewan Brad Schmid CE 320 Project Engineering - Prof. Schmid - 1 Univ of Saskatchewan Project Budgets The amount of money the owner is willing to spend to design and complete a project Estimating is required in budgeting Budget = Base Estimate + Contingency CE 320 Project Engineering - Prof. Schmid - 2 Univ of Saskatchewan Project Estimates for Budgeting Budgeting is difficult Done before the work is started May not have all of the required information Require a well defined scope Need to consider the risks of the project The estimated cost is based on the information known when it was prepared This is often forgotten CE 320 Project Engineering - Prof. Schmid - 3 Univ of Saskatchewan Project Estimates for Budgeting Owner/Sponsor needs Realistic maximum and minimum cost of the project Designer Determine the cost of performing design tasks & producing contract documents Estimate the total project costs as part of the design process Contractor Must determine the cost of all labour, materials, and equipment Does not usually know what the owner’s expected cost is CE 320 Project Engineering - Prof. Schmid - 4 Univ of Saskatchewan Levels of Accuracy A percentage (± % ) Based on estimators judgement Building Projects Approximate estimates – based on past projects and project design Detailed Estimates –contractor prepares based on detailed design. This is the bid price Industrial Projects Order of magnitude estimates Equipment factored estimates Approved for expenditure (AFE) estimate CE 320 Project Engineering - Prof. Schmid - 5 Univ of Saskatchewan Owner’s Estimate for Budgeting Owner needs this for decision making Economic analysis (NPV, Capital recovery, payback) Benefit cost At some point the estimate needs to be frozen and converted into the project budget Data company records or from commercial databases are used (eg. Means Cost Guide) CE 320 Project Engineering - Prof. Schmid - 6 Univ of Saskatchewan CE 320 Project Engineering - Prof. Schmid - 7 Univ of Saskatchewan Weighted Unit Cost Estimating Weighting refers to the use of historical cost data to determine a unit cost for future forecasting Emphasizes the average value but accounts for extreme values 𝐴𝐴 + 4𝐵𝐵 + 𝐶𝐶 𝑈𝑈𝑈𝑈 = 6 A = minimum cost of previous projects B = average cost of previous projects C = maximum cost of previous projects CE 320 Project Engineering - Prof. Schmid - 8 Univ of Saskatchewan Parking garage example: What is the expected unit cost? How much would a 135 stall garage cost? CE 320 Project Engineering - Prof. Schmid - 9 Univ of Saskatchewan Adjustments for Time, Size, and Location Time adjustments account for: Inflation or deflation Interest rates … Size Might use Using unit costs to account for sizing indexes for any of these Location Labour costs Equipment costs Material costs CE 320 Project Engineering - Prof. Schmid - 10 Univ of Saskatchewan Indexes (Additional Notes) Way of developing present and future cost and price estimates from historical data. k = reference year for which cost or price is known. n = year for which cost or price is to be estimated (n>k). Cn = estimated cost or price of item in year n. Ck = cost or price of item in reference year k. Indexes can be created for a single item or for multiple items CE 420 Project Engineering - U of S Engineering - Brad Schmid 11 Index Stats Canada CE 320 Project Engineering - Prof. Schmid - 12 Univ of Saskatchewan Power Sizing (Additional Notes) The power-sizing technique (or exponential model) is frequently used for developing capital investment estimates for industrial plants and equipment. (both in $ as of the point in time for which the estimate is desired) (both in the same physical units) CE 320 Project Engineering - Prof. Schmid - 13 Univ of Saskatchewan Parametric Estimating (unit cost) Relates the total cost of a project to a few measureable items Eg. Gross floor area, weight, volume, power Unit costs may be determined from company records, pricing manuals Data should be current Unit cost data may need to be adjusted for time, size, location CE 320 Project Engineering - Prof. Schmid - 14 Univ of Saskatchewan Parameter Cost Estimate (Additional Notes) Costs are estimated for each parameter, eg. Site work Foundation Floors Walls Roof Plumbing Electrical Mechanical CE 420 Project Engineering - U of S Engineering - Brad Schmid 15 Parametric  Parametric Product Cost Driver Construction Floor space, roof surface area, wall surface area Trucks Empty weight, gross weight, horsepower Car Weight, wheel base, passenger space, hp Turbine engine Max thrust, cruise thrust, fuel consumption Electrical power plants Kilowatts Software # of lines of code CE 320 Project Engineering - Prof. Schmid - 17 Univ of Saskatchewan Economic Feasibility Study Monetary return Capital recovery Payback period Rate of return Benefit/Cost CE 320 Project Engineering - Prof. Schmid - 18 Univ of Saskatchewan Design Budgets Compensation for design could be Fixed price (lump sum) Salary cost times a multiplier Cost plus a fixed payment: Percent of construction costs Depends on the scope definition The budget should be facilitated by a WBS Based on experience with past projects Hours per drawing, number of design hours, travel expenses CE 320 Project Engineering - Prof. Schmid - 19 Univ of Saskatchewan Design Budgets Salary cost times a multiplier Scope is difficult to define Multiplier between 2 and 3 Provide the owner with a fee schedule Cost plus fixed payment Scope not well defined Designer is reimbursed for the actual costs and receives a fixed fee on top of that Fee is usually 10-25% CE 320 Project Engineering - Prof. Schmid - 21 Univ of Saskatchewan Design Budgets Percent of construction costs Not as common today Percentage varies depending on the level of design services (design, drawings, observation during construction) Percentage usually between 5%-12% of the anticipated construction cost CE 320 Project Engineering - Prof. Schmid - 22 Univ of Saskatchewan Final Cost Estimate (Additional Notes) Completed when the project design is complete Quantity survey – nature and quantity of each work type required Supervision requirements Equipment required Summary sheets – costs, resources, materials CE 420 Project Engineering - U of S Engineering - Brad Schmid 23 Final Cost Estimate (Additional Notes) Direct costs Those costs directly attributed to the individual work task Indirect costs Overhead costs Management costs Insurance … Mark up Profit, contingency CE 420 Project Engineering - U of S Engineering - Brad Schmid 24 Contractor’s Bid Largest component of the cost Several compensation methods can be used Fixed price Lump sum Fixed unit price Cost reimbursable Cost plus a fixed fee Cost plus a percentage May include incentives CE 320 Project Engineering - Prof. Schmid - 25 Univ of Saskatchewan Lump Sum Well defined scope Contractor’ bid includes All costs for the project Overhead costs Profit Only the final number matters – the overall cost CE 320 Project Engineering - Prof. Schmid - 26 Univ of Saskatchewan Unit-Price Similar to Lump Sum Contractor submits a fixed price per unit of work in place Final cost is dependent on the quantity of work completed CE 320 Project Engineering - Prof. Schmid - 27 Univ of Saskatchewan Cost Reimbursable May allow an earlier start to the project May allow the owner to make changes as the project develops without substantial contract modifications Project may be unique or complex Often has an incentive for completing the project under a defined budget CE 320 Project Engineering - Prof. Schmid - 28 Univ of Saskatchewan