CSVA 2008 Conference

Steve Taylor Presentation

Target Costing

October 28, 2008

Presentation OutlinePresentation Outline

• Client Budget Constraints• VE Job Plan for Target Costing • Sample Projects

•Building•Roadway•Sewage Treatment Plant

•Questions

Client Budget ConstraintsClient Budget Constraints

VE a tool for:– Innovation– Cost control– Cost effective/budget control ( maximize every

dollar available to clients)Pre-workshop phase defines the magnitude of the constraint.Is there a fixed budget for the project and an estimate that significantly exceeds it? If yes – consider target costing

VE Job Plan VE Job Plan

VE job plan can led to:– Innovative proposals that can improve value

(better performance at little or no change to project cost)

– Proposals to reduce scope (unnecessary or unwanted functions) with no change to performance

– -Cost savings related to greater reduction in cost than reduction in performance

Target Costing leads to greater ideas in all three categories

Target CostingTarget Costing

Forces organized definition of resources to match budgetWhat is the best project that can be delivered for the budget ….not what is the best project that can be deliveredForces value judgement on worth to the customer (consensus building on difficult decisions)

Target Costing StepsTarget Costing Steps

VE Job Plan uses functional analysisModern analyses use FAST diagrammingConventional Functional Analysis –Focuses on components/functions/costs and worth (best Suited for Target Costing)

Traditional Functional AnalysisTraditional Functional Analysis

Worth(Target Cost)

CostTypeFunctionComponent

Sum of Target Costs = Budget

Case Study: Building ProjectCase Study: Building Project

Algonquin College Ottawa

Sample Building ProjectSample Building Project

Police Justice Building Algonquin CollegeDesign Build projectMaximum Upset price $18 millionBudget $14 million

Target Costing Functional AnalysisTarget Costing Functional Analysis

SPass Fire Trucks

SPass Trucks

UnwantedUnwantedRaise Building

SPass Cars

BasicMove Pedestrians(link buildings)

PedestrianBridge

Worth(Target Cost)

CostTypeFunctionComponent

FunctionsFunctions

Unwanted – Raise buildingRequired Basic – Link BuildingMaximum vertical elevation 5.0 m fire codeStudy Results– Minimize elevation to 4.5 m (existing bridges)– Accept slope on interior floor– Eliminate 4 ft unwanted building height– $14 million contract

Case Study: Highway ProjectCase Study: Highway Project

Highway 15 MTO eastern Region

Key IssuesKey Issues

Meeting the objectives of SOHP i.e. resurfacing, passing lanes and bridge replacementTraffic volumes generally 20% lower than existing conditions in 1992Crosby Creek Bridge immediate need for replacement

Project FunctionsProject Functions

Highest Order Goals– Satisfy Users– Satisfy Stakeholders

Basic Function– Improve Mobility– Improve Safety

Supporting Functions:– Protect Environment– Limit Property Impacts– Maintain Access– Accommodate Other Users

FAST ExerciseFAST Exercise

WP 479-92-00 (23.58km)WP 4315-06-00 (3.53km)

Average %age of

total cost

%age of project cost

Total Project Length (27.11km)Asphalt 9,002,762 44.3 20.9Granulars 4,508,485 22.2 10.5Grading 2,264,649 11.1 5.3Drainage 1,546,378 7.6 3.6Removals 736,427 3.6 1.7Guiderail 656,885 3.2 1.5Traffic Control 423,443 2.1 1.0Fencing 261,674 1.3 0.6Pavement Markings 215,750 1.1 0.5Landscaping 230,162 1.1 0.5Electrical 207,546 1.0 0.5Curb & Gutter 132,654 0.7 0.3Environmental 133,183 0.7 0.3

Sub-total 20,320,000 100.0 47.3

Intersections (South to North)Big Hill Road / Bay Road 50,000 0.1County Road 43 (North junction) 50,000 0.1County Road 32 100,000 0.2Parking Bay (15+800) 25,000 0.1Lyndhurst Road 100,000 0.2Back Street 25,000 0.1MTO Lay By Station 15,000 0.0Sweets Corners Road / Thomas Road 100,000 0.2Jones's Falls Road 100,000 0.2Muchmore Road 25,000 0.1Mallens Road / Bush Road 50,000 0.1Smiths Road / Franks Road 100,000 0.2Kingston Road 50,000 0.1County Road 8 / Davis Locks Road 50,000 0.1Perth Street 50,000 0.1Earle Dwyre Road 15,000 0.0Freeman Road / Chaffey's Locks Road 150,000 0.3Crosby Creek structure 1,063,125 2.5Crosby Road 25,000 0.1County Road 42 150,000 0.3Highway 15 Realignment 5,600,000 13.0

Sub-total 7,893,125 18.4

Passing LanesSB-12 (2330m) 4,660,000 10.8NB-7 (1860m) 3,720,000 8.7SB-9 (1785m) 3,570,000 8.3NB-9 (1413m) 2,826,000 6.6

Sub-total 14,776,000 34.4

TOTAL PROJECT COST 42,989,125Allowance for CA (10%) and Utilities(3% 5,588,586Most Probable Capital Cost 48,577,711

10M6M 7M 8M 9M1M 2M

20,320,000

4M 5M3M

Cost Model Cost Model (Seeleys Bay to Big Hill Road)(Seeleys Bay to Big Hill Road)

Estimated Cost Model (100 km/h Estimated Cost Model (100 km/h design speed, 4 passing lanes, design speed, 4 passing lanes, County Road 42 realignment and County Road 42 realignment and Crosby Creek Structure)Crosby Creek Structure)

Seeleys Bay to Big Hill Road - $48.5 millionPortland - $3 millionTOTAL - $51.5 million

Target Cost (pavement rehabilitation, Target Cost (pavement rehabilitation, 2 passing lanes, Crosby Creek 2 passing lanes, Crosby Creek Bridge and Portland)Bridge and Portland)

Seeleys Bay to Big Hill Road - $24 millionPortland improvements - $5 millionTOTAL - $29 million

Target worth for project = $29 million

Cost Worth Analysis (Seeleys Bay to Cost Worth Analysis (Seeleys Bay to Big Hill Road)Big Hill Road)

$1$1Bridge

$14$14Pavement rehabilitation

Worth (m)Cost (m)ComponentAsset Management

Target Cost (Worth) Analysis Target Cost (Worth) Analysis (Seeleys Bay to Big Hill Road)(Seeleys Bay to Big Hill Road)

$2$15Passing LanesWorth (m)Cost (m)Component

Mobility

Cost Worth Analysis (Seeleys Bay to Cost Worth Analysis (Seeleys Bay to Big Hill Road)Big Hill Road)

$1Side roads $5Geometrics $6Realignment $1Turn Lanes$6Cross Section

$3$4ClearzoneWorth (m)Cost (m)Component

Safety

Target Cost ( Worth) Analysis Target Cost ( Worth) Analysis (Portland)(Portland)

$0$0.7Crest curve flattening

$2.5$2.3Rehabilitation

Worth (m)Cost (m)Component

All Roadworks

Summary of CostsSummary of Costs

$24$5Budget

$49$3To standards to 100 km/h design standards

Seeleys BayPortlandDesign

Creative PhaseCreative Phase

138 Ideas Generated43 Ideas Short Listed29 Ideas Carried Forward to Development

VE Team Prioritization VE Team Prioritization

421

3

VE Ranking

Low (28)High (38)

High (39.5)

Medium (29.5)

Performance

Yes ($11.9)4No ($25.2 m)3No ($29.3 m)2

Yes ($24 m)1

Affordability(1)(2)

Strategies

Notes:1) Including Minor Operational and Safety VE Ideas2) Budget based on direction of $24 million provided during workshop

Case Study: Wastewater Treatment Case Study: Wastewater Treatment PlantPlant

Morrisburg Ontario

VE PrioritiesVE Priorities

Cost Highest PriorityPerformance Second HighestSchedule Lowest Priority

Current Project BudgetCurrent Project Budget

Current funding limits dictate that:

Total Budget $13,377,307Total Budget $13,377,307

Includes:– Capital cost– Construction contingencies

Cost Model Cost Model -- RevisedRevised

Updated Cost Model

16.6%

9.5%

3.1%

27.4%3.0%9.7%

5.5%

1.4%4.4%

1.7%

17.7%

Front Office/LaboratoryPumping StationScreen/Grit RemovalWW Treatment TankageUltravoilet DisinfectionMechanicalElectricalSCADAOutfallDecommissioning WorkATAD Slidge Treatment/Storage

Capital Cost Estimate Capital Cost Estimate –– Target CostTarget Cost

Components Revised TargetTarget

Building $2.13M $1.55M$1.55MProcess $11.70M $9.90M$9.90MOutfall $0.59M $0.59M$0.59MPump Station $1.38M $1.38M$1.38MDecommissioning $0.25M $0.15M$0.15M

Capital Cost $16.05M $13.57M$13.57M

Function AnalysisFunction Analysis

Highest Order Functions– Protect Public– Control Pollution

Basic Function– Treat Sewage

Key Secondary Functions– Manage Solids– Manage Liquids

CreativityCreativityVE Targets– SBR Process 18 Ideas– Sludge 10 Ideas– Main Building 14 Ideas– Equipment 3 Ideas– Pumping Station 5 Ideas– Outfall 7 Ideas– Mechanical/Electrical 4 Ideas– Other 7 Ideas

Total 68 Ideas

Sample VE IdeaSample VE Idea

SBR ProcessSBR Process

SubSub--Team Tasked with Idea Team Tasked with Idea Development to Achieve Target CostDevelopment to Achieve Target Cost

Ideas developed based on functional analysis and prioritizationTeam included design and independent TeamIndependent Team had expertise to support size reduction of tankSacred Cow was the roof- Landmark Design of design teamSub-team reported back to team. Did not reach target cost. Advised to return until target cost reached. In doing so roof was identified as secondary function that had to be eliminated to reach target cost

SBRSBR--03/1303/13Description– Optimize SBR size

Reduce size by 1/3Reduce blowers from 6 to 4

Advantages– Lower capital cost– Provides adequate treatment

Disadvantages– Needs to be confirmed through modelling (additional

cost $20,000) Cost Implications– Cost Savings up to $885,000 (includes roof removal)

Proposed Site PlanProposed Site Plan

Proposed Floor PlanProposed Floor Plan Reduced Area

Eliminated Roof

QuestionsQuestions