Construction Cost Analysis

and
Financial Controls

Everglades University
 Learning Objectives
• Identify and prepare a conceptual estimate.
• Review quantity take-offs.
• Perform take-offs.
• Review the pricing of an estimate and compile an
estimate.
• Complete a subcontractor selection process and
select subcontractors for an estimate.

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 The Conceptual Estimate
• Developed early in project development.
• Limited accuracy.
– Large contingency may be required (depending on
contractor’s database).
• Usually based on simple parameters.
– Such as gross area multiplied by the square foot
cost for similar projects.
• Helps the owner make basic decisions about
moving forward with the project.
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 A Simple Conceptual Estimate
Item Type Area SF Cost Total Cost

Building A Office Building 20,000 $100.00 $2,000,000

Building B 65,000 $65.00 $4,225,000

Warehouse
Site Development 225,000 $2.00 $450,000

Site Utilities 225,000 $1.50 $337,500

Parking Lots 50,000 $2.20 $110,000

Landscaping 90,000 $1.30 $117,000

$7,239,500

Contingency 20% $1,447,900

Total Construction Costs $8,687,400

Figure 2.1

2-4
 Conceptual Estimate Summary Sheet
for the Project

Item Description Area Unit Unit Price Cost

Site Development Entire Site 3,525,000 SF $ .20 $ 705,000
Bridges 2 Each 7,200 SF $ 100.00 $720,000
Site Utilities Entire Site 3,525,000 SF $ .20 $705,000
Truck Access Paving 624,483 SF $ 2.72 $1,698,594
Parking Lots +90,000 SF 141,750 SF $ 2.09 $ 296,258
Landscaping 75,474 SY $ .81 $ 61,134
Gatehouse 1 200 SF $ 150.00 $ 30,000
Gatehouse 2 200 SF $ 150.00 $ 30,000
Building A Receiving Building 35,000 SF $ 33.51 $1,172,850
Building B Warehouse 250,000 SF $ 33.51 $8,377,500
Building C Warehouse 250,000 SF $ 33.51 $8,377,500
Building D Warehouse 250,000 SF $ 33.51 $8,377,500
Office Building 25,000 SF $ 103.43 $2,585,750
Total Cost $ 33,137,086
20% Contingency $6,627,417
Total Budget $ 39,764,503

Completed Form 2.1

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 Creating the Project Budget
Project spread over three years to finance:
• Phase I: Site work; gatehouses; bridges;
Building A for offices; slabs of Buildings B, C,
and D; site asphalt paving and landscaping.
• Phase II: Complete three warehouse buildings.
• Phase III: Construction of new office building,
remodel Building A.

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 Phase I Budget

Figure 2.3

2-7
 Phase II Budget

Figure 2.3 (Continued)

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 Phase III Budget

Figure 2.3 (Continued)

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 The Detailed Estimate
• Identifies assembly elements.
• Detailed take-off of material quantities.
• The more detailed the estimate, the more
accurate the estimate can be.
– As the documents increase in detail, the estimate
increases in detail, and the included contingency
decreases.
– More accurate than the conceptual estimate.
– Little or no contingency is added.
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 The Detailed Estimate
The Detailed Estimate Includes:
• A break down of the work by categories of similar items or as required by the bid
form.
• Quantification of similar elements of work for each category for costing.
• Determination of a construction plan.
• Determination of a construction schedule.
• An estimate of cost of labor, material, equipment, subcontractors and service
providers for each element of each item of work.
• The direct and indirect cost of the work which includes all the cost elements.
• Solicitation and receipt of quotes for materials, services by others and work to be
subcontracted.
• A summary of all elements of costs (labor, material, equipment, subcontractors
and service providers) to determine the total estimated cost of work.
• Analysis of risk the project should bear.
• Determination of a markup to be added to the cost of work to produce a selling or
bid price.

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 Commonly Used Conversion Factors

Figure 2.4

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Relationship of Estimating, Accounting, and Productivity

Figure 2.5

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 Concrete Quantity Take-Off
Item Cost Item Quantity Unit
Grade Beams Form Beam Sides 30,000 SFCA
Reinforcing Steel 23.7 Tons
Place Concrete 611 CY
Chamfer Strips 2,500 LF
Float Top 2,500 SF
Embeds 1,250 Each
Slab-on-Grade Fine Grade 250,000 SF
Compacted Base Course 3,361 CY
Vapor Barrier 282,500 SF
Reinforcing Steel 183.7 Tons
Edge Form 2,500 LF
Screeds 5,000 LF
Expansion Joint 4,861 LF
Finish 250,000 SF
Cure 250,000 SF
Box-Out Columns 108 SF

Completed Form 2.2

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 Concrete Quantity Take-Off
Project Concrete Recap Sheet Labor Material

Man- Unit
Cost code Item Quantity Unit Unit/hr hours Cost/hr Total Labor Cost Total Mat. Total Cost

03 03 03 Grade Beams
03 03 03.01 Form Beam Sides 30,000 SFCA 10 3000 $ 45.00 $ 135,000 $ 0.35 $ 10,500 $ 145,500
03 03 03.02 Reinforcing Steel 23.7 Ton 0.0375 632 $ 50.00 $ 31,600 $ 500.00 $ 11,850 $ 43,450
03 03 03.03 Place Concrete 611 CY 3 204 $ 42.00 $ 8,554 $ 52.00 $ 31,772 $ 40,326
03 03 03.04 Chamfer Strips 2500 LF 200 13 $ 45.00 $ 563 $ 0.10 $ 250 $ 813
03 03 03.05 Float Top 2500 SF 300 8 $ 42.00 $ 350 $ - $ - $ 350
03 03 03.06 Embeds 1250 Ea 3 417 $ 50.00 $ 20,833 $ 17.00 $ 21,250 $ 42,083
Total Grade Beams 4273 $ 196,900 $ 75,622 $ 272,522
03 03 04 Slab-on-Grade
03 03 04.01 Fine Grade 250000 SF 400 625 $ 42.00 $ 26,250 $ - $ - $ 26,250
03 03 04.02 Slab Gravel 3361 CY 5 672 $ 42.00 $ 28,232 $ 10.50 $ 35,291 $ 63,523
03 03 04.03 Vapor Barrier 282500 SF 1000 283 $ 42.00 $ 11,865 $ 0.02 $ 5,650 $ 17,515
03 03 04.04 Reinforcing Steel 183.7 Ton 0.05 3674 $ 50.00 $ 183,700 $ 500.00 $ 91,850 $ 275,550
03 03 04.05 Edge Form 2500 LF 20 125 $ 45.00 $ 5,625 $ 1.00 $ 2,500 $ 8,125
03 03 04.06 Screeds 5000 LF 40 125 $ 45.00 $ 5,625 $ 0.30 $ 1,500 $ 7,125
03 03 04.07 Expansion Joint 9000 LF 40 225 $ 45.00 $ 10,125 $ 0.32 $ 2,880 $ 13,005
03 03 04.08 Place Concrete 4861 CY 2 2431 $ 42.00 $ 102,081 $ 52.00 $ 252,772 $ 354,853
03 03 04.09 Finish 250,000 SF 120 2083 $ 42.00 $ 87,500 $ - $ - $ 87,500
03 03 04.10 Cure 250,000 SF 1000 250 $ 42.00 $ 10,500 $ 0.06 $ 15,000 $ 25,500
03 03 04.11 Box-Out Columns 108 SF 6.5 17 $ 45.00 $ 748 $ 2.50 $ 270 $ 1,018
Total Slab-on-Grade 10509 $ 472,251 $ 407,713 $ 879,964

Pricing for Form 2.2

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 Selecting Subcontract Bids
• Bid analysis is necessary to determine:
– Lowest prices, including full scope.
– No duplications.
– No “holes.”
– Responsible subcontractors.
– Preferred subcontractors (those you have a long-
term relationship with and have used in the past).

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 Combination Bid Analysis

Figure 2.6

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 Subcontractor Selection
Section Description Bidder
31 64 00 Piles/Caissons Price Northwest Caisson $1,220,990
32 12 16 Asphalt Paving Statewide Paving $1,730,000
32 90 00 Landscaping Mulchers, $ 42,000
LGL Sprinkler $ 35,000
03 45 00 P/C Deck Panels PC Precast $ 85,000
05 10 00 Structural Steel Steel Struct, Inc. $ 175,000
05 20 00 Metal Joists Steel Struct, Inc.
05 30 00 Metal Deck Steel Struct, Inc.
06 40 00 Arch. Woodwork Chris’s Cabinets $ 7,200
07 20 00 Insulation Quick Insulation $ 35,000
07 50 00 Membrane Roofing Local Roofing $ 89,916
07 60 00 Flashing Local Roofing
08 31 00 Overhead Doors Door & Window Co. $ 18,000
08 80 00 Glazing/Windows Door & Window Co.
09 25 00 Gypsum Drywall Universal Finishes $ 7,300
09 65 00 Floor Covering Universal Finishes
09 90 00 Painting Universal Finishes
23 00 00 Mechanical Charlie’s Plumbing $ 249,000
26 00 00 Electrical Ellen’s Electrical $ 309,000
Total Subcontracts $4,003,406

Completed Form 2.3

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 Review
• Conceptual estimates may be based on specific project
areas (measured in SF).
– Conceptual estimates are used to establish the project
budget.
– Contingencies allow for the uncertainties at a specific time in
the project design.
• More detailed estimates are prepared as the
documents are completed.
• A take-off of quantities is completed to provide more
detail estimates.
– These quantities are used to estimate labor, material, and
equipment.
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 Review
(Continued)

• Subcontractor selection is completed using an

analysis based on the candidates’ capabilities,
scope and price.
• A project plan and schedule are usually
prepared using either a bar chart format or a
critical path method format.
• An updated project plan is needed to help the
supervisor avoid incorrect management
decisions
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 Apply What You Have Learned So Far
• Look at the original estimate for your project.
– How is it organized?
– How is the information condensed for owner’s billings?
– How was the data generated?
– How were subcontractors selected?
– Is there a correlation between subcontractor selection and
subcontractor problems on the job?
– Is the estimate organized into crew activities?

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 Labor Costs
• Labor costs will vary more than other costs
on most construction projects, so labor is
the main emphasis of managing cost
variances.
• Familiarize yourself with the ways that your
firm addresses, analyzes and measures
productivity, efficiency and cost savings.

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7-3
 Categories of Factors That Negatively
Impact Productivity (negative impact factors)
• Worker ability to do work.
• Work sequencing (continuity of the work process).
• Environmental factors.
• Disruption of the work process.
• Added support activities.
• Human element.

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 Loss of Labor Productivity (Impact)
Due to Changes and External Events
Examples of construction changes include the
following:
• Schedule changed and work shifted into colder temperatures.
• Contractor required to work overtime due to owner or designer
delays.
• Contractor required to add workers to project to accelerate
schedule.
• Contractor required to do work in an unexpectedly crowded or tight
working area.
• Contractor required to store materials farther from project than
planned, due to unavailability of lay-down areas.
• Contractor required to start-stop, start-stop work process because
design documents or design decisions are unavailable.
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 Loss of Labor Productivity
Construction labor productivity is a complex process and the productivity or
units of output produced per person-hour of effort or input is very sensitive
to many input factors:
• The amount and quality of labor, equipment, materials, weather, and expected
working conditions.
• The quality and completeness of the drawings and specifications.
• The expected actions of the project owner.
The contractor’s labor productivity estimate is predicated upon a
reasonable estimate of each of these factors. This is illustrated in the next
slide.

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 Unexpected Events That Negatively Impact
Site Labor Productivity
(outside of the Construction Supervisor’s control)

• Added work due to change orders.

• Changed job conditions (different weather, soil
conditions, material lay-down areas).
• Incomplete drawings or specifications.
• Late project owner and designer decisions.

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 Unexpected Events That Result in Work
Performed Under Adverse Conditions

• Overtime
• Learning curve
• Temperature, wind, humidity
• Start-stop-start-stop
• Double handling of material
• Morale problems

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 Impact of Overtime on Productivity
• Overtime needed to accelerate the work process.
• Construction is hard, physically-demanding work.
When required to work overtime, the onsite craft
worker is likely to become fatigued and do less
than the normal hourly output.
• Studies conducted by the Business Roundtable,
the National Electrical Contractors Association
(NECA) and various contractor associations and
contractor groups illustrate the loss of
productivity, as shown in the next slide.
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Impact of Overtime on Productivity

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 Impact of Crew Size on Productivity
• Ideal Crew Size
• There normally is an ideal crew size and mix for every work
task.
• The construction firm and supervisor should collect data from
past performances of work tasks to estimate productivity lost
when crew size is changed.
• Dilution of Supervision
• Supervision is a critical component of worker productivity.
• Studies have indicated a 15% to 20% possible decrease in
worker productivity if needed supervision is absent.
• When workers or crews are added to the supervisor’s
workload, the supervisor’s inability to be in three places at
one time will result in lower worker productivity.
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Impact of “Learning” on Productivity

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Impact of Work Space on Productivity

• Stacking – Available Work Space

• To make up time crew sizes may be
increased.
• To make up time crews may be brought in
before previous work finished.
• Extra workers or crews in a space reduces
productivity.

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Impact of Work Space on Productivity

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 Impact of “Learning” on Productivity
• Learning Curve of Workers
• Worker output is lower with new, unfamiliar work
processes.
• Productivity increases as the worker completes the work
processes more times.
• As proficiency increases, output reaches a steady state.
• Studies have modeled a worker’s ability to produce as a
function of how many times he or she has done a work
process. An example is illustrated in the next slide.
• Given the need to accelerate the work process, the
supervisor could use such “learning data” to quantify extra
labor hours to accomplish the tasks.
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 Impact of Environmental Factors
on Productivity
• Adverse temperature (hot and/or cold).
• Humidity.
• Wind.
• Precipitation.
• Noise.
• Poor lighting.
• Significant variation from the expected would
require the supervisor to attempt to quantify
the impact on worker productivity and adjust
accordingly.
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Impact of Temperature on
Productivity

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 Review
Look back over Session 7 and review these key points
to be sure you understand them.
• There are six different categories of factors that
negatively impact labor productivity.
• There is a loss of productivity when a worker is subjected
to conditions that were not expected.
• There has been a considerable amount of research
conducted on measuring lost productivity as a function of
various impact factors.
• Change orders can negatively impact overall project
productivity.

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 Apply what you have Learned
• Learn how your firm uses data on the learning curve
for new work processes.
• Determine how your firm gathers and uses data on
work process disruption.
• Determine how your firm gathers and uses data on
environmental effects.
• Determine how your firm gathers and uses data on
human element productivity impacts.
• Learn what data your firm uses when workers or
crews must be added to the work space.
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