presentation - cost estimation

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Cost Es t im at ion in aConst ruc t ion Com pany

Department of Humanities and Social Science

Indian Institute of Technology, Bombay

Under the guidance of Prof. K. Narayanan

Submitted by :-Deepak Garg (05329015)Priyesh Wadhwa (05329011)Saurabh P. Singh (05329037)Mukesh S. Rawat (05329020)



Road Map

• Introduction

• Types of Construction Cost

Estimates

• Approaches to Cost Estimation

• Unit Cost Method of Estimation

• Other Methods



I n t roduc t ion

• Cost Estimation

– Cost estimation is one of the most

important steps in project management.

– What, why, when, how.



Cost s in Const ruc t ion Fi rm• Initial Capital cost

– Land acquisition– Planning and feasibili ty studies

– Architectural and engineering design

– Construction, including materials, equipment and labor

– Insurance and taxes during construction

• Operation and maintenance cost– Operating staff

– Labor and material for maintenance and repairs– Utilities

– Periodic renovations

– Insurance and taxes

• Unexpected cost during construction– Design development changes

– Schedule adjustments– General administration changes



Types of Construction Cost Estimates

• Design Estimates

– Screening estimates (or order of magnitude estimates)– Preliminary estimates (or conceptual estimates)

– Detailed estimates (or definitive estimates)

– Engineer's estimates based on plans and specifications

• Bid Estimates– As a contractor, a bid estimate is submitted to the owner

either for competitive bidding or negotiation.• Control Estimates

– Budget estimate for financing

– Budgeted cost after contracting but prior to construction– Estimated cost to completion during the progress of construction.



Approac hes t o Cos t Es t im at ion

• Production functionQ = P(I1,I2,….. In)

• Empirical cost inference

• Unit costs for bill of quantities

• Allocation of joint costs



Uni t Cost Met hod of Es t im at ion

Simple Unit Cost Formula

Formula Based on Labor, Material and Equipment



Example

• Cost estimate using labor, material and equipment

rates.



Ot her Met hods

• Allocation of joint costs

- Difficult causal relationship b/w element and associated costs

- Joint costs are prorated in proportion of basic costs of

elements

For example : F being overhead associated with differentelements

Fi = F * y i/y

Then total cost can be written as :-

L i = y i + Fi

• Historical cost data

- Widely used for forecasting / estimation future costs

- Collected and organized for future use

- Continuous updates

- May effect cost substantially if relative prices change



Ot her Met hods c ont d .

• Cost indices

- Reflect price level changes for inputs and outputs

- Weighted aggregate average of different components of selectedelement

- Can be used for cost forecasting with historic data

- General price indices are provided by govt.

- Construction specific price indices are collected from industry

sources- Screening estimates are generally made on single factor likeconstructed area, no. of rooms etc

- Adjustments are made to these using- Inflation indices

- Construction specific indices

of detailed factors



Ot her Met hods c ont d .•Based on Engineer's List of Quantities

- based on a list of i tems and the associated quantities

- list is provided to contractor

- costs for winning bidder is taken as starting estimates

- progress payments are made to contractor depending uponthe units of work done and unit prices listed

- each unit defined the level of detail of measure

- ex. Sample entries in bid table for engineer’s list-

Item Unit Quantity Unit price Item cost

Tiling sf 1000 12 12000

Water

Proofing

sf 1000 7 7000

.

.

.

.

.

.

.

.

.

.

Rs.19000



Com put er A ided Cost

Es t imat ion

• Types:– Simple spreadsheet calculation software.

– Integrated systems.

• Features:– Databases for unit cost items.

– Databases of expected productivity for

different components types, equipments, andprocess.

– Version control, Flexible reporting formats,import and export utilit ies, archive of past

projects.• Advantages: Rapid cost estimation and with

less efforts.

• Example : as will be shown



Est im at ion o f Operat ing Cost s• Depends upon: maintenance

policies and facility use.

• Minimized by: periodic repairsand rehabil itation at periodicintervals.

• Example: Maintenance cost on a

roadway– C = 596 + 0.0019 V + 21.7 A– Where, C is the annual cost of

routine maintenance per lane-mile.

– V is the volume of traffic onthe roadway measured inESAL (equivalent standardaxle loads)

– A is the age of the roadway in

years since the lastresurfacing.



Case st udy

• Raheja builders

• Estd. in 1952

• Uses simple unit cost estimation

method

• Uses simple accounting tools

• In process of configuring ERP



Thanks

Questions?



Al loc a t ion of Const ruc t ion Cost

over t im e

• Rate of work doneduring various timeperiods expressedin percentage of

project cost per unit time.

• The value of work

completed at agiven timeexpressed as acumulative

percentage of project cost



Example

• Decomposition of a building foundation into design

and construction elements.



Price indices in subsequent years show a proportionate changes due

to price changes. Percent change in price indices for year t+1-

j t+1=((It+1-It) / It )* (100%)

- Measure price level changes

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