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

 ontr
actor
s Purposeof
Esti
ma te
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

 Engi
neers Purposeof
Esti
ma te
1.Provide the owner with probable
estimate.
2.Evaluate alternatives.

Prof Awad S. Hanna

 omparison of
ontractors and Engineers Estimator
 Contractor’s Estimator  Engineer’s Estimator
Determines actual cost of Determines expected
project for bidding cost.
purposes. Does not know who will
Has detailed company receive award, therefore
cost data for labor and does not know
equipment. contractor’s exact
Knows which resource costs. Does not
construction methods are know actual labor rates.
to be used. Must assume probable
Has knowledge of actual construction methods to
materials suppliers to be be used.
used and quantity Does not know who
discount prices. 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% Preliminary

15% 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
anumber of beds in hospital
asquare feet of office space
anumber of students in school
Prof Awad S. Hanna
 Pr
eli
minar
yEsti
mate(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
 ExampleofPreliminary
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
 UnitPriceEstimate
 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

 ExampleofUnitPri
ceEsti
ma ti
ng
Te
chni
quef orHeavyonstru
ction
______________________________________________________
______
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 AssemblyoronceptualEsti
mate
 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

 Var
iati
on Fa
ctor
sin Esti
mati
ng
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
 Ti
me(ont
)
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Lo
cati
on(ont
)

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,

Proposed Size
Size Factor =Comparison Size

 UCM = Unit Cost Multiplier

E-1
UCM = SF

Prof Awad S. Hanna

 Use This Side for Use This Side for
Unit Cost Mult ipliers Tot al Cost Mult ipliers
(UCM Met hod) (TCM Met hod)

Tablefor
Project
Complex Size Complex
Buildings Project s Fact or Buildings Project s

UnitandTotal
1.175 1.904 0.2 0.235 0.381
1.128 1.619 0.3 0.338 0.486
1.096 1.443 0.4 0.438 0.577
1.072 1.320 0.5 0.536 0.660

ostMulti
pli
ers
1.052 1.227 0.6 0.631 0.736
1.036 1.153 0.7 0.725 0.807
1.023 1.093 0.8 0.881 0.875
1.011 1.043 0.9 0.910 0.939
1.000 1.000 1.0 1.000 1.000
0.991 0.963 1.1 1.090 1.059
0.982 0.930 1.2 1.178 1.116
0.974 0.900 1.3 1.266 1.170
0.967 0.874 1.4 1.354 1.224
0.960 0.850 1.5 1.440 1.275
0.954 0.829 1.6 1.527 1.326
0.948 0.809 1.7 1.612 1.375
0.943 0.780 1.8 1.697 1.423
0.938 0.774 1.9 1.782 1.470
0.933 0.758 2.0 1.866 1.516
0.928 0.743 2.1 1.950 1.561
0.924 0.730 2.2 2.033 1.605
0.920 0.717 2.3 2.116 1.648
0.916 0.705 2.4 2.199 1.691
0.912 0.693 2.5 2.281 1.733
0.909 0.682 2.6 2.363 1.774
0.905 0.872 2.7 2.445 1.815
0.902 0.662 2.8 2.526 1.855
0.899 0.653 2.9 2.607 1.894
0.896 0.644 3.0 2.688 1.933
0.893 0.636 3.1 2.768 1.972
0.890 0.628 3.2 2.849 2.010
0.887 0.620 3.3 2.929 2.047
0.885 0.613 3.4 3.008 2.084
0.882 0.606 3.5 3.088 2.121
0.880 0.599 3.6 3.167 2.157
0.877 0.593 3.7 3.246 2.192
0.875 0.586 3.8 3.325 2.228
0.873 0.580 3.9 3.404 2.263
0.871 0.574 4.0 3.482 2.297

Prof Awad S. Hanna

 harttoonvertUnitPrices
2.000
Unit Price Cost Multiplier

1.500
(UCM)

1.000

0.500

0.000
0.1 1.0 10.0
Size Factor

Buildings Complex Projects

Prof Awad S. Hanna

harttoonvertTotalProjectost
Total Project Cost Multiplier

4.000
3.500
3.000
2.500
(TCM)

2.000
1.500
1.000
0.500
0.000
0.1 1.0 10.0
Size Factor

Buildings Complex Projects

Prof Awad S. Hanna

 4
Shape
40’
50’

Bldg B
Bldg A
Area
30’

40’
Area = 15ooft2
=1500ft2
Perimeter = 160ft
Perimeter

10’
= 150ft
15’ 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
 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