1

The Three Gorges Dam, world's largest power station in terms of

installed capacity (22,500 MW), is an enormous project including a
dam for flood control, a giant lock for carrying ships up and down
river, and 26 hydroelectric power generators.
When approved in 1992, the initial cost was $8.35 billion. But by the
time the dam was completed in 2006, the price tag had more than
quadrupled to a mind-boggling $37 billion [source: Reuters].

The

MOSE project in Venice

(MOdulo Sperimentale
Elettromeccanico or Experimental Electromechanical Module) came

to rescue the venerable Italian city from sinking deeper into

the lagoon which has been a problem for centuries. The
project entailed 78 hinged metal gates, each weighing up to
300 tons and rising 66 feet in height.
Since its inception, MOSE's estimated cost has ballooned from
$1.7 billion to $8.1 billion (almost 5 times).

The Millennium Dome was initially budgeted at 758 million at its

inception in the mid-1990s and completed at 789 million. Worse, with ticket
sales only 189 million versus a forecast of 359 million and yearly
maintenance costs of 28.4 million; it was an expensive fiasco.
However, in 2007 the dome was renamed the O2 Arena, after being sold to
AEG, and a 20,000 seat concert arena was added at an additional cost of
600 million. The O2 Arena is now a very popular venue for rock concerts
and sports events in London.

The Channel Tunnel is a trio of 50 KM long tunnels underneath the

English Channel, connecting England and France. When finished in 1994, the
Chunnel's $21 billion cost (an 80% cost overrun) made it one of the most
expensive construction projects in history [source: PBS].
The project was funded privately, through bank loans and selling shares to
the public. The original shareholders lost most of their money due to cost
overruns, which crippled the company.

The Panama Canal Expansion project was an ambitious upgrade of the

canal, aiming at allowing it to serve more massive vessels and double the
cargo moving in and out of the Western Hemisphere. In early 2014, a dispute
between the Panama Canal Authority and a consortium of European
construction firms over who would cover a $1.16 billion cost overrun caused
the work to grind to a halt for two weeks.

Denver International Airport which cost $5 billion, opened in 1995

following a 200 % cost overrun, and passenger traffic in 1995 was only half
that expected.

If you think keeping to construction schedules and budgets is tough on Earth,

try doing it in orbit. Original estimated to cost of $17.4 billion, the
International Space Station really costed $160 billion by the time it
was finished

Why this phenomenon?

Cost overruns is an exceedingly frequent phenomenon
and is associated with almost all the construction
projects (Azhar et al., 2008).
The reason for poor performance are incentives to
underestimate costs, overestimate revenues, undervalue
environmental impact, and overvalue economic
development effects (Zahariadis, 2004).
The central problems are lack of accountability and
inappropriate risk sharing (Flyvbjerg et al., 2003).
(Mahamid & Dmaidi, 2013)
9

Problem at the core

The uncertainty (positive or negative) is an inevitable
aspect of most projects and can significantly affect
performance.
achievable
Classification
of Uncertain events by:
Source

Technical issues
Market
People
Cost
Schedule
Quality

Variation
Foreseen
Uncertainty
Unforeseen
Uncertainty
Chaos

Potential impact
10

Problem at the core

Variation

Foreseen
Uncertai
nty

Unforese
en
Uncertai
nty

Chaos
11

CEM-804 Construction
Cost Estimating & Control
Spring Semester 2016
Dr. Muhammad Jamaluddin Thaheem
Asst. Prof. and HoD, CE&M
NIT-SCEE
jamal.thaheem@nit.nust.edu.pk
04/02/2016
12

Course Details
Course Objectives:
The role of estimating in construction contract
administration. Types of estimates. Unit
costs and production rates; job costs.
Preparing bid for complete building
project using manual methods and the CSI
format; checking quantity take-off and
cost estimating in selected divisions using
a computer package. Controlling cost on
projects using management methods.

Course Outcomes:
At the end of the course, participants should have:
the ability to prepare a project budget and relate
the budget to a Bill of Quantities
the ability to prepare a feasibility cost estimate
knowledge of how to control costs
knowledge of how to accommodate risk in cost
estimating
knowledge of broad principles and processes of
construction cost estimating
knowledge of elements of price and build up of
cost from first principles
an appreciation of the difference between cost,
value and waste
13

Teaching plan
18 Weeks Semester
Holistic Subject Perspective

3 x Assignments /
Presentations

Detailed Exposure to all Subject

Areas & Methodology

3 x Quizzes

Completion of Course Outline

2 x One Hour Tests

Course Text Books Supplemented

by Handouts

End Semester Exam

Theme-Oriented MS PowerPoint
Presentations
Encourage Creative Thinking

Extensive Class Interaction

Guest Speaker Lecture and Site

Visit

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Grading policy/assessment
Assessment
instrument*

Weighting
(%age)

Schedule

4 x Quizzes

10%

TBD

2 x Assignments

5%

Week 2, Week 10

2 x One Hourly Test

(OHT)

30%

Week 6, Week 12

Term paper/project

15%

Week 15

End semester exam

(ESE)

40%

Week 18

* The indicated number mentions the minimum figure.

15

Project work
1. Preparation of bid using multiple contractual
arrangements
2. The work must include;
1.

Planning and scheduling

2.

Cost estimation

3.

Risk management

4.

Supply chain and logistics

5.

Contract preparation

6.

The whole nine yards

3. Group of 3 students
4. Weekly meetings to monitor progress
5. Usage of technology is highly encouraged
6. Fill in all the gaps yourself
7. Same baseline costs for en even playing field
16

Related books
1. Dagostino, F.R. and Peterson, S.J. (2011).
Estimating in Building Construction. Prentice Hall.
2. Popescu, C.M., Phaobunjong, K. and Ovararin, N.
(2003). Estimating Building Costs. Marcel Dekker,
Inc.
3. Peurifoy, R.L. and Oberlender, G.D. (2002).
Estimating Construction Costs. McGraw-Hill.
4. Holm, L., Schaufelberger, J.E., Griffin, D. and Cole,
T. (2004). Construction Cost Estimating: Process
and Practices. Prentice Hall.
5. Willis, C.J. and Newman, D. (1988). Elements of
Quantity Surveying. BSP Professional Books.
6. Dutta, B.N. (2008). Estimating and Costing in Civil
Engineering: Theory and Practice. UBS Publishers.
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Related journals
1. Journal of Construction Engineering and Management
2. Journal of Management in Engineering
3. Journal of Professional Issues in Engineering and Practice
4. Journal of Performance of Constructed Facilities
5. Automation in Construction
6. Building and Environment
7. Building Research and Information
8. Construction Management and Economics
9. Journal of Construction in Developing Countries
10. International Journal of Project Management
11. Engineering Construction and Architectural Management
12. International Journal of Construction Education and Research
13. Journal of Construction Research
14. The International Journal of Construction Management
15. International Journal Management Review
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