Construction Management

ENCE4331:

Estimating Techniques

Abdulhamid Mimi
Construction Management Lecture 6 1
Today’s Presentation Outline
• Estimating techniques (5)

• Suitability of estimating techniques to project

stages

Construction Management Lecture 6 2

Revisit Previous Lecture
Cost estimating background

Project cash flow

Cost

Price

Construction Management Lecture 6 3

 Man-Hour Technique
• This technique is most suitable for labour-intensive implementation,
construction and operations.
• Total man-hours = current labour rates + costs of materials + costs of
equipment
• This technique is similar to the operational technique.
• A detailed programme is required when using this technique to
identify constraints associated with the project. The prediction of
cash flow requires such a programme.

Construction Management Lecture 6 4

Man-Hour Technique Cont’d
• The total man-hours estimated for a given construction activity are
then costed at the current labour rates and added to the costs of
materials and equipment. The advantages of working in current
costs are obtained current costs are obtained.
Cost of Per Man-hour=Labour Rate + Costs of materials + Costs of
Equipment
Where Labour rate is cost of one man per hour

Construction Management Lecture 6 5

Man-Hour Technique Cont’d

Example 1 :

Units of man-hours on a design team working out a pipework stress

analysis problem. A man-hour equals to $100 including labour @$70,
materials @$10 and computer hour @$20.

Construction Management Lecture 6 6

Global
The Global technique relies on historical data.
Examples:
•Building projects -cost per square metre of building floor area or
per cubic metre of building volume;
(total cost/total area or total cost /total building volume)
• Electricity Power Station Projects -cost per megawatt capacity of
power stations;
• Highway Projects -cost per metre/kilometre of roads/motorways;
• Chemical Process Plant Projects -cost per tonne of output of
products for process plants.
Construction Management Lecture 6 7
Global Cont’d
Example 2:

Total area = 11*250 m2 (11 floors)= 2750 m2

Total cost = $5.46 million

Cost per m2 = 5460000/2750=$ 1985.46 m2

Construction Management Lecture 6 8

Global Cont’d
 Attention has to be paid as follows:
(A)Different definitions of what costs are included:
• Engineering fees and expenses by consultants/contractors/promoter, including
design, construction supervision, procurement and commissioning
• Final accounts of all contracts including settlements of claims and any exclusion
payments claims and any exclusion payments
• Land price
• Directly supplied plant and fittings
• Transport costs
• Financing costs
• Taxes and duties

Construction Management Lecture 6 9

Global Cont’d
(B) Different definitions of measurement of the unit of capacity:
• Square metre of building floor area: measured inside or outside the external
walls.
• Cubic metre of building volume: height measured from top of ground floor or
top of foundations.
• A metre/kilometre of motorway an overall average including interchanges or
should these be estimated separately.

Construction Management Lecture 6 10

Global Cont’d
(C) Not comparing like with like:
• Differing standards of quality applied for the projects.
• Different ground conditions

(D) Inflation and Interest rates:

• Different cost base dates

(E) Market factors

• Competition for resources during periods of construction activity
• Developing technology may influence unit costs (e.g applying sustainable materials and
construction technology in the projects)

Construction Management Lecture 6 11

Global Cont’d

Therefore, data used in Global technique have to be carefully

selected so that more reliable results can be obtained.

Construction Management Lecture 6 12

Factorial
Functions
This technique provides factors for a comprehensive list of
potential costs such as pipe work, electric, instruments,
structures or foundations.
Application
It is widely used for
• process plant
• power station projects, or
• where the project has major items of plant, the prices of
items can be easily obtained for them from potential
suppliers.

Construction Management Lecture 6 13

 Factorial Cont’d
Factorial technique is not normally reliable for site works, including
most civil and building and mechanical and electrical installation
work

The success of the technique depends largely on Estimator’s

experience and knowledge of the project, which requires to make a
judgement on the value to include in his or her estimate depending
on the state of the market and the firmness of the specification

Construction Management Lecture 6 14

Unit rates
• This technique is based on Bill of Quantity (BOQ)
approach to pricing construction work.
• Use historical rates or prices for each item in the bill using
either information from recent similar contracts or
published information (e.g. price books for buildings or
civil engineering)
The Bill of Quantities (BOQ) –
• is a schedule of work elements or activities, required to
execute the contract. Each of these items is priced by the
contractors, and is peculiar to measurable contracts.

Construction Management Lecture 6 15

Operational
• This is the fundamental estimating technique as the total cost of the
work is compiled from consideration of the constituent operations
or activities revealed by the method statement and programme and
from the accumulated demand for resources. Labour, plant and
materials are costed at current rates to produce a cash flow.

• It is the most reliable estimating technique for engineering work.

Construction Management Lecture 6 16

Operational Cont’d
Key success points by applying this technique are:

• Accurate data collection (e.g. costs of labour and plant and

equipment in the geographical location of the project and especially
the circumstances of the specific circumstances of the specific
activity under consideration).

• Identifying risks (e.g. the best chance of identifying risks of delay as

it involves the preparation of a method of implementation and
sequential programme including an appreciation of productivities).

Construction Management Lecture 6 17

Suitability of Estimating Techniques to Project
Stages
Suitability of the five estimating techniques can be summarised as:
Preliminary. An initial estimate at the earliest stages where there is
likely to be no design data available and only a crude indication of
the project size or capacity and the estimate is likely to be of use in
provisional planning of capital expenditure programmes.

• The global estimating technique

(if existing data from similar projects such as size, capacity or output available)
• The Factorial method for process plants
( the key components can be easily identified and priced and all other works are
calculated as factors of these components)

Construction Management Lecture 6 18

Suitability of Estimating Techniques to Project
Stages Cont’d
 Feasibility. These are directly comparable estimates of the
alternative schemes under consideration. It should include all
costs that will be charged against the project to provide the best
estimate of total cost.

• The unit rate method

• Operational method

Construction Management Lecture 6 19

Suitability of Estimating Techniques to Project
Stages Cont’d
 Design. Estimate for the selected scheme.

• A man-hours method is most suitable for labour intensive operations.

For example:

-. design,
-. maintenance , or
-. mechanical erection,

Construction Management Lecture 6 20

Suitability of Estimating Techniques to Project
Stages
Construction. A further refinement to reflect the prices in the
contract awarded.

• Unit rate method

The Unit Rate method is a technique based on the BOQ approach
where the quantities of work are defined and measured in accordance
with a standard method of measurement

Construction Management Lecture 6 21

Summary
Estimating techniques (5)

Suitability of estimating techniques to

project stages

Construction Management Lecture 6 22

 Any Questions??

Construction Management Lecture 6 23