Best Practice Response - Project Estimating FrameworkBRIEFING NUMBER THREECheryl Nelms, P.Eng, Ph.D.GENERAL MANAGER, PROJECT DELIVERY

GVWD Board Meeting: November 27, 202042464512

Section E 2.1

Greater Vancouver Water District

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Agenda

• Introduction to Cost Estimating

• Best Practice Framework

• Next Steps

PHOTO: NORTH SHORE WASTEWATER TREATMENT PLANT Greater Vancouver Water District

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Cost Estimating

Prediction of the costs of a project from inception to project completion

Prediction is based on evaluating uncertain circumstances

PHOTO: LULU ISLANDGreater Vancouver Water District

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Impacts of Poor Estimating Practices

Cost overrun and scope creep

Requirement for significant budget revisions during

execution

Multiple requests for funding

Poorly informed decision making

Inability to reconcile budget changes over

time

Limited lessons learnt from one project to the

next

POOR ESTIMATING PRACTICE

PHOTO: LULU ISLANDGreater Vancouver Water District

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Cost Estimating Objectives

Improves decision making as a project is advanced through its various stages

Improves cost certainty and cost management

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Best Practice Framework

PHOTO: IONA WWTP Greater Vancouver Water District

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Project Estimating Best Practices

Consistent guidelinesthroughout the project

lifecycle

Standardized costcategorization

Formalized cost & scope stage gate

process

Internal database used for benchmarking and knowledge transfer

PHOTO: IONA WWTP Greater Vancouver Water District

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1. Cost Categorization

Base Design & Construction Costs

Owner’s Cost

Risk Reserve

Escalation

• Design & Construction cost estimates

• D&C estimate uncertainty contingency

• Time/inflation based cost increases estimating using project specific construction indices and schedule

• Specific reserve to account for risks retained by Metro Vancouver (E.g. geotechnical risk)

• Based on standardized risk review process

TotalProject

Contingency

• MV staff, owner advisors, site acquisition, permitting, procurement, legal costs

• Owner’s costs estimate uncertainty contingency

Greater Vancouver Water District

1. Cost Categorization: Procurement Options Analysis

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Greater Responsibility

Limited Responsibility

Shared Responsibility

LegendRISK ALLOCATION CATEGORIES DBB DBF

Contractor Owner Contractor Owner Changes in regulations ● ● ● ●Owner initiated changes ● ● ● ●Achieving schedule ● ● ● ●Design functionality ● ● ● ●Construction costs ● ● ● ●Commissioning & Acceptance ● ● ● ●

-5

0 5

10 15 20 25 30 35 40 45

Values in Millions ($)

DBB

Mean $14,295,52490% $21,095,958

DB

Mean $11,249,54690% $17,621,085

Greater Vancouver Water District

2. Guidelines: Steps for Each Project Stage

• 10+ years timeline for execution of large capital projects

• Estimate requirements and guidance provided at each project stage

• Use of AACE Estimate class, well understood by engineering industry

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Expected Accuracy Range

* Class 1-5 is equivalent to Class A-EGreater Vancouver Water District

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2. Guidelines: Steps for Each Project Stage

Greater Vancouver Water District

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3. Stage Gate Process: Internal Review

Detailed Guideline - Standardized Cost Categorization

Definition Design Construction Closeout

Level of Development • Need identified• Screening level

business case• Conceptual design• Options analysis

• Preliminary design• Detailed design• Bottom-up estimate

• Construction • Completion of contractual obligations

Key Project EstimatingDeliverables

Screening level business case

Project estimate Class 4/5

Project estimate Class 3 Value Engineering (max

impact at 30% design) Authorization for expenditure

Class 2/1estimates for key contracts

Preparation and Issue of Project Completion Report

Close authorization for expenditure

Gate Gate Gate Gate

Greater Vancouver Water District

Next Steps• Create Project Controls Group

• Formalize internal practice and guidelines

• Develop training for project estimation

• Implement best practices on Metro Vancouver large capital projects

• Develop internal database as fourth pillar for benchmarking and knowledge transfer

13 ONA WWTPGreater Vancouver Water District

Thank You

Greater Vancouver Water District