Cost Estimation in a Construction Company Under the guidance of Prof. K. Narayanan Department of...
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Transcript of Cost Estimation in a Construction Company Under the guidance of Prof. K. Narayanan Department of...
Cost Estimation in a Construction Company
Under the guidance of Prof. K. Narayanan
Department of Humanities and Social Science Indian Institute of Technology, Bombay
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
Introduction• Cost Estimation
– Cost estimation is one of the most important steps in project management.
– Why• Feasibility study.• Profit measures.
– How• Advanced software packages are available.
Costs in Construction Firm• Initial Capital cost
– Land acquisition– Planning and feasibility 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.
Approaches to Cost Estimation
• Production function
Q = P(I1,I2,….. In)
• Empirical cost inference
• Unit costs for bill of quantities
• Allocation of joint costs
Unit Cost Method of Estimation
Simple Unit Cost Formula
Formula Based on Labor, Material and Equipment
Example
• Cost estimate using labor, material and equipment rates.
Other Methods• 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 different elements
Fi = F * yi/y
Then total cost can be written as :-
Li = yi + 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
Other Methods contd.• Cost indices
- Reflect price level changes for inputs and outputs
- Weighted aggregate average of different components of selected element
- 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 like constructed area, no. of rooms etc
- Adjustments are made to these using
- Inflation indices
- Construction specific indices
of detailed factors
Other Methods contd.•Based on Engineer's List of Quantities
- based on a list of items 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 upon the 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
Computer Aided Cost Estimation • Types:
– Simple spreadsheet calculation software.– Integrated systems.
• Features:– Databases for unit cost items.– Databases of expected productivity for
different components types, equipments, and process.
– Version control, Flexible reporting formats, import and export utilities, archive of past projects.
• Advantages: Rapid cost estimation and with less efforts.
• Example : as will be shown
Estimation of Operating Costs • Depends upon: maintenance
policies and facility use.• Minimized by: periodic repairs
and rehabilitation at periodic intervals.
• 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 on the roadway measured in ESAL (equivalent standard axle loads)
– A is the age of the roadway in years since the last resurfacing.
Case study• Raheja builders
• Estd. in 1952
• Uses simple unit cost estimation method
• Uses simple accounting tools
• In process of configuring ERP
Thanks
Questions?
Allocation of Construction Cost over time
• Rate of work done during various time periods expressed in percentage of project cost per unit time.
• The value of work completed at a given time expressed as a cumulative 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-
jt+1=((It+1-It) / It )* (100%)
- Measure price level changes