Identify a typical type of project in your profession or field of study. Researc

Question

Identify a typical type of project in your profession or field of study. Research the top two to three most common project costing/estimating techniques used for this type of projects. Provide the following:

Name the profession/field of study and describe the type of projects you choose.

A short description and steps of each estimation technique.

The pros and cons of each technique.

Explanation of which estimation technique is more prevalent in the industry and why.

Assessment of whether project managers typically use only one or more than one estimation technique for a project and reasons why

Explanation / Answer

Rate Estimation
expenses associated with built amenities
The expenses of a built facility to the proprietor comprise each the initial capital price and the subsequent operation and renovation costs. Each of those most important price categories includes a quantity of cost accessories.
The capital rate for a building assignment entails the bills involving the inital establishment of the power:
Land acquisition, together with assembly, retaining and development
Planning and feasibility reviews
Architectural and engineering design
building, including substances, apparatus and labor
area supervision of construction
building financing
insurance and taxes for the period of construction
proprietor's general place of work overhead
apparatus and furniture now not included in development
Inspection and checking out
The operation and upkeep price in subsequent years over the mission life cycle involves the following fees:
Land appoint, if applicable
operating staff
Labor and fabric for upkeep and repairs
Periodic renovations
insurance and taxes
Financing expenditures
Utilities
proprietor's different fees
The magnitude of every of those cost accessories depends upon the character, measurement and place of the assignment as good as the management group, among many issues. The proprietor is eager about attaining the bottom viable overall task price that's consistent with its investment goals.
It's principal for design authorities and building managers to understand that even as the construction price may be the one largest factor of the capital cost, other cost components are not insignificant. For illustration, land acquisition expenses are a essential expenditure for constructing development in high-density urban areas, and building financing expenditures can attain the identical order of magnitude as the development rate in colossal tasks corresponding to the development of nuclear power crops.
From the owner's perspective, it is equally main to estimate the corresponding operation and maintenance price of each alternative for a proposed facility to be able to analyze the existence cycle expenses. The massive charges needed for facility maintenance, especially for publicly owned infrastructure, are reminders of the forget about up to now to don't forget thoroughly the implications of operation and upkeep rate in the design stage.
In most construction budgets, there may be an allowance for contingencies or unexpected costs occuring during building. This contingency quantity may be incorporated within every price item or be integrated in a single class of building contingency. The amount of contingency is centered on ancient expertise and the anticipated challenge of a special building project. For example, one construction corporation makes estimates of the expected price in five one of a kind areas:
Design progress alterations,
time table changes,
common administration changes (such as wage charges),
Differing website online conditions for these anticipated, and
third celebration necessities imposed for the period of development, comparable to new allows.
Contingent amounts no longer spent for building can also be released close the end of building to the owner or to add additional mission elements.
On this chapter, we shall center of attention on the estimation of construction price, with handiest occasional reference to other cost add-ons. In Chapter 6, we shall take care of the monetary evaluation of a developed facility on the basis of each the capital cost and the operation and maintenance price in the existence cycle of the power. It is at this stage that tradeoffs between working and capital charges may also be analyzed.
Strategies to fee Estimation
fee estimating is one of the essential steps in venture management. A rate estimate establishes the base line of the venture cost at extraordinary phases of development of the mission. A price estimate at a given stage of assignment development represents a prediction furnished with the aid of the price engineer or estimator on the basis of on hand data. In keeping with the American organization of cost Engineers, price engineering is outlined as that discipline of engineering follow where engineering judgment and expertise are utilized in the software of scientific concepts and tactics to the main issue of cost estimation, price control and profitability.
Essentially all price estimation is carried out in line with one or some combo of the following normal methods:
construction operate. In microeconomics, the relationship between the output of a procedure and the imperative resources is known as the creation operate. In construction, the creation operate is also expressed by the connection between the quantity of construction and a element of creation akin to labor or capital. A production operate relates the quantity or volume of output to the quite a lot of inputs of labor, fabric and equipment. For instance, the quantity of output Q could also be derived as a operate of quite a lot of enter reasons x1, x2, ..., xn by way of mathematical and/or statistical methods. For that reason, for a targeted level of output, we may try and discover a set of values for the input motives so as to cut back the creation price. The connection between the size of a constructing project (expressed in rectangular toes) to the input labor (expressed in labor hours per rectangular foot) is an instance of a production function for development. Several such production functions are shown in figure 3-three of Chapter three.
Empirical rate inference. Empirical estimation of fee capabilities requires statistical tactics which relate the price of constructing or running a facility to some important traits or attributes of the method. The position of statistical inference is to estimate the high-quality parameter values or constants in an assumed fee perform. On the whole, this is accomplished by the use of regression analysis techniques.
Unit charges for bill of quantities. A unit cost is assigned to each of the facility components or duties as represented through the bill of quantities. The whole rate is the summation of the products of the portions accelerated by way of the corresponding unit charges. The unit rate procedure is straightforward in principle but fairly laborious in utility. The preliminary step is to collapse or disaggregate a method into a quantity of duties. Jointly, these tasks ought to be accomplished for the construction of a facility. As soon as these tasks are outlined and portions representing these duties are assessed, a unit price is assigned to each and then the total fee is determined by summing the costs incurred in each and every project. The extent of detail in decomposing into tasks will fluctuate notably from one estimate to one more.
Allocation of joint costs. Allocations of fee from existing accounts may be used to strengthen a price function of an operation. The elemental idea in this procedure is that each expenditure object will also be assigned to distinctive characteristics of the operation. Ideally, the allocation of joint costs should be causally regarding the category of basic expenses in an allocation process. In lots of occasions, nevertheless, a causal relationship between the allocation element and the fee object can not be identified or may not exist. For illustration, in building projects, the money owed for normal expenses could also be labeled according to (1) labor, (2) material, (3) construction apparatus, (4) construction supervision, and (5) basic workplace overhead. These basic expenditures may then be allotted proportionally to quite a lot of tasks which might be subdivisions of a task.
Types of construction price Estimates
construction cost constitutes handiest a fraction, although a big fraction, of the complete undertaking rate. However, it's the a part of the rate below the manipulate of the development assignment manager. The specified stages of accuracy of building rate estimates fluctuate at different levels of mission development, ranging from ball park figures in the early stage to particularly reliable figures for budget manipulate previous to development. On account that design choices made at the beginning stage of a mission life cycle are more tentative than these made at a later stage, the cost estimates made on the earlier stage are expected to be much less correct. Almost always, the accuracy of a rate estimate will replicate the know-how on hand on the time of estimation.
Construction fee estimates could also be viewed from distinct views given that of one-of-a-kind institutional necessities. Regardless of the various types of fee estimates used at exceptional phases of a venture, cost estimates can best be labeled into three fundamental classes consistent with their functions. A construction cost estimate serves probably the most three normal functions: design, bid and manipulate. For establishing the financing of a mission, either a design estimate or a bid estimate is used.
Design Estimates. For the owner or its certain design specialists, the forms of price estimates encountered run parallel with the planning and design as follows:
Screening estimates (or order of magnitude estimates)
Preliminary estimates (or conceptual estimates)
particular estimates (or definitive estimates)
Engineer's estimates based on plans and requisites
For every of those distinctive estimates, the amount of design information to be had mainly raises.
Bid Estimates. For the contractor, a bid estimate submitted to the proprietor both for competitive bidding or negotiation consists of direct construction price together with area supervision, plus a markup to quilt common overhead and earnings. The direct fee of construction for bid estimates is as a rule derived from a combo of the following procedures.
Subcontractor quotations
quantity takeoffs
development tactics.
3. Manipulate Estimates. For monitoring the challenge during development, a manipulate estimate is derived from to be had expertise to establish:
funds estimate for financing
Budgeted price after contracting however prior to development
Estimated cost to completion throughout the progress of building.
Design Estimates
within the planning and design stages of a task, more than a few design estimates reflect the growth of the design. At the very early stage, the screening estimate or order of magnitude estimate is most likely made earlier than the ability is designed, and must thus depend on the cost data of identical amenities constructed in the past. A preliminary estimate or conceptual estimate is situated on the conceptual design of the power at the state when the basic technologies for the design are known. The distinctive estimate or definitive estimate is made when the scope of labor is certainly defined and the certain design is in growth so that the most important features of the power are identifiable. The engineer's estimate is founded on the accomplished plans and necessities when they are competent for the proprietor to solicit bids from development contractors. In getting ready these estimates, the design legitimate will incorporate expected amounts for contractors' overhead and earnings.
The costs associated with a facility could also be decomposed right into a hierarchy of stages which can be proper for the cause of rate estimation. The extent of element in decomposing the power into duties relies on the kind of cost estimate to be ready. For conceptual estimates, for instance, the extent of detail in defining duties is really coarse; for special estimates, the level of element may also be fairly best.
As an instance, take into account the cost estimates for a proposed bridge across a river. A screening estimate is made for every of the knowledge choices, equivalent to a tied arch bridge or a cantilever truss bridge. As the bridge style is selected, e.G. The technology is chosen to be a tied arch bridge as a substitute of some new bridge form, a preliminary estimate is made on the basis of the layout of the chosen bridge type on the foundation of the preliminary or conceptual design. When the certain design has advanced to a factor when the major small print are identified, a detailed estimate is made on the basis of the good defined scope of the assignment. When the exact plans and necessities are completed, an engineer's estimate can be made on the groundwork of items and quantities of labor.
Bid Estimates
The contractor's bid estimates in most cases mirror the wish of the contractor to cozy the job as good because the estimating instruments at its disposal. Some contractors have good based fee estimating techniques even as others don't. In view that best the lowest bidder will be the winner of the contract in most bidding contests, any effort devoted to rate estimating is a loss to the contractor who shouldn't be a triumphant bidder. Therefore, the contractor may put in the slightest degree quantity of viable effort for making a rate estimate if it believes that its threat of success is not high.
If a common contractor intends to use subcontractors within the building of a facility, it is going to solicit price quotations for various duties to be subcontracted to area of expertise subcontractors. For this reason, the overall subcontractor will shift the burden of price estimating to subcontractors. If all or a part of the construction is to be undertaken by using the final contractor, a bid estimate may be prepared on the groundwork of the quantity takeoffs from the plans provided by the owner or on the foundation of the development methods devised via the contractor for imposing the mission. For instance, the price of a footing of a certain style and dimension is also found in commercial publications on fee data which can be utilized to facilitate cost estimates from wide variety takeoffs. Nevertheless, the contractor could want to investigate the genuine fee of construction by in view that the precise development methods for use and the associated charges if the project is deemed to be exclusive from usual designs. Thus, gadgets such as labor, material and equipment needed to perform more than a few tasks could also be used as parameters for the price estimates.
Manage Estimates
each the owner and the contractor ought to adopt some base line for price manage in the course of the development. For the owner, a funds estimate ought to be adopted early adequate for planning long run financing of the facility. As a consequence, the designated estimate is most of the time used as the price range estimate considering it's adequate definitive to mirror the project scope and is on hand lengthy before the engineer's estimate. As the work progresses, the budgeted price need to be revised periodically to mirror the estimated cost to completion. A revised estimated price is quintessential either due to the fact of change orders initiated through the owner or because of surprising cost overruns or savings.
For the contractor, the bid estimate is on the whole considered as the finances estimate, that will be used for manage functions as well as for planning construction financing. The budgeted cost will have to also be updated periodically to mirror the estimated cost to completion as well as to insure ample cash flows for the completion of the task.
Effects of Scale on construction price
Screening fee estimates are regularly founded on a single variable representing the capability or some physical measure of the design such as flooring subject in constructions, length of highways, quantity of storage boxes and construction volumes of processing vegetation. Expenditures don't constantly fluctuate linearly with appreciate to special facility sizes. Commonly, scale economies or diseconomies exist. If the usual rate per unit of capability is declining, then scale economies exist. Conversely, scale diseconomies exist if average fees develop with bigger dimension. Empirical information are sought to set up the economies of scale for various forms of facility, if they exist, to be able to take competencies of shrink fees per unit of ability.
Let x be a variable representing the ability capacity, and y be the resulting building price. Then, a linear rate relationship can be expressed within the form:
(5.1)
the place a and b are positive constants to be determined on the groundwork of old data. Notice that in Equation (5.1), a constant price of y = a at x = 0 is implied as shown in figure 5-2. Typically, this relationship is applicable only in a unique range of the variable x, reminiscent of between x = c and x = d. If the values of y comparable to x = c and x = d are known, then the rate of a facility similar to any x within the specific variety is also received by means of linear interpolation. For instance, the construction fee of a school building will also be estimated on the groundwork of a linear relationship between cost and floor field if the unit price per square foot of flooring subject is legendary for institution constructions inside detailed limits of size.


Unit cost approach of Estimation
If the design science for a facility has been precise, the challenge can be decomposed into elements at quite a lot of stages of detail for the rationale of fee estimation. The unit price for each and every detail within the invoice of quantities need to be assessed to be able to compute the complete construction fee. This suggestion is applicable to both design estimates and bid estimates, although different factors could also be selected in the decomposition.
For design estimates, the unit price approach is in most cases used when the undertaking is decomposed into factors at quite a lot of levels of a hierarchy as follows:
Preliminary Estimates. The assignment is decomposed into important structural methods or creation apparatus gadgets, e.G. The complete ground of a building or a cooling procedure for a processing plant.
Specified Estimates. The assignment is decomposed into components of quite a lot of most important techniques, i.E., a single ground panel for a constructing or a warmness exchanger for a cooling procedure.
Engineer's Estimates. The challenge is decomposed into distinctive items of various accessories as warranted via the on hand rate information. Examples of specified gadgets are slabs and beams in a flooring panel, or the piping and connections for a heat exchanger.
For bid estimates, the unit fee process can be applied despite the fact that the contractor may prefer to decompose the mission into special levels in a hierarchy as follows:
Subcontractor Quotations. The decomposition of a challenge into subcontractor items for quotation involves a minimum quantity of labor for the general contractor. However, the accuracy of the ensuing estimate will depend on the reliability of the subcontractors when you consider that the general contractor selects one in all a number of contractor quotations submitted for every object of subcontracted work.
Variety Takeoffs. The decomposition of a task into items of quantities that are measured (or taken off) from the engineer's plan will influence in a method just like that adopted for a precise estimate or an engineer's estimate through the design respectable. The stages of detail could fluctuate according to the want of the final contractor and the supply of rate information.
Development techniques. If the development procedure of a proposed project is used because the groundwork of a rate estimate, the challenge could also be decomposed into gadgets akin to labor, material and gear wanted to participate in various tasks in the tasks.
Simple Unit cost components
believe that a project is decomposed into n factors for price estimation. Let Qi be the range of the ith detail and ui be the corresponding unit rate. Then, the whole rate of the project is given via:
(5.7)
the place n is the number of items. Founded on traits of the construction web page, the technological know-how employed, or the administration of the construction procedure, the estimated unit fee, ui for each and every element is also adjusted.
Factored Estimate formulation
A distinctive application of the unit fee system is the "factored estimate" mostly utilized in system industries. Often, an industrial method requires a couple of primary gear components similar to furnaces, towers drums and pump in a chemical processing plant, plus ancillary objects corresponding to piping, valves and electrical elements. The complete rate of a task is dominated with the aid of the costs of buying and putting in the predominant apparatus components and their ancillary items. Let Ci be the purchase cost of a major equipment component i and fi be a aspect accounting for the rate of ancillary objects wanted for the installation of this equipment factor i. Then, the total price of a mission is estimated.
The place n is the number of fundamental apparatus components incorporated within the assignment. The factored procedure is pretty much centered on the precept of computing the cost of ancillary gadgets such as piping and valves as a fraction or a multiple of the expenditures of the predominant gear items. The value of Ci may be bought via applying the exponential rule so the use of Equation (5.8) could involve a mixture of fee estimation ways.

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