Technological University of the Philippines – Cavite

CQT Avenue, Salawag, Dasmariñas City, Cavite

ENGINEERING DEPARTMENT

TECHNICAL REPORT

PCE 9

CONSTRUCTION METHOD & PROJECT MANAGEMENT

BUILDING TELECOMMUNICATION SYSTEMS

SUBMITTED BY:
GROUP
BSCE-3A
DE DIOS, JERICHO
ESCALA. KRIST CHRISTOPHER
GALOS, JAYSON
MARTINEZ, JOHN STEVEN
PARTOZA, KNOWELL JAN

SUBMITTED TO:
ENGR. CARLITO SAPIDA PROFESSOR

JUNE 06, 2022

CONSTRUCTION COST ESTIMATION BACKGROUND AND PURPOSE
Construction cost estimating is the process of forecasting the cost of building a physical
structure. Builders and clients both worry about the financial impact of cost overruns and failing
to complete a project. This is why they devote time and effort to estimating how much a project
will cost before deciding to move forward with it. Clients considering large projects often seek
multiple cost estimates, including those prepared by contractors and those calculated by
independent estimators.
Project owners use cost estimates to determine a project’s scope and feasibility and to
allocate budgets. Contractors use them when deciding whether to bid on a project. Usually, the
preparing of estimates comes with the input of architects and engineers to ensure that a project
meets financial feasibility and scope requirements.
A good cost estimate prevents the builder from losing money and helps the customer avoid
overpaying. It is a core component of earned value management, a project management technique
that tracks a project’s performance against the total time and cost estimate. A good starting point
is this construction estimator template.
Creating a construction cost estimate is good practice for anyone who cares about how
much their project will cost. Cost estimates are required for all kinds of construction projects, from
building new structures to remodeling.
Accurate estimates are especially critical for development projects, which have budgets
and timelines closely linked to paying back lenders and generating revenue as early as possible.
They are also essential for large civil projects or mega-projects because of their sizable scope and
the potential involvement of public money. On a mega-project, small miscalculations become
magnified. In projects constructed with public funds, cost estimates increase accountability,
provide transparency, and enhance trust in your ability to manage the project properly.
Failing to prepare a reliable cost estimate can have disastrous results. One notorious
example was the Marble Hill nuclear power plant in Indiana. The owner abandoned construction
in 1984, seven years after it began. The Public Service Company of Indiana had completed the
project only halfway and spent $2.5 billion due to cost overruns.
Estimating the cost of any project with absolute precision is impossible, and projects can
fail for unforeseen reasons but a skilled estimator will account for as many factors as necessary —
including such things as market conditions — to create an accurate estimate.
The accuracy of a cost estimate relies on a number of things: the quality of the project plan;
the level to which the estimator defines a project; the experience and skill of the estimator; the
accuracy of cost information; and the quality of any tools and procedures the estimator uses.
Depending on the type and size of a project, as well as the industry, cost estimation may
fall to one individual or a team, and estimators may hold a number of different positions. For some
construction projects, contractors and subcontractors prepare the cost estimates, though this is not
regarded as best practice. At other times, the construction salesperson will be responsible for
creating an estimate. Architectural firms may have in-house estimators, typically people who take
on the estimator’s function in addition to their primary role. Increasingly, however, qualified
independent estimators handle estimates against which one verifies the contractor’s estimates.
For contractors, good cost estimates win jobs. Customers usually select the lowest bid that
meets the standards and specifications they set. In a competitive bidding situation, the time and
effort spent preparing the estimate are a cost of doing business and an investment in winning the
job. If urgency is a factor for a project, the speed at which you prepare a bid can also be a
differentiator.

OVERVIEW OF THE CONSTRUCTION ESTIMATION PROCESS

Understanding cost estimation requires having a basic grasp of the construction process.
Here are the nine basic phases of a building project:
1. Commissioning a Project: Commissioning is essentially a verification process that
ensures a builder to design, constructs, and delivers a project according to the owner’s
requirements. It begins early in the construction process and can last until up to a year of
occupancy or use. A commissioning provider carries out commissioning, usually a firm
with experience in commissioning buildings that serve particular functions.
2. Determining Requirements: The first real step in constructing a project is a pre-design
phase or planning phase. The pre-design phase involves defining a project’s requirements:
what its function(s) will be, how much it should cost, where it will be located, and any
legal requirements it must comply with.
3. Forming a Design Team: The project owner contracts with an architect who will then
select other specialized consultants to form a design team. Complex projects and projects
which require meeting specific design requirements — such as acoustics or housing
hazardous materials — will have more specialized consultants on board to ensure the
design meets requirements. The architect is generally responsible for overseeing and
coordinating the design process, though for some projects (such as industrial construction),
an engineer may be one of the people overseeing design.
4. Designing the Structure: This step deals with the architect creating a series of designs.
The architect works first with the owner to decide on the broad strokes of the design and
then increasingly closely with the other members of the design team to flesh out the
structure’s design in accordance with requirements. Designing thus progresses from a
schematic design phase, when the architect presents a high-level design to the owner for
approval, to a design development phase, when the architect works with the design
consultants to decide on specifics of the construction design. The last step is the
construction documents phase, i.e., creating construction drawings and specifications from
which the contractor will build. The specifications, which various participants in the
construction process read, appear in a standard format called the MasterFormat, which the
 Construction Specifications Institute developed. Estimators produce and revise cost
estimates for the project as the architect fleshes out the design.
5. Bidding Based on the Scope of Work: Once the construction documents are finalized,
they are released to contractors who wish to bid on the project. Along with these bidding
documents, they include instructions on how to submit bids, a sample of the contract
agreement, and financial and technical requirements for contractors. These documents,
which effectively define the scope of the work, are the basis on which contractors prepare
their estimates. To ensure fair bidding, all contractors receive the same information, and
the project owner usually selects the lowest qualified bidder.
6. Signing the Contract: Once the contractor has been selected, they execute a set of contract
documents with the owner. The contract documents encompass the bidding documents,
which now function as a legal contract between owner and contractor. Contracts can follow
a number of models, depending on how complete the construction design is and how the
owner and contractor bear risks. One of the basic models is a lump sum (also called a
stipulated sum or turnkey) contract, which involves the contractor bidding a fixed sum for
the total project and agreeing upon it when the project’s design is virtually complete. A
unit price contract allows for more flexibility in design by having the owner pay the
contractor per number of units they build. A cost-plus contract, signed when the design is
incomplete, has the owner pay for all costs plus a predetermined fee for the contractor. A
variation of this is cost plus a fee with a guaranteed maximum.
7. Construction: During the construction phase, the contractor oversees building in
accordance with the construction documents. A general contractor will hire specialized
subcontractors for different sets of construction tasks, such as plumbing or foundation
work. Throughout the construction process, the contractor engages in careful cost control,
comparing actual expenditure with forecasted expenditure at multiple points in the
construction process. Cost control ensures that the contractor is actually able to turn a
profit. This budget template can help you compare actual costs to estimated costs.
8. Close-Out: When the builder comes close to finishing a structure, the contractor requests
the architect perform a substantial completion inspection in which the architect verifies the
near-complete status of the project. At this stage, the contractor provides the architect with
a document called the punch list, which lists any incomplete work or needed corrections.
After the architect inspects the structure, they will add any additional incomplete items to
the punch list.
9. Completion: After the contractor completes all the incomplete work detailed on the punch
list, the architect performs a final inspection. If the contractor has completed the structure
according to construction drawings and specifications, the architect will issue a certificate
of final completion, and the contractor is entitled to receive the full payment.
An alternative method of project delivery is the design-build process, which integrates
building design and building construction. Instead of contracting first with a design team and then
with a contractor, the owner contracts with a design-build firm, which handles both functions. The
main strength of this approach is greater alignment and coordination between design and
construction and a reduction of construction missteps. Accountability rests with a single party,
which owners may appreciate. It can also save time and increase efficiency, and design-build
processes are likely to be significantly cheaper than conventional design-bid-construct processes
like the one detailed above.

THE MAIN TYPES OF CONSTRUCTION COST ESTIMATES

Since a cost estimate can only be accurate with a well-defined project plan, it is standard
practice to create multiple estimates during the pre-design and design phases. These become more
accurate as the project’s level of definition increases. The American Society of Professional
Estimators classifies estimates according to a five-level system that becomes increasingly more
detailed and reliable.
• Level 1: Order of Magnitude Estimate: Made when project design has not yet gotten
under way, using only an order of magnitude estimate to determine the overall feasibility
of a construction.
• Level 2: Schematic Design Estimate: An estimate produced in line with schematic design
• Level 3: Design Development Estimate: An estimate made during the design
development phase
• Level 4: Construction Document Estimate: An estimate based on the construction
drawings and specifications
• Level 5: Bid Estimate: An estimate prepared by the contractor, based on construction
documents. The bid estimate is the basis of the bid price offered to the customer.
A simpler system of classifying estimates features just three primary categories: design
estimates, bid estimates, and control estimates. These category names reflect the way in which you
use the estimates.
• Design Estimates: These estimates, prepared during a project’s pre-design and design
phases, start with an order of magnitude estimate, or screening estimate, which determines
which construction methods and types are most feasible. Next comes the preliminary
estimate, or conceptual estimate, which you base on the schematic design. Then comes the
detailed estimate, or definitive estimate, which you base on design development. The last
of the design estimates is the engineer’s estimate, which you base on the construction
documents.
• Bid Estimates: Contractors prepare bid estimates when bidding to construct the project.
Contractors will draw from a number of data points to prepare their estimates, including
direct costs, supervision costs, subcontractor quotes, and quantity take-offs.
• Control Estimates: Prepared after one signs a contractor agreement and before
construction gets under way, the control estimate functions as a baseline by which
assessing and controlling the actual construction costs. The control estimate also allows
 contractors to plan ahead to meet upcoming costs and determine the project’s cost to
completion.

A CONSTRUCTION COST ESTIMATES PERSPECTIVE ON BUILDING SYSTEMS

Creating a cost estimate for a project as complicated as a building calls for a systematic
way of enumerating costs. To simplify the process, cost estimators may use the Uniformat system
of viewing a building as a set of seven functional divisions. These are:
• Substructure
• Shell
• Interiors
• Services
• Equipment and furnishings
• Special construction
• Building site work
Contractors who are bidding for a job will create a document called the bill of quantities,
which is an itemized list of the work and materials required for a construction project. This is a
crucial step in determining the cost of the work before bidding. Creating a bill of quantities is a
four-step process that used to be done painstakingly by hand on paper and is now usually done
with spreadsheets or specialized software.
a. Taking-Off Quantities: Working from the construction documents, a quantity
surveyor will measure the tasks and items of work in a project. This requires scaling
dimensions from drawings. One will record these in standard units such as area,
volume, or length. For example, you can quantify excavation in cubic meters and
steel supports in linear feet. It’s important to follow one of the standard
methodologies, such as the New Rules of Measurement. The surveyor will list the
number of each item in the project.
b. Squaring: Next, the quantity surveyor multiplies the dimensions of the component
into square area and multiplies this by the number of times this work item occurs
in the construction, thus getting the total dimensions, length, volume, and area as
applicable.
c. Abstracting: Abstracting is the collecting and ordering of the squared dimensions.
Similar tasks and components are grouped together. Once you have taken off and
squared all items and have obtained total dimensions, they must be merged. You
make deductions for any voids or openings in the building, such as stairs.
d. Billing: This last step simply involves presenting item descriptions and quantities
in a structured format, the bill of quantities. You usually present these in a hierarchy
for group, subgroup, and work section. (Examples include substructure, earthwork,
and site clearance.)
THE ELEMENTS OF A CONSTRUCTION COST ESTIMATE
So, what information do estimators use to create an estimate? The following are key terms
and concepts but be aware that there’s a large degree of overlap between some of them.
• Quantity Take-Off: Developed during the pre-construction phase, a quantity take-
off measures the materials and labor needed to complete a project.
• Labor Hour: The labor hour, or man hour, is a unit of work that measures the
output of one person working for one hour.
• Labor Rate: The labor rate is the amount per hour one pays to skilled craftsmen.
This includes not just the basic hourly rate and benefits, but the added costs of
overtime and payroll burdens, such as worker compensation and unemployment
insurance.
• Material Prices: Since the cost of materials is prone to fluctuation based on market
conditions and such factors as seasonal variations, cost estimators may look at
historical cost data and the various phases of the buying cycle when calculating
expected material prices.
• Equipment Costs: Equipment costs refer primarily to the cost of running, and
possibly renting, heavy machinery, such as cement mixers and cranes. It’s
important to note that the equipment in use influences how quickly you can
complete the project, so the use of equipment actually impacts many costs outside
of those directly associated with running the equipment.
• Subcontractor Quotes: Most contractors will hire multiple specialist
subcontractors to complete parts of the construction. You add these subcontractors’
quotes to the contractor’s total estimate. (It can be helpful to use a tracker to collect
all the subcontractor documentation in one place.
• Indirect Costs: Indirect costs are expenses not directly associated with
construction work, like administrative costs, transport costs, smaller types of
equipment, temporary structures, design fees, legal fees, permits, and any number
of other costs, depending on the particular project.
• Profits: Of course, in order to make a profit, the contractor adds a margin on to the
cost of completing the work. Subcontractors do the same when preparing their own
quotes.
• Contingencies: Since even the most accurate estimate is likely to be affected by
unforeseeable factors, such as materials wastage, an estimate will usually have a
predetermined sum of money built into account for such added costs.
• Escalation: Escalation refers to the natural inflation of costs over time, and it’s
especially vital to take into account for long-running projects. Some projects have
escalation clauses that address how to handle this inflation.
• Bonds: An owner will usually require a contractor to arrange for the issuance of a
performance bond in favor of the project owner. The bond functions as a kind of
guarantee of delivery. Should the contractor fail to complete the project according
 to the terms of the contract, the owner is entitled to compensation for monetary
losses up to the amount covered by the performance bond.
• Capital Costs: Capital costs are simply the costs associated with establishing a
facility. These include the following: the cost of acquiring land; the cost of
conducting feasibility studies and the pre-design phase; paying the architect,
engineer, and specialist members of the design team; the total cost of construction,
which covers not just materials, equipment, and labor, but also administrative,
permitting, and supervision costs, as well as any insurance fees or taxes; the cost of
any temporary equipment or structures that are not part of the final construction;
the cost of hiring a commissioner; and the cost of inspecting the structure when it’s
near completion.
• Operations and Maintenance Costs: More a concern for the owner than the
contractor, one accounts for operations and maintenance costs during the design
phase. Making choices that lower the total lifetime cost of a building may result in
higher construction costs.
Operating costs include land rent, the salaries of permanent operations staff,
maintenance costs, renovation expenses (as needed), utilities, and insurance.
• Variances: Owners will often allocate construction budgets that are larger than cost
estimates because even good, thorough cost estimates tend to underestimate actual
construction costs.
This can happen for a number of reasons. For example, wage increases,
which can be difficult to forecast, will make construction costs rise. Seasonal or
natural events, such as heavy rainfall, may call for action to protect construction or
restore the construction site. Large projects in urban areas may face regulatory or
legal issues, such as a demand for additional permitting.
And lastly, owners who begin construction without finalizing the project’s
design will over-budget to account for design changes and the inevitable cost
increases that result from throwing a project off schedule.
INFLUENCES ON CONSTRUCTION COSTS
Naturally, the costs we’ve detailed in the previous section are anything but consistent from
project to project. In fact, so many factors can influence these costs, that cost estimators recognize
that every project is unique.
1. One of the primary factors that influences cost is the Building Site.
a. Waterlogged soils
b. previous construction
c. geological formations
d. nature of the rock
e. native animal species
f. presence of historical or natural heritage sites
are just a few of the things that can affect materials and labor requirements, delay the
issuance of permits, and increase the time needed to complete the project.
g. Similarly, the location of the construction site relative to economic centers can
also be significant.
h. Contractors may have to transport workers and materials for a long distance if
the site is remote.
i. In a bustling urban area, the wages may be higher
j. Furthermore, regulatory requirements may be stricter, and hence more
expensive to fulfill or comply with, at some construction sites than at others.
k. Lastly, certain construction sites require the completion of feasibility or impact
studies, which are likely to prove expensive.

2. Time-related aspect can also affect costs significantly.

a. project schedule, as a compressed, labor-intensive schedule will incur higher
costs and rush charges. Shorter projects, especially those with significant
penalties for the contractor’s failure to complete the project on time, are also
likely to have more expensive insurance. Also, with a project that you expect to
take years to complete, you will almost certainly have to consider fluctuating
market conditions and inflation. Finally, owners inviting bids may notice
seasonal variations in bid amounts, since contractors are busier at some times
of the year than at others.

3. The size and complexity of the project are other major influences on cost estimates.
Larger, more prestigious projects may attract more reputable contractors, or there may
simply be few firms capable of handling the project. Either of these scenarios can
escalate project costs.
 4. The quality of plans and specifications are also vital factors, as is the contractor’s
relationship with the project engineer. Construction documents that hint at imprecision
will almost certainly result in higher bids from contractors who want to err on the side
of safety. On the other hand, the project engineer’s reputation can swing costs the other
way, since contractors will know that plans drawn by a reputable engineer are less
likely to result in efficiency losses.

Some other factors that affect the project cost include

1. whether a government or quasi-governmental agency commissions or funds the project,

a circumstance which may require additional paperwork and reporting.
2. Some large projects require the completion of a value-engineering review before
bidding commences. Value engineering, which examines the function-to-cost ratio of
a project, aims at making the design as cost efficient as possible.
3. Finally, all cost estimates add at least a tenth, and sometimes closer to a fifth, of the
construction total to account for contingencies. Contingencies are allowances held in
reserve for unexpected costs.

Using Historical Data in Construction Cost Estimates

When preparing a cost estimate, an estimator usually relies, at least to some extent, on historical
data. Though no two projects are exactly alike, using comparable historical cost and estimate data
can be an excellent way to validate estimates.

Historical data comes from a number of sources, including catalogs of vendor data, databases,
periodicals, commercial references, and digests of actual project costs. Contractors may also look
at successful past bids, assuming these proved accurate. Regardless of what data you use, it’s
critical to have reliable data, so experienced estimators recommend using a trusted industry
standard source.

Catalogs of Vendor Data

- Sweets' Catalog published by McGraw-Hill Information Systems Company.

Periodicals

- ENR, the McGraw-Hill Construction Weekly

- Cost Engineering, a journal of the American Society of Cost Engineers

Commercial References

- Building Construction Cost Data published annually by R.S. Means Company, Inc
- Dodge Manual for Building Construction, published by McGraw-Hill
Digests of Actual Project Costs

- Dodge Digest of Building Costs and Specifications

That said, you’ll have to adjust almost all standardized cost data to local economies, and there’s
likely to be a considerable degree of cost fluctuation even between cities in the same region or
country. You’ll have to adjust most costs for inflation, depending on how old the data is.

Labor costs are especially variable. Based on the demand for labor, the required level of skill, and
the condition of the construction site, which in turn hinge on such factors as the time of year,
economic and market conditions, and the location of the construction site, an estimator will usually
have to adjust historical labor data when creating a new estimate.

For contractors with successfully completed projects under their belts, comparing their actual cost
data to their cost data reference can help gauge the accuracy of the data reference. For example, a
contractor who notices that their actual materials costs are consistently five percent lower than
those quoted in the data reference will likely adjust materials costs in future estimates so that
they’re about five percent lower than those quoted in the data reference.

Nevertheless, good cost estimators will tend toward caution since cost estimates generally
underestimate the actual cost of construction. Even with contingencies built into the estimate,
factors such as design changes and unforeseeable economic conditions can quickly increase costs.
Try these templates for keeping track of change orders.

It’s worth remembering that both the contractor and the owner bear substantial risks when
constructing large projects. Contractors don’t just stand to have their profit margins cut and their
reputations hit. Many end up declaring bankruptcy when it simply becomes too expensive to
complete a project. And while owners shield themselves somewhat from financial losses through
performance bonds and similar protections, the failure to complete a project on time may result in
financial damage due to lost potential profits or an inability to pursue a strategic plan. Furthermore,
those who don’t complete government projects successfully are likely to hurt the reputation of
political leaders who backed them.

The Effects of Scale on Construction Cost Estimates

Cost estimators keep one important phenomenon in mind when estimating quantities: costs are not
always directly proportional to the size of a facility or the number of units one’s building. If plotted
on a graph, this phenomenon, known as an economy or diseconomy of scale depending on which
way the cost varies, would appear as a non-linear relationship between facility size and costs.
If the average cost per unit falls as the number of units increases, we have an economy of scale. If
the average cost rises as the number of units increases, we have a diseconomy of scale.

The cost exponent is an indicator of whether a scale economy or diseconomy exists. Empirical
data are sought to establish the economies of scale for various types of facility, if they exist, in
order to take advantage of lower costs per unit of capacity.

Let x be a variable representing the facility capacity, and y be the resulting construction cost.
Then, a linear cost relationship can be expressed in the form:

(5.1)

where a and b are positive constants to be determined on the basis of historical data. Note that in
Equation (5.1), a fixed cost of y = a at x = 0 is implied as shown in Figure 5-2. In general, this
relationship is applicable only in a certain range of the variable x, such as between x = c and x =
d. If the values of y corresponding to x = c and x = d are known, then the cost of a facility
corresponding to any x within the specified range may be obtained by linear interpolation. For
example, the construction cost of a school building can be estimated on the basis of a linear
relationship between cost and floor area if the unit cost per square foot of floor area is known for
school buildings within certain limits of size.

Figure 5-2: Linear Cost Relationship with Economies of Scale

A nonlinear cost relationship between the facility capacity x and construction cost y can often be
represented in the form:

(5.2)

where a and b are positive constants to be determined on the basis of historical data. For 0 < b <
1, Equation (5.2) represents the case of increasing returns to scale, and for b > 1, the relationship
becomes the case of decreasing returns to scale, as shown in Figure 5-3.

If the exponent is greater than zero but less than one, an economy of scale exists. If it is greater
than one, a diseconomy of scale exists. If it is equal to one, the cost-capacity relationship is
unaffected by scale.

Figure 5-3: Nonlinear Cost Relationship with increasing or Decreasing Economies of Scale

Taking the logarithm of both sides this equation, a linear relationship can be obtained as follows:

(5.3)

Although no fixed cost is implied in Eq.(5.2), the equation is usually applicable only for a certain
range of x. The same limitation applies to Eq.(5.3). A nonlinear cost relationship often used in
estimating the cost of a new industrial processing plant from the known cost of an existing
facility of a different size is known as the exponential rule. Let yn be the known cost of an
existing facility with capacity Qn, and y be the estimated cost of the new facility which has a
capacity Q. Then, from the empirical data, it can be assumed that:
(5.4)

where m usually varies from 0.5 to 0.9, depending on a specific type of facility. A value of m =
0.6 is often used for chemical processing plants. The exponential rule can be reduced to a linear
relationship if the logarithm of Equation (5.4) is used:

(5.5)

or

(5.6)

The exponential rule can be applied to estimate the total cost of a complete facility or the cost of
some particular component of a facility.

You can determine cost exponents using historical data from construction projects of the same
type. Once calculated, you can use cost exponents to adjust future cost estimates depending on the
scale of a project.

Determination of m for the exponential rule

 Figure 5-4: Log-Log Scale Graph of Exponential Rule Example

The empirical cost data from a number of sewage treatment plants are plotted on a log-log scale
for ln(Q/Qn) and ln(y/yn) and a linear relationship between these logarithmic ratios is shown in
Figure 5-4. For (Q/Qn) = 1 or ln(Q/Qn) = 0, ln(y/yn) = 0; and for Q/Qn = 2 or ln(Q/Qn) = 0.301,
ln(y/yn) = 0.1765. Since m is the slope of the line in the figure, it can be determined from the
geometric relation as follows:

For ln(y/yn) = 0.1765, y/yn = 1.5, while the corresponding value of Q/Qn is 2. In words, for m =
0.585, the cost of a plant increases only 1.5 times when the capacity is doubled.

The exponential rule as represented by Equation (5.4) can be expressed in a different form as:

where

If m and K are known for a given type of facility, then the cost y for a proposed new facility of
specified capacity Q can be readily computed.
TABLE 5-4 Cost Factors of Processing Units for Treatment Plants
 Processing Unit of K Value m
unit capacity (1968 $) value

1. Liquid processing
Oil separation mgd 58,000 0.84
Hydroclone degritter mgd 3,820 0.35
Primary sedimentation ft2 399 0.60
Furial clarifier ft2 700 0.57
Sludge aeration basin mil. gal. 170,000 0.50
Tickling filter ft2 21,000 0.71
Aerated lagoon basin mil. gal. 46,000 0.67
Equalization mil. gal. 72,000 0.52
Neutralization mgd 60,000 0.70
2. Sludge handling
Digestion ft3 67,500 0.59
Vacuum filter ft2 9,360 0.84
lb dry
Centrifuge 318 0.81
solids/hr

Source: Data are collected from various sources by P.M. Berthouex. See the references in his
article for the primary sources.

The estimated values of K and m for various water and sewage treatment plant components are
shown in Table 5-4. The K values are based on 1968 dollars. The range of data from which the K
and m values are derived in the primary sources should be observed in order to use them in
making cost estimates.

As an example, take K = $399 and m = 0.60 for a primary sedimentation component in Table 5-
4. For a proposed new plant with the primary sedimentation process having a capacity of 15,000
sq. ft., the estimated cost (in 1968 dollars) is:

y = ($399)(15,000)0.60 = $128,000.

The Major Approaches to Construction Cost Estimation

Cost estimators rely on a number of estimation techniques, which vary in speed and potential
accuracy. The major approaches to cost estimating include:
• Production Function: the relationship between the output of a process and the necessary
resources is referred. A production function relates the amount built (the output) to factors such
as materials and labor (the input). So if you want to achieve a certain level of output (number of
square feet built), you look for the optimal input (labor hours per square foot). Production
functions can be quite accurate for forecasting input-output relationships for projects of a particular
type, and there is extensive data to draw from for certain project types, like schools and hospitals,
for example.
• Stick Estimating: Highly accurate, but incredibly time consuming, stick estimating is the practice
of determining total costs by listing, in order, the costs for every single component of a job. The
sheer amount of time it takes to produce a stick estimate invites errors due to loss of concentration
or carelessness.
• Empirical Cost Inference: This statistical method uses regression analyses to relate the cost of
construction to a model of predictors. The accuracy of this method depends on the quality of the
predictive model, so it calls for a good degree of familiarity with individual predictors of total
construction costs and a knowledge of statistical methods.
• Unit Cost Estimating: Unit cost estimating simply associates unit costs with each assembly
involved in a construction process. It’s fairly quick and accurate, especially if one has used the
assemblies previously, and there is evidence to justify the unit costs for each assembly.
• Allocation of Joint Costs: You allocate costs that are difficult to assign to individual project
elements by using different mathematical formulas. For example, you can prorate field supervision
proportionally to tasks based on their share of the total basic costs.

The Construction Cost Estimator’s Job

Of course, the cost estimator is central to the cost estimation process. Typically a professional who
is familiar with both design and construction and skilled at navigating the myriad costs associated
with construction projects, the cost estimator must have both skill and training.

The U.S. Department of Labor’s Bureau of Labor Statistics says there were 213,500 cost
estimators in the country in 2014, with employment opportunities expected to grow by nine percent
over the next decade. A plurality of these estimators work in the construction industry.

Essential skills for cost estimators include the ability to work quickly with numbers, an in-depth
knowledge of construction, and familiarity with construction documents. On large projects,
multiple specialist cost estimators may be responsible for estimating different aspects of the
project, so a specialization or first-hand experience in constructing certain types of structures can
also be valuable.

Although tertiary education is typically a requirement for cost estimators, first-hand experience
with construction and a knowledge of the contracting landscape are perhaps more essential skills.
Some estimators are individuals who have risen through the ranks as construction workers. These
experienced construction professionals also know how to negotiate with subcontractors and may
be better able to appreciate the factors that impact estimated amounts.

But as construction has gotten more specialized, professionally trained cost estimators are
increasingly common. A number of qualifications in cost estimation are available, including the
International Cost Estimating and Analysis Association’s Certified Cost Estimator/Analyst
program,the American Society of Professional Estimators’ Certified Professional Estimator
certification, and the American Association of Cost Engineers’ certifications for cost consultants,
cost engineers, and cost technicians. Most certification programs require continuing education and
recertification.

Dedication to continued learning is necessary for all cost estimators, whether certified or not. It’s
key to keep abreast of the construction industry and also to be able to learn and implement evolving
cost estimation methods and software, which we’ll talk about shortly.

In addition, cost estimators must be highly organized and highly attentive to detail. They should
know how to communicate cost information with accuracy and integrity. Moreover, given the
competitive nature of the construction industry, they must maintain confidentiality when
communicating with stakeholders and commit themselves ethically to delivering accurate
estimates despite possible pressures to engage in corner-cutting and expediency.

COMMON PITFALLS FOR CONSTRUCTION COST ESTIMATOR

Experienced cost estimators say you can often avoid common pitfalls by consistently
following standard procedures. One common source of problems is the failure to read the
project documents carefully, which frequently leads to a poor understanding of the project scope
and certain associated costs. Others include forgetting to incorporate costs or entering costs
incorrectly. These issues can be compounded by neglecting to thoroughly check the completed
estimate.
Other oversights include the failure to visit the site and the inability to fully understand the site
conditions. As we talked about earlier, a site’s natural conditions and location can impact
costs in a number of ways, and a cost estimator will develop an eye for spotting and asking
about these. This makes site visits imperative.
Finally, some cost estimators who draw from cost data repositories will fail to adjust costs based
on local conditions or will make arbitrary adjustments without considering prior experience or
quantitative comparisons. Either of these can throw estimates off and make it more difficult for
another cost estimator to verify an estimate.
Typical Mistakes in construction cost estimating
1. Not accessing the site conditions
Every project comes with unique variables that can drastically impact your overall
cost estimates.
Hence, most clients provide bidder the opportunity to have a pre-bid meeting and visit the
jobsite before submitting the bid. That's rightly so because no two jobsites can be
identical. There can be unknown site conditions that need to be factored in the overall
estimate.

2. Mistakes in measurement takeoffs

You've got the blueprints; all you have to do is to take accurate measurements. But with
so many detail drawings and a lot of components, one can mistakenly take inaccurate
takeoffs. Your estimate relies heavily on the measurements you take. If the
measurements are wrong or incomplete, it can quickly screw up your estimates. So,
try to take accurate takeoffs. You need to take your time in understanding the project
requirements and determine the exact quantities of the materials and supplies. Your
labor and resources costs also rely on the takeoffs.

3. Inaccurate labor cost data and wrong assessment of productivity

Estimating labor cost is a crucial yet the hardest part to nail down accurately. From your
overall project cost estimate, the labor cost takes a big share. You need to take care of the
factors like availability of labor, experience required for the project, wages, and their
productivity.
You need to access the time to complete a project in your mind before reckoning the
number of labor required. A tight deadline would eventually need more number of
experienced labors. Hiring labor with low salary would not have good experience and
would eventually cause delays that will hurt your bottom line. So, try to estimate man-
hours you need to perform a task and use that as a guide to estimate overall labor costs.

4. Inaccurate price data for materials and supplies

Estimating materials and supplies cost is the hardest part in cost estimation.
Sharing the biggest part in the overall estimate, it is crucial to use accurate price
data for all the materials and the supplies you need for the project. Material prices
rely heavily on market trends and they tend to fluctuate overtime. So, if you're bidding on
a 4 years long project, you should factor in the escalation that will happen over the course
of project duration. The demand for a material in market, and the tarrifs, and taxes are
uncertain and will fluctuate overtime.
So, if you've got a better relationship with your budging product manufacturer and
supplier, you can drag that to your benefit. They'll help you in locking the prices and
 put together the same data in the project estimate. They can also guide you for alternate
material that might be a better fir for your project.
You also need to make sure, you choose a supplier that can fulfill your project
requirement and can supply adequate quantities. The delays caused by shipment
delays can be embracing and will eventually hurt your bottom line.

5. Relying on an uneducated guess

One common mistake in construction estimating is making an uneducated guess
rather than making informed or tracked cost estimation. In estimating labor costs, the
estimator should collect relevant information about the material and supplies to be used
and should evaluate and consider the impact such supplies and materials will have on the
project.
So, try to track your job costs on every project and use this data as a guide in estimating
costs for labor, material, and equipment. You can't have accurate estimates or bids by
gambling and relying on uninformed or uneducated guess work. You need to factor in the
cost data based on actual or current market condition. A lot of estimators forget to factor
in overhead or soft costs like permitting and inspections. You can access the availability
of supplies and equipment to factor in the subletting cost or rental costs.

6. Not factoring in risks and contingencies

Construction projects are unique and challenging, by all means. So, the risk that
comes with the project has to go somewhere in the cost estimates. Make sure to
complete risk assessment as part of the estimating process.
For example if you're bidding on a job for cleaning exterior façade of a building.
The cost to clean the first floor would be comparatively low as compared with the cost to
clean 30th floor windows and doors. So, try to identify a project and pass on the risk to
the bid you submit. Same stands true with the contingencies.
Failing to do risk and contingencies assessment would be detrimental to your
business when things would go wrong. You can go like this; first access the risk and
enlist the steps you need to take to mitigate that risk. Once you've enlisted the steps,
associate the cost to every step and estimate the risk mitigation cost.

7. Not reviewing the estimation work

To err is human. So no matter how vigilant and sharp you are at reckonings,
mistakes can still happen. The best way to go at it is by reviewing every estimate
before finalizing the bid. Mistakes like taking wrong units, omitting scope items,
inaccurate measurement, or using wrong calculations can spell big trouble to your
project. So, once you're done with the estimate, take your time in carefully reviewing the
work. You can also let your friend or a subordinate to review the work. They can double
check the measurements and the math calculation to be correct.
The rule of thumb for bid submission is - never rush through the work. Yeah, the bid
deadlines are there, but you should plan your estimation work to get adequate time to
review and make up your bid together. Your profit margins rely heavily on the accurate
 estimation work. If you'll underestimate the bid, you may have to cut your profit margins
in order to be able to complete the work.

COST ESTIMATING APPLICATIONS AND SOFTWARE

Estimating applications make cost estimates faster and easier to produce, which is crucial in
a construction market that’s immensely competitive. They’re also more accurate than
human estimators working on their own, as long as you use up-to-date cost data. Estimation
software has become a must-have for anyone generating complex construction cost estimates.
Free cost estimating software is available, but it has limited functionality, and it’s not really
suitable for anything but smaller projects. For-purchase software, which can be pricey, is a much
better option for anyone dealing with complex projects because of the functionality and features it
can offer. Here are a few of the benefits of for-purchase software:
• Cost-Related Inputs and Processes: Estimating software can offer access to cost
databases, calculate taxes and the costs of labor and materials, allow estimators to
adjust prices to local contexts, feature standard-size room lists, as well as item or
activity lists, and integrate with accounting software. Some offer worksheets for
specific trades and calculators for standard costs.
• Generating Estimates: Estimating software can perform measurements and take-
offs, count objects, allow estimators to mark-up construction drawings, and generate
bills of quantities.
• Documentation: Estimating software offers templates for proposals and cover letters,
generates proposals and cost reports, and maintains records of past projects.
• Other Features: Some software offers support for macros, online collaboration, and
the ability to integrate with computer-aided design files.

NEW ASPECTS OF CONSTRUCTION COST ESTIMATING

Construction cost estimating continues to evolve as design, building methods, and materials
change. Some trends that impact cost estimating today include:
Building Information Modeling (BIM): A building information model is a digital model of
a structure and all its characteristics and dimensions. From the design to the construction,
commissioning, and maintenance of a building, all participants can use the model. As such,
there’s an increasing demand for cost estimating to become an aspect of BIM, though this
opinion has not been without challenges. The main criticism of cost estimating in BIM is that
cost estimators, with some justification, have less confidence in the level of detail of BIM
designs. That lack of specificity can lead to substantial inefficiencies and reworking of
estimates.

Sustainability and LEED Certification: Currently something of a hot topic in construction,

LEED is a point system for rating buildings based on their environmental performance.
The role of an estimator in projects seeking to obtain LEED certification involves both
calculating the cost of scoring LEED points and communicating these to clients. These
include not just direct costs (using environmentally friendly materials, for example), but also
increased administrative costs for ensuring compliance with the LEED standards. Therefore,
estimators in LEED projects should be involved during the construction design phase, so they
can contribute information about costs associated with specific LEED points.

Lean Construction and Cost Control: Lean construction, a fairly new approach, draws
from the principles of lean management, which is the systematic effort to reduce waste
without affecting productivity. Studies indicate that applying lean principles in
construction projects results in significant cost savings. As such, an understanding of lean
principles is a good asset for cost engineers who apply principles of value engineering to
construction projects.

REFERENCES