Cost Estimate

Module 2
Dr. Ari Sandhyavitri
Engineering Faculty
UNRI, 2007

Cost Components
Cost (Direct costs):

Labours
Materials
Equipment
Sub-contractors

Price (In-direct cost):

Taxes
Insurances
Overheads:
Offices & adms.
Sites
General conditions
Risks:
Contingencies
Loss & profit

Types of Estimate
Peurfoy and Oberlender (1989) classified
estimate in 3 senses:

1. Approximate Estimates (preliminary,

conceptual, or budget estimate).

2. Detailed Estimates.
3. Organisation Estimates.

Ad.1. Approximate Estimates (preliminary,

conceptual, or budget estimate)

The project owner need to know the approximate cost

to ensure that the cost of a project does not exceed

the allocated provided for the project.
Feasibility Study (FS) during the development phase:
Economic analysis, investment cost of construction
and revenue generation (private)
Design alternatives to meet owners budget.
Experience and judgement for technical purposes;
estimating cost of materials, workmanship, location
and risks.
Organisation of project.
Contract strategies.

Ad. 2a. Detailed Estimates

Determine the costs of materials, labour, equipment,

subcontractor work, overhead and profits.

Prepared by contractors in the form a complete set of
contract document prior to submission of a bid.
Consideration put into account for estimating process:
1. Review a set of bidding document from the project owner
and its technical and administration specifications, and
requirement standards.
2. Checklist of all work items Learn the drawings provided in
the bidding doc.
3. Visitation of the project site (Aanwidzing)
4. Check subcontracted works for specialists
5. Check the current costs of material, labours and
equipment from suppliers;
6. Identify indirect costs; taxes, bonds, insurances,
contingencies, and overheads
7. Set up adequate profits (e.g. at the range 5%-30%)

Ad. 2b. Steps for Preparing a Detailed Estimate

1. Review scope of the project and consider the effect of the project
location, security, traffics and other risks on costs.
2. Determine a material quantities takeoff for all works (1 m3 sand
= 0.8 m3 in practice).
3. Price material. Material cost = Quantity x Unit price
4. Price labour. Labour cost =
Quantity
x Labour Rate
Labour Production Rate
5. Price Equipment. Equip. cost =
Quantity
x Equip. Rate
Equip. Production Rate
6. Subcontracted works for specialists. Receive and tabulate costs
for each subcontractor.
7. Suppliers bids. Receive and tabulate the material, labours and
equipment costs for each supplier.
8. Calculate indirect costs; taxes, bonds, insurances, and overheads
9. Set up contingencies and mark up. Add cost for potential
unforeseen works based on the amount of risks.
10. Profits. Adds cost for compensation for performing the work.

Ad. 3a. Organisation of Estimates

Essential to the preparation of an estimate
Work Breakdown Structure (WBS)
Construction Specification Institute (CSI)

CSI : The organisation of work items is divided by some

major divisions. Each major division is subdivided into

smaller items following the CSI division of works
(Example 1).
WBS : Heavy Engineering construction contractors
organise work in some groups (packages). Each group is
subdivided into major divisions. Each major division is
subdivided into smaller items following the CSI division
of works (Example 2, 3 and 4)

Example 1. Building Construction project Bid Summary Using CSI

Organisation

CSI
Provides a systematic checklist and

guideline for the quantity takeoff (e.g.

transportation materials, 1-5%
damage/waste)
Price extensions
Each division may contain 10-20 item of
works
Summary cost estimate

Example 2. WBS for Sitework

(Look at example 1 Item 2 as a starting point)

Example 3. Construction of Electric power Construction Bid

Summary Using WBS

Example 4. Construction of Electric power Construction for

Transmission Line A (Work Item 2100) Using WBS

References
Smith, N. J. (Editor), Engineering Project

Management, Blackwell Science, 1999, UK.

Merna, A. and Smith, N. J. (1990), Project
Managers and the Use of Turnkey Contracts,
International Journal of Project Management, 8
(3), 183-189.
Peurfoy, R, L and Oberlender, G, D, (1989),
Estimating Construction Costs, McGraw-Hill Book
Company,USA.