Page 1 of 5 ASSIGNMENT # 2 - ESTIMATION Cost estimating is one of the most important steps in project management. A cost estimate establishes the base line of the project cost at different stages of development of the project. A cost estimate at a given stage of project development represents a prediction provided by the cost engineer or estimator on the basis of available data. According to the American Association of Cost Engineers, cost engineering is defined as that area of engineering practice where engineering judgment and experience are utilized in the application of scientific principles and techniques to the problem of cost estimation, cost control and profitability. Virtually all cost estimation is performed according to one or some combination of the following basic approaches: Production Function: In microeconomics, the relationship between the output of a process and the necessary resources is referred to as the production function. In construction, the production function may be expressed by the relationship between the volume of construction and a factor of production such as labor or capital. A production function relates the amount or volume of output to the various inputs of labor, material and equipment. For example, the amount of output Q may be derived as a function of various input factors X1, X2, ..., Xn by means of mathematical and/or statistical methods. Thus, for a specified level of output, we may attempt to find a set of values for the input factors so as to minimize the production cost. The relationship between the size of a building project (expressed in square feet) to the input labor (expressed in labor hours per square foot) is an example of a production function for construction. Empirical Cost Inference: Empirical estimation of cost functions requires statistical techniques which relate the cost of constructing or operating a facility to a few important characteristics or attributes of the system. The role of statistical inference is to estimate the best parameter values or constants in an assumed cost function. Usually, this is accomplished by means of regression analysis techniques. Unit Costs for Bill of Quantities: A unit cost is assigned to each of the facility components or tasks as represented by the bill of quantities. The total cost is the summation of the products of the quantities multiplied by the corresponding unit costs. The unit cost method is straightforward in principle but quite laborious in application. The initial step is to break down or disaggregate a process into a number of tasks. Collectively, these tasks must be completed for the construction of a facility. Once these tasks are defined and quantities representing these tasks are assessed, a unit cost is assigned to each and then the total cost is determined by summing the costs incurred in each task. The level of detail in decomposing into tasks will vary considerably from one estimate to another. Allocation of Joint Costs: Allocations of cost from existing accounts may be used to develop a cost function of an operation. The basic idea in this method is that each expenditure item can be assigned to particular characteristics of the operation. Ideally, the allocation of joint costs should be causally related to the category of basic costs in an allocation process. In many instances,Page 2 of 5 however, a causal relationship between the allocation factor and the cost item cannot be identified or may not exist. For example, in construction projects, the accounts for basic costs may be classified according to (1) labor, (2) material, (3) construction equipment, (4) construction supervision, and (5) general office overhead. These basic costs may then be allocated proportionally to various tasks which are subdivisions of a project. Types of Construction Cost Estimates Construction cost constitutes only a fraction, though a substantial fraction, of the total project cost. However, it is the part of the cost under the control of the construction project manager. The required levels of accuracy of construction cost estimates vary at different stages of project development, ranging from ball park figures in the early stage to fairly reliable figures for budget control prior to construction. Since design decisions made at the beginning stage of a project life cycle are more tentative than those made at a later stage, the cost estimates made at the earlier stage are expected to be less accurate. Generally, the accuracy of a cost estimate will reflect the information available at the time of estimation. Construction cost estimates may be viewed from different perspectives because of different institutional requirements. In spite of the many types of cost estimates used at different stages of a project, cost estimates can best be classified into three major categories according to their functions. A construction cost estimate serves one of the three basic functions: design, bid and control. For establishing the financing of a project, either a design estimate or a bid estimate is used. 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: Screening estimates (or order of magnitude estimates) Preliminary estimates (or conceptual estimates) Detailed estimates (or definitive estimates) Engineer's estimates based on plans and specifications For each of these different estimates, the amount of design information available typically increases. 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. Subcontractor quotations Quantity takeoffs Construction procedures.3. Control Estimates: For monitoring the project during construction, a control estimate is derived from available information to establish: Budget estimate for financing Budgeted cost after contracting but prior to construction Estimated cost to completion during the progress of construction. Suppose you are a Project Manager and working for a contractor. You have been given the task to prepare the bid estimate for the upcoming job. Accurate assessment of effort, time and resources for estimation of project cost is a challenging task for project managers. Several methodologies are commonly practiced around the globe for project cost estimation based on the project's scope, type, and availability of resources. Please prepare the estimate for the following project using an excel spreadsheet. The deliverable for this assignment is a workable and interactive spreadsheet so that it can be used readily and effectively for estimation. Highway US 60 is going to be reconstructed and rehabilitated. Bicycle lanes are also to be included in both directions. The recommended strategy is as under: 1. PART "A" Reconstruction from Carolina Road to Town of Mariana South Limits, Missouri Road Mainline Paving Sta. 80+800 to 90+900 Remove the existing pavement structure full width including shoulder. The depth of the pavement structure is 800mm in depth. Pave with the following structure: 50mm SP 12.5 FC1 75mm SP 19.0 75 mm SP 19.0 100mm SP 25.0 500mm Granular "A" Base Fully paved shoulder area 50mm SP 12.5 FC1 75mm SP 19.0 675mm Granular "A" 2. PART "B", Resurfacing from Michael Road to Gabrial Road Mainline Paving Sta. 80+800 to 90+900 Mill the existing pavement structure full width and partial depth including partially paved shoulder up to two top layers i.e. surface course and upper binder. The existing structure is as under:Page 4 of 5 50mm SP 12.5 FC1 75mm SP 19.0 75 mm SP 19.0 100mm SP 25.0 500mm Granular "A" Base Partially paved shoulder area 50mm SP 12.5 FC1 75mm SP 19.0 Granular "A" Resurfacing: Pave with the following: 50mm SP12.5FC1 75mm SP19.0 Partially Paved Shoulder 50mm SP12.5 75mm SP19.0 SUPPLEMENTARY INFORMATION: T = Tonne = Volume x conversion factor Fully Paved Shoulder width = 3 m Partially paved shoulder width = 0.5 m Highway Lane width = 3.75 m Number of lanes on the highway = 4 Surface Course - Superpave SP 12.5 FC1 = USD 150 / T Binder - Superpave SP 19.0 = USD 130 /T Binder - Superpave SP 25 = USD 120 / T Granular A = USD 50 / T Removal of asphalt (Partial depth) = USD 30 / T Earth Excavation / Excavation of Asphalt and Granular Material = USD 40 / T Tack Coat = USD 5 M Miscellaneous (Curb & Gutter, Pavement Marking, Illumination, Drainage, known unknowns, ancillary works etc.) = 30%% of the estimated cost Traffic Control Signing = 3 % of the total cost Mark up = 20% of the total cost Conversion factors to Tons: 0 Earth Excavation = 2.4; SP 12.5 FC1, and SP 19 = 2.5; SP 25 = 2.6) * Clearing = 10% of the total cost Surveying = 15% of the total costPage 5 of 5 SUBMISSION REQUIREMENT: 12" font Calibri 1" margin All calculations must be shown on an Excel spreadsheet (Rows and Columns using Excel Formulas). However, calculations must be shown. Please submit the spreadsheet in the dropbox on or before the due date. The name of the file shall be the author's last name as per FOL records. NOTE: Email submission will not accepted. In the case of emergency, accommodation will be provided as per College policy