COST ESTIMATING

CONEN 441

INTRODUCTION TO COST ESTIMATE

Dr. Bandar Alqahtani

◦ Course title: Cost Estimate: CONEN-441
◦ Course Hours: 2 CR-H – 2 contacts hrs.
◦ Class: 4Th Construction Engineering Department
◦ Convener: Dr. Bandar Moshabab Alqahtani
◦ Email: bmalqahtani@iau.edu.sa
◦ Text Book:
◦ David Bratt, “Fundamentals of Construction Estimating” 3rd edition (2010), ISBN-13: 978-1439059647ISBN-10
◦ Popescu C., Phaobunjong K. ,and Ovararin N., “Estimating Building Costs”, Book of Marcel Dekker, 2003, Inc. ISBN: 0-
8247-4086-6, http://www.dekker.com/
◦ Peterson, S. and Dagostino, F., “Estimating in Building Construction” 8thedition (2015), ISBN-13: 978-0-13-343110-0
◦ Course Evaluation:
◦ 40 % Final examination
◦ 60 % Course work (Assignments, Projcts, Mid-term exam and Quizzes)
Assessment Tasks
No. Assessment Tasks Timing % Final
Assessment
1 Homework & Every 2 or 3 15%
Projects Weeks
2 Quizzes & Class Done 20%
Performance
3 Mid Term As scheduled by 25%
Registrar
4 Final Exam As scheduled by 40 %
Registrar
 Course Objectives
Introduce and discuss various types of estimating methods in
Construction

Conduct a Quantity Take Off of construction deliverables and determine

the required resources (Material, Labors, and Equipment)

Determine productivity, balanced bid and budget

Discuss bidding procedures and Ability to generate subcontract bids

 Learning Outcomes
At the completion of the course, each student should be able to:
1. Demonstrate a proficiency in the fundamentals of reading and using the
specifications, preliminary estimating techniques including their role as a
part of the contract documents
2. Make efficient use of construction drawings for estimating purposes
3. Describe methods used in quantity surveys
4. Prepare a quantity survey tabulated on "estimating data sheets
5. Describe the applications of computers for estimating and cost control
6. Determine the overhead costs and profit margins for successful bidding
7. Analyze balanced and unbalanced bids
What Is an Estimate?
Probable total cost of a future activity
 Occurs in all industries and government agencies:
• Budget preparation for future expenditures
• Anticipate what something will cost
 Basic approach:
• Identify work items to be completed
• Measure work items size
• Assess likely cost of work
 PROJECT COST ESTIMATE
Objectives
During design phase:
◦ Keeping the ultimate cost of work within the budget
For construction
◦ To make construction costs within the budget

Estimating Construction Costs

◦ The key to a good job and successful cost control is the development of a good
estimate as the basis for bid submittal.
◦ Estimating is the process of looking into the future and trying to predict project
costs and resource requirements.
Important Estimating Principle
Become thoroughly familiar with the bid
documents.

Why?
 Because:
•Accurate quantity takeoff of material
•Accurate quantity takeoff of labor
•Determine general and project overhead
•What equipment will be needed and when
• Begin the formation of a project schedule
• Determine how project will be managed
• Develop a list of questions (get answers)
• Begin a relationship with owner/AE
What Must Happen……
◦ In the arena of competitive bidding for a contractor to
stay in business?

AND

◦ In the arena of negotiated bidding what must happen in

order to continue to attract clients to the negotiated
process?
Estimating Is Very Important
◦ In the competitive arena ◦ In the negotiated arena

◦ Need to be low bidder on sufficient ◦ Reliable advanced cost information

number of projects to maintain a that will become the “project cost”
revenue base

◦ And realize a reasonable profit to

stay in business.
Estimating Approaches
1. Conceptual Estimates
At the conceptual stage
2. Preliminary Estimates
At the design process stage
3. Detailed Estimates
When the design is complete
 Conceptual Estimates
◦ Project stage: Early in the design process
◦ Objectives:
• Owners wants are in line with their budget
• A starting point to begin contract negotiations

1. A contractor prepares a cost estimate based on project s concept

2. Drawings are not available or limited
3. A unclear verbal or written description of project scope
4. May be accompanied by a few sketches
5. A contractor makes assumptions about every aspect of the project
Preliminary Estimates
◦ Project stage: During the design process
◦ Objectives:
◦ Informs whether design meets the budget

1. A contractor prepares and maintains a cost estimate based on

the current stage
2. Incomplete design
3. Select building materials
4. Determine whether the cost to upgrade the materials is justified
Detailed Estimates
◦ Project stage: Once the design is complete
◦ Objectives:
◦ Getting most accurate cost of the project

1. Includes determination of the quantities and costs of everything that is required to complete the project
such as:

• Labors
• Equipment
• Insurance
• Bonds
• Overheads
• Profit
Cost Elements/ Contractor Perspective
Cost Elements/ Contractor Perspective
◦ Direct Cost: (70-90% of total cost)
◦ They are attributed to the production activities of a project.
◦ Project Overhead: (5-30% of total cost)
◦ They cannot be directly charged to a specific work element. These include the
costs of utilities, permits, supervisors…etc.
◦ General Overhead: (0-15% of total cost)
◦ They cannot be directly attributed to a single project.
◦ These include head office expenses, taxes, etc.
Cost Elements/ Contractor Perspective
◦ Markup(0-20% of total cost)
 Profit:
◦ Depending on the business objectives of the contractor organization.
 Risk:
◦ Used to provide a safeguard against uncertain circumstances that are
anticipated to affect the project such as weather, labour problems, soil
conditions, changes, etc.
Estimating Methods
◦ The Estimate methods are based on:
◦ The required level of accuracy
◦ Amount of information

◦ The Estimate methods required

◦ Different amounts of time cost

◦ The Estimate methods are

1. Project Comparison
2. Square Foot
3. Parametric
4. Model
5. Assembly
6. Detailed
 6.Detaled

5.Assembly
Estimate accuracy

4. Model

3.Parametric

2.Square Foot

1.Project Comparison

Time to Complete
Estimating and Construction Safety
 Occupational Safety and Health Administration
◦ Safety standards
◦ Failure to comply may result in fines

 Cost of poor safety on the work site

◦ Growing awareness
◦ Direct and hidden costs
Cost Estimates: Accuracy
Technically, if an estimate is poorly prepared very little can be done to improve it.
Accurate and consistent cost estimates are critical to any organization
responsible for:
◦ Budget submission
◦ Contract negotiations
◦ Financial decision‐making

Such estimates are first developed at the order of magnitude level with an
accuracy of +50% to –30%.
Cost Estimates: Accuracy
The accuracy of Estimates depends on FOUR factors:

Who is involved in the preparation of estimate? Experience

How was the estimate prepared? Level of Details
What information was available? Project Data
How long the preparation of estimates takes? Time
Cost Estimates: Accuracy