josé a. faria, ph.d.web.eng.fiu.edu/fariaj/unib/bcn5618_su12_module1_8pp.pdf · 2 fridays...

Master of Science in ConstructionConstruction

Management – UNIBEModule 1Module 1

José A. Faria, Ph.D.

BCN 5618 Fundamentals of Construction Estimating 1

Section: RXASummer• Instructor Bio.

• Ethics

Summer May 11, 2012 - Jun 9, 2012Fridays from 5:30 p.m. – 10:00 p.m. (With a 30-minute refreshment

• Grading• Project

(break)Saturdays from 8:30 a.m. – 2:15 p.m. (With two 15-minute breaks

• Course Calendar• Tools Lecture time format

and a 30 minute lunch)

• Introduction• Basic Concepts From To Minutes

Lecture time format

6:25 PM 7:40 PM 75 Lecture

7:40 PM 7:50 PM 10 Break

7 50 PM 9 05 PM 75 Di i

BCN 5618 Fundamentals of Construction Estimating

7:50 PM 9:05 PM 75 Discussion

2

Fridays

Saturdays


Instructor: Dr José A Faria • Job experience:Instructor: Dr. José A. Faria

• B.S. Industrial Engineer (UCAB, Venezuela)

Job experience:– Project engineer / project manager– Process design and control– Material handling systems

B i iVenezuela)• M.S. Systems Engineering (UMD)• Ph.D. Civil Engineering (UMD)

Operations Research

– Beverage processing equipment– Owner of a consulting business– Professor at University of Maryland

and American University in Washington– Operations Research– Project Management

• Contact Information:– Phone: 305-348-3541

y gD.C.

• Teaching at FIU– Environmental Control I

Cost Estimating IIPhone: 305 348 3541– Office: EC 2951

– Cost Estimating II– Management of Construction Projects– Safety in Construction– Productivity in Construction– Cost Analysis and Control


• ABC• Associated Builders

• SLC• Sigma Lambda Chi

and Contractors• AGC

• Honors Society

• NAHB• ASPEASPE


• Name• Interests• Interests• Skills, expertise, hobbies …• Work experience• Your classmates may use this informationYour classmates may use this information

to choose potential study groups


Academic Misconduct is defined as the following intentional acts or omissions committed by any FIU student:Academic Misconduct is defined as the following intentional acts or omissions committed by any FIU student:Cheating: The unauthorized use of books, notes, aids, electronic sources; or assistance from another person with respect to examinations, course assignments, field service reports, class recitations; or the unauthorized possession of examination papers or course materials, whether originally authorized or not. Any student helping another cheat may be found guilty of academic misconduct.Plagiarism: The deliberate use and appropriation of another's work without any indication of the source and the representationg pp p y pof such work as the student's own. Any student who fails to give credit for ideas, expressions or materials taken from another source, including internet sources, is guilty of plagiarism. Any student helping another to plagiarize may be found guilty ofacademic misconduct. Misrepresentation: Intentionally lying to a member of the faculty, staff, administration, or an outside agency to gain academic advantage for oneself or another, or to misrepresent or in other ways interfere with the investigation of a charge of academic misconductmisconduct.Misuse of Computer Services: The unauthorized use of any computer, computer resource or computer project number, or the alteration or destruction of computerized information or files or unauthorized appropriation of another's program (s).Bribery: The offering of money or any item or service to a member of the faculty, staff, or administration anyone in order to commit academic misconduct.Conspiracy and Collusion: The planning or acting with one or more fellow students any member of the faculty staff orConspiracy and Collusion: The planning or acting with one or more fellow students, any member of the faculty, staff oradministration, or any other person to commit any form of academic misconduct together.Falsification of Records: The tampering with, or altering in any way any academic record used or maintained by the University.Academic Dishonesty: In general, by any act or omission not specifically mentioned above and which is outside the customary scope of preparing and completing academic assignments and/or contrary to the above stated policies concerningy p p p g p g g y p gacademic integrity.

Source: http://w3.fiu.edu/enc/Academic%20Misconduct.htm


• Whenever you use the result of otherpeople’s work, you should give properp p , y g p pcredit to the author by citing the source. The use of opinions ideas expressionsThe use of opinions, ideas, expressions,conclusions or other material within your writing without providing acknowledge ofwriting without providing acknowledge ofthe source constitutes plagiarism. (Gibaldi 151)


A t d t i l d i f th d i• Any student involved in any of the academicmisconduct activities will be subject to the procedures outlined in FIU’s Academic Affairsprocedures outlined in FIU s Academic AffairsPolicies & Procedures Manual.– All matters relating to academic misconduct are

referred to the Office of the Provost for Academicreferred to the Office of the Provost for AcademicAffairs. Acts of academic misconduct may be alleged by faculty, staff or students. Two actions that may be taken are:taken are:• Expulsion: Permanent separation of the student from the

University, preventing readmission to the institution. This sanction shall be recorded on the student's transcriptsanction shall be recorded on the student s transcript.

• Suspension: Temporary separation of the student from the University for a specific period of time.


Source: http://www.fiu.edu/provost/polman/sec2web.html#2.44%20ACADEMC%20MISCONDUCT

9

• Required textbookRequired textbook– Estimating in Building Construction

• Frank R. Dagostino and Steven J. Petersong• Prentice Hall 2011• ISBN- 13: 978-0-13-119952-1

ISBN 10 0 13 119952 8• ISBN-10: 0-13-119952-8


L t i t ill NOT b t d• Late assignments will NOT be accepted• Please submit your work on time to receive credit• Try to submit your work early enough to prevent

technical problemsCh k th l d f d d t d• Check the calendar for paper due dates, andexamsNo makeup exams will be given except with a• No makeup exams will be given except with averifiable medical note, or because of an emergency as posted by the University’s web siteemergency as posted by the University s web site


W d• Word processor• Spread sheet

– MS Excel

• WEBCT• WBS Pro*• WINESTMS Excel

• Presentation software– MS Power Point

WINEST• OnScreen Takeoff

• Database*– MS Access

• Project management• Project managementsoftware*– MS Project– OpenWorkBench– Primavera

* N t R i d b t d t k


* Not Required but good to know

Wh d d t ti t t?• Why do we need to estimate cost?• Why can’t we just build whatever we need and

ll th t?sum all the cost?• Cost, price, profit…what is the difference?

Wh t i ti t ?• What is an estimate?• Who does the estimation?

H d k ?• How do we make one? • What do we do with it?


• “To ensure maximum productivity, it isnecessary to have an accurate estimate ofythe cost required to accomplish a job before it is started and to manage the jobbefore it is started and to manage the jobefficiently and effectively within the cost constraints established ”constraints established. (Stewart)


• Estimating is one of the most importantphases of any contractor’s businessp ybecause:

• To stay in business a contractor must be• To stay in business, a contractor must below bidder on a certain number of projects,

t th i i t b l th t it iyet their prices cannot be so low that it isimpossible to make a profit on them.


W k l t• Life cycle• Cost

• Work element• Work Breakdown

Str ct re (WBS)• Estimation• Time

Structure (WBS)• Deliverable

P d t• Materials• Work

• Product• Process

P j tWork • Project• Service


• Definition:“ ” f f f• A “best judgment” of the future cost of a

project.• Objective:• To prepare an approximate realistic cost• To prepare an approximate , realistic cost

of a project in an orderly, efficient, andcomprehensive mannercomprehensive manner.


“An estimate is a judgment, opinion,forecast, or prediction. A cost estimate,, p ,therefore, is a judgment or opinion of the cost of a process product project orcost of a process, product, project, orservice. It is a prediction or forecast of what a work output or work activity will cost ”a work output or work activity will cost. (13)


• “A life cycle cost estimate provides an exhaustive accounting of all resourcesgnecessary to develop, deploy or field, operate maintain and dispose of a systemoperate, maintain, and dispose of a systemover its lifetime.” (NASA CEH 8)


Screening estimates

Preliminary or budget cost estimatePreliminary or budget cost estimateDefinitive cost estimate


D di th D li th d h• Depending on the Delivery method chosenby the Owner

• D-B-B: Design – Bid - Build• D-N-B: Design – Negotiate - Buildg g• D-B: Design - Build• CM: Construction Management• CM: Construction Management• OB: Owner Build

IPD I t t d P j t D li• IPD: Integrated Project Delivery


• Competitive Bidding: many contractors areable to perform the work. Request forp qQuotations are issued, prices and scopes are compared to select the Lowestare compared to select the Lowest,REASONABLE, responsive, responsible bidderbidder

• Negotiated Bidding: Only one contractor is able to perform the job. The ownernegotiates a cost with the contractor


g

• Lump sum• Unit Price• Cost plus fee

Fixed fee– Fixed fee– Fixed fee with Guaranteed Maximum PriceB d P lti• Bonuses and Penalties– Bonuses based on early completion– Penalties based on late completion of the project


O i d• Credible• Supportable

• Organized• Readable

U d t d bl• Usable• Accurate

• Understandable• Concise

A il bl ti• Achievable• Competitive

• Available on time• Adjustable

Competitive• Complete• Realistic• Realistic


with a low cost estimate? (under estimating)

with a high cost estimate? (over estimating)with a high cost estimate? (over estimating)


• Significant overrun• Inconsistent results

• Factors that affectaccuracy

– Large overruns– Large underruns

– Time during life cycle– Experience of Cost

E i• Few details• Poorly documented

Engineer– Methods used

Data and tools availabley• Unreliable

– For funds allocation

– Data and tools available

– For project control


Is it possible to have an accurate costestimate and end up with a lower real cost?p

I it ibl t h t tIs it possible to have an accurate cost estimate and end up with a higher real cost?

How? What would happen?


• “A risk is an uncertain event or condition that, if itoccurs, has a positive or negative effect on a

j t bj ti ”project objective” (PMBOK)

• “In a situation that includes favorable and funfavorable events, risk is the probability that an

unfavorable event occurs” (Garvey)

• “Uncertainty is the indefiniteness about theoutcome of a situation. We analyze uncertainty for th f i i k ”the purpose of measuring risk.” (Garvey)


Conceptual or Evaluation

Phase

FeasibilityFeasibilityPreliminaryEngineering

DetailedDetailedEngineeringProcurement

C t tiConstructionTesting

Deployment

Operationand

Maintenance

Removal,Disposal,

Retirement Time


100%

Commitment

InfluenceCost of Changes

Time


Planning Basic / Detailed Execution

Thi i iti l h h th d i i ff t• This is a critical phase where the decisions affectthe total project value

• Decisions made thereafter will only affect portionsDecisions made thereafter will only affect portionsof the project value

• The least amount of information is available therefore the uncertainty is at its highest point

• From all strategic alternatives one is chosen. All efforts will concentrate based on that choiceefforts will concentrate based on that choice

• Little time and effort spent on total cost estimates. Typically several screening estimates are createdTypically several screening estimates are createddepending on the number of alternatives.


R h d f it d ti t t t l t• Rough order-of –magnitude estimate total cost• Used to decide between alternatives• Used to take a go or no go decision• Used to take a go or no-go decision• Approaches to prepare the estimate are based on

historical data compared to new project data.historical data compared to new project data.– Gross (overall) proration– Curves

R h i d t il d– Rough semi-detailed• The estimator must clearly identify the differences

in scope and transfer them in differencesin scope and transfer them in differences


• A preliminary set of design drawings is availableto calculate area or volume

• To check whether the project as designed is within the owner’s budget

• Physical dimension method (sf, lf)• End-product units method (parking space, bed)p (p g p , )• Cost indexes (Means)


• Project definition is created as starting point of all efforts• Project definition is created as starting point of all efforts• Basic design is finalized• Physical layout is considered• Need for support facilities considered• Schedule is created• Project execution strategy discussed• Project execution strategy discussed• Not all information is at hand so a great deal of uncertainty

is presentA li i b d i i d• A preliminary or budget cost estimate is created– Cost Engineers (CEs) need to visualize the final product and the

process to achieve it by preparing a plan (schedule). They gather d t l it d di t f t l f diff t hi ldata, analyze it and predict future values for different geographicallocations.

– CEs need data from many people with different areas of expertise.


D ft l ti l i k• Done after completing planning work• In order to secure funds or prepare the budget, an

ti t i i d Th f th B d testimate is required. Therefore the name Budgetestimate .

• The preliminary design of the work output is• The preliminary design of the work output is complete although many details are still missing

• Approaches to make the budget estimate:• Approaches to make the budget estimate:– Curve– Semi-detailedSemi detailed– Factored


S l ti if t t i li d fi iti f• Selection if contractors implies definition of aprocurement strategy and contract administration– Qualification reviewQualification review– Contracting terms review– Performance and penalties

P i ifi ti i bid h k ti t– Price verification using a bid-check estimate• After contract award CEs turn focus from cost

estimating to cost controlestimating to cost control– Change orders management– Appraise and monitor contractors’ performance

• A definitive cost estimate is prepared


• Most accurate and time consuming estimate– Averaging approach or “in-house”

• Somewhat like the factored approach but moreSo e a e e ac o ed app oac bu o edetailed

– Takeoff approachpp• Each item is engineered with sufficient detail to

prepare a customized estimate for each item


• Based on 100% completed contract documents,includes determination of the quantities and costs

fof everything required to complete the work .• Used for bidding, negotiating of projects, change

orders, and claims.


• To determine the quantities of materials requiredto build a project.

• To be able to do quantity takeoffs, the estimator:• Must be able to read and measure plans• Must have a knowledge of mathematics• Must have the patience and ability to do careful,

thorough work.• Create a WBS helps tremendously in to acomplish task


• Handbook or trade books• Historical dataHistorical data• Request for Quotation RFQ

E i (Di t E ti ti )• Experience (Direct Estimating)


• The cost engineer:– Appraise contractors’ cost control effortspp– Monitor changes– Review extrasReview extras– Update cost estimates with new information at

handhand– Keep track of variations from original plan

Forecast cost at completion– Forecast cost at completion


H b i t f k t t h• Here are some basic types of work output whereestimating efforts are made

1 E t i1. Enterprise2. Program3 F ilit3. Facility4. Projects5 P d t5. Products6. Services7. Processes


Project, product, process or service scope and estimate

D fi iti C t ti ti• Definition• Scope and basis

• Cost estimating categories: screening, budget and definitive– Size and capacity

– Use and requirementsLi it ti

budget and definitive– Top Down or

Parametric approach– Limitations– Time frame

Location

Parametric approach– Bottom Up or Industrial

Engineering ApproachFigure Out– Location Engineering ApproachFigure Out

Verification: Are we building the product right?


g p gValidation: Are we building the right product?

Each cost estimate should have Ground Rules

A f ll description of the prod ct or ork o tp t at• A full description of the product or work output atcompletion.

• The work schedule including starting date and milestones.g g• Geographical location and related aspects.• Skills available to perform work.

Expected quality and life of product• Expected quality and life of product.• Assumptions, exclusions.• Resources available.Resources available.• Spare parts and warranty policies.• Maintenance, manuals and documentation.

O ti l i t d i• Optional equipment and services.


We need…documentation!

D i E i t– Drawings– Proposals

– Equipment – People

– Catalogs– Specifications

– Skills– Software

– Standards– Processes

– Schedules– Flow charts

– Tasks– Tools

– DefinitionsTools




Th l d h d l• The plan and schedule• The cost estimate• The contract between the owner and the contractor

They are all prepared during a relative shortThey are all prepared during a relative shorttime, early in the project… They are difficult to change and are used continually on ato change… and are used continually on adaily basis… (Clark and Lorenzoni)


C t t !• Contracts!– Owner / CM or GC– CM and Prime Contractor / Sub Contractors– Sub Contractors and Sub-Sub Contractors and

lior suppliers• Review what contracts does your contract

reference this is known as flow down provisions. Get a copy of the referenced contract(s)!


Hi hli ht th t i t t ti• Highlight the most important sections– Payment requirements– Notice requirements– Scope of work– Change orders– Claims– Indemnification

• Prepare a spreadsheet of deliverablesp p– What? To whom? When?


• Most likely your company is responsible forALL drawings and specifications, this isg p ,standard language of contracts


• Definition:• “A deliverable-oriented grouping of projectA deliverable oriented grouping of project

elements that organizes and defines the total work scope of the project Eachtotal work scope of the project. Eachdescending level represents an i i l d t il d d fi iti f thincreasingly detailed definition of theproject work.” (PMBOK)



Construction Specifications Institute (CSI) Divisions

Master format:Before (1995) and Now (2004)


MasterFormat™ is a list of standardizedMasterFormat is a list of standardized numbers and titles for organizing construction bidding and contract requirements,bidding and contract requirements, specifications, drawing notes, cost data, and building operations by work results.g p y

•Changed from MF1995 to MF2004


Division 01 — General Requirements

Division 02 — Site Construction

Division 09 — Finishes

Division 10 — Specialties

Division 03 — ConcreteDivision 04 — Masonry

Division 11 — Equipment

Division 12 — FurnishingsDivision 05 — Metals

Division 06 — Wood and Plastics

gDivision 13 — Special

Construction

Division 07 — Thermal and Moisture Protection

Division 14 — Conveying Systems

Division 15 — Mechanical

Division 08 — Doors and Windows Division 16 — Electrical


Current CSI Master Format:Has 16 Divisions (01 16)• Has 16 Divisions (01 – 16)

• Division 16 – Electrical – Subdivided A & B

A = Electrical & B = Low Voltage– A = Electrical & B = Low Voltage– reserved– Moved to 26 Electrical and 27 Communication

• New Divisions from 01 - 86• New Divisions from 01 - 86• New Division Codes for the construction industry

– Division 65 - ElectricalDivision 67 Communications– Division 67 – Communications

– Division 68 – Electronic Safety & Security– Division 69 - Integrated Automation


• GENERAL REQUIREMENTS SUBGROUP– Division 01 General Requirements– Division 01 General Requirements

• FACILITY CONSTRUCTION SUBGROUP– Division 02 Existing Conditions

Division 03 Concrete– Division 03 Concrete– Division 04 Masonry– Division 05 Metals

Division 06 Wood Plastics and Composites– Division 06 Wood, Plastics, and Composites– Division 07 Thermal and Moisture Protection– Division 08 Openings

Division 09 Finishes– Division 09 Finishes– Division 10 Specialties– Division 11 Equipment

Di i i 12 F i hi

Reserved groupsDivision 15 ReservedDi i i 16 R d– Division 12 Furnishings

– Division 13 Special Construction– Division 14 Conveying Equipment

Division 16 ReservedDivision 17 ReservedDivision 18 ReservedDivision 19 Reserved


Division 19 Reserved

FACILITY SERVICES SUBGROUP• FACILITY SERVICES SUBGROUP– Division 20 Reserved– Division 21 Fire Suppression– Division 22 Plumbing– Division 23 Heating, Ventilating, and Air Conditioning– Division 24 Reserved– Division 25 Integrated Automation– Division 26 Electrical– Division 27 Communications– Division 28 Electronic Safety and Security– Division 29 Reserved


• SITE AND INFRASTRUCTURE SUBGROUP• SITE AND INFRASTRUCTURE SUBGROUP– Division 30 Reserved– Division 31 Earthwork– Division 32 Exterior Improvements

Division 33 Utilities– Division 33 Utilities– Division 34 Transportation– Division 35 Waterway and Marine Construction– Division 36 Reserved

Di i i 37 R d– Division 37 Reserved– Division 38 Reserved– Division 39 Reserved


PROCESS EQUIPMENT SUBGROUP• PROCESS EQUIPMENT SUBGROUP– Division 40 Process Integration– Division 41 Material Processing and Handling Equipment– Division 42 Process Heating, Cooling, and Drying Equipment– Division 43 Process Gas and Liquid Handling, Purification, and Storage

EquipmentDi i i 44 P ll ti C t l E i t– Division 44 Pollution Control Equipment

– Division 45 Industry-Specific Manufacturing Equipment– Division 46 Reserved

Di i i 47 R d– Division 47 Reserved– Division 48 Electrical Power Generation– Division 49 Reserved


Hi hi l i ti f k l t• Hierarchical organization of work elements• Special characteristic: The resources of each

k l t i th f th i dwork element is the sum of the resources requiredfor all the work elements below it.

• The bottom level work elements are estimated• The bottom level work elements are estimatedusing one or more estimating tool. They are detailed to a level low enough to preventdetailed to a level low enough to preventconfusion, but not more detailed than absolutely needed. Always aim to answer: “Who is going toy g gdo what, where, when, why, how and for how much?”



• The components are grouped into assemblies ofitems that would be installed together (the cost

f fper sf of slab-on-grade including gravel, vaporbarrier, wire mesh, edge form, concrete, finishing,

d i )and curing).• Useful for conceptual and preliminary estimates.• Can be prepared quickly, but is less accurate.


• Try to maintain the same level of detail oneach branch of the WBS. The level of detail should be consistent with the user of the document and the time of issue Lowerthe document and the time of issue. Lowerlevel users might need higher level of detail During later phases of the life cycledetail. During later phases of the life cyclethe level of detail is higher due to lower

t i tuncertainty.


• Key points to keep in mind– Lower level work elements specified to the pointp p

where it they can be easily defined, staffed, scheduled and estimated.

– Include all work elements that are required and only those work elements that are required.y q

– Work elements include time and resources both of which affects the cost.o c a ects t e cost


“Each element in the structure must befully described to allow the specialist in thaty parea to estimate accurately the resources to do the job To avoid duplications overlapsdo the job. To avoid duplications, overlaps,or omissions it is important to identify what is included in and excluded from each workincluded in and excluded from each workelement.”


Th WBS i t th th t• The WBS is not the same as the costestimate! The WBS is a “deliverable

”oriented” input to the cost estimate.Everything included in the WBS should be included in the cost estimate, but the costestimate has more elements than those listed in the WBS. Indirect costs forinstance are not necessarily included in the WBS but they should be included in thecost estimate.


T d B tt• Top down– Faster– Parametric

• Bottom up– Industrial engineering

approach– Parametric• Historical data

– Less accurate

approach– Increased level of detail– Better understanding of

– Difficult to adjust or change

– Better understanding ofcost drivers

Screening Preliminary DefinitiveTi

Top down used earlier in the life cycle, bottom up used later on, when more information is available. Most final estimates are bottom up with

Time


parametric estimation of some elements.

Initiali ation• Initialization– RFQ, management, business, market.

• Formulation– Collection of data, synthesis and ground rules

• Implementation– Assemble the team get the tools and familiarize with scopeAssemble the team, get the tools and familiarize with scope

• Estimating– Implementation of methods and estimation of work elements, R i• Review

• Consolidation and reconciliation• Pricing and publicationPricing and publication• Use of the estimate


Derived inputFee or Profit

Scope or statement of work

R tSkills

Travel

Other direct costs

Fee or Profit

CostTimeframe Work Breakdown

RatesRisk assessment

EstimateTimeframe

Structure

ScheduleMaterials and

Quotations Labor hours

subcontract

G&A

Ground rules

Q

Unit PricesDetailed drawingsIndirect costs

G&A


I di t• Ingredients– Labor hours– Labor rates

• Types– Initial acquisition

Fixed and variable– Materials and subcontracts

• Make or buy decisions– Equipment

– Fixed and variable– Recurring and nonrecurring– Direct and indirectEquipment

– Tools– Travel costs

Other direct costs

• Indirect:– Controllable and

noncontrollable– Other direct costs– Indirect costs– Facilities

– Engineered vs. managed

– Administrative costs– Fee or profit


• Team of estimators or estimator• Methodical approachMethodical approach• Knowledge of the outcome, the steps, and

resources required to obtain itresources required to obtain it• Computation capability• Publication capability


L b• Labor– Methods, time and

motion

• Indirect cost– Usually 100 to 150% of

di t l b tmotion– Staffing technique– Direct judgment

direct labor cost• Administrative costj g

– Handbooks– Mathematical models

– Usually 20% of totaldirect and indirect cost

F fit i• Materials and sub.– Drawing takeoff

Di t t ti

• Fee, profit or earnings– Company policy

– Direct quotation– Mathematical models


1 D t il d d fi iti ti ti1 Detailed or definitive estimating2 Direct estimating3 Estimating by analogy or averaging approach3 Estimating by analogy or averaging approach4 Unitized approach5 Firm quotes5 Firm quotes6 Handbook estimating7 Learning curveg

– See me if interested in this technique (will not be covered in class)8 Staffing methods9 S i i l d i i i9 Statistical and parametric estimating

– See me if interested in this technique (will not be covered in class)


I fl ti•Inflation“Time oriented increase in costs broughtgabout by rising prices … caused principallyby the injection of funds into the economyy j ythat unbalance the law of supply anddemand for money.” (Stewart)y“Inflation has been defined as a process of continuously rising prices, or equivalently, ofcontinuously rising prices, or equivalently, ofa continuously falling value of money.” (U.S. Department of Labor Bureau of Labor Statistics web site)


“The law of supply and demand says that themore limited the supply is at a given demandpp y grate, the greater is the cost or price of a raw material commodity or service ” (Stewart)material, commodity or service. (Stewart)


•Consumer Price Index (CPI)“The Consumer Price Index (CPI) is a measure( )of the average change over time in the prices paid by urban consumers for a market basket ofp yconsumer goods and services. ”

•Find the CPI on the web at:Find the CPI on the web at: http://www.bls.gov/cpi/

(U.S. Department of Labor Bureau of Labor Statistics)


Sourcehttp://data bls gov/PDQ/servlet/SurveyOutputServlethttp://data.bls.gov/PDQ/servlet/SurveyOutputServlet


• “The tendency for work output per dollar todecrease, causing increased prices” (8), g p

• “Includes mainly the continuing increase in the amount of resources principally laborthe amount of resources, principally laborbut including other cost elements, required t d j b ”to do a job.”


W d• We need:– Definition

• Scope of work• BasisDoc mentation– Documentation• Drawings, takeoffs, specifications, etc.• Historical data• Historical data

– Discipline• Tools and methodsTools and methods

• The three D’s required for success!


• Must be able to visualize what is not apparent• Must have sufficient construction experience• Must have knowledge of labor performance and

productivity• Must have access to cost data for material, labor,

equipment, and overhead• Must be familiar with computer-assisted estimating.• Must be patient• Must pay attention to details and perform research


• People can not be taught experience andjudgment, but they can be taught an acceptable

fmethod of preparing an estimate, items to includein the estimate, calculations required, and how to

k th Th l b d i tmake them. They can also be warned againstpossible errors and alerted to certain problems

d d b t th ti l i dand dangers, but the practical experience and useof good judgment required can not be taught and

t b bt i d th h imust be obtained through experience.


• A third party called surety guaranteespayment if one of the parties fails top y pcomplete their obligations

• Bid bond: Ensures that if the contractor is• Bid bond: Ensures that if the contractor isawarded the bid then, within certain time, th t t ill i t t dthe contractor will sign a contract andprovide all other specified bonds


• Performance bond: guarantees the ownerthat the contractor will perform all workpaccording to the contractual documents

• Labor and material bond or payment bond:• Labor and material bond or payment bond:guarantees the payment of the contractor’s bill f l b d t i l d i thbill for labor and materials used in the project


• Worker’s compensation• Builder’s risk fire insuranceBuilder s risk fire insurance


josé a. faria, ph.d.web.eng.fiu.edu/fariaj/unib/bcn5618_su12_module1_8pp.pdf · 2 fridays...

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