Fundamentals of Cost Estimating

Start Date: 21 Apr 2019
End Date: 25 Apr 2019
Duration: 5
Country: Kuala Lumpur / Malaysia
Category: Finance, Accounting & Investment

Course Description

The development of reliable cost estimates during the design and early conceptual stages of a proposed project are of critical importance.

The decision to proceed with a project is often based almost exclusively on early conceptual cost estimates, and these estimates provide the basis for the cash flow projections and forecasts used during the project feasibility study. Unreliable cost estimates can result in significant cost overruns later in the project life when it is too late to contain them.

In addition to the potential financial losses suffered by the organization, many such projects subsequently fail to deliver the required quality of outcomes intended for the project as a direct consequence of poor estimating. Budgeting inaccuracies inevitably result in lower quality workmanship and materials.

The estimating techniques and processes covered in this course will provide delegates with the necessary skills to forecast accurately the anticipated costs of projects with a focus on budget estimates, estimates for pre-construction services, estimating contractor and sub-contractor work, estimating general conditions, pricing self-performed work, estimating negotiated contracts, and performing lump sum and unit-price estimates.

This brand new day course will significantly enhance the skills and knowledge of delegates and improve their ability to perform estimates at both the conceptual and detailed levels , and to compare feasible alternatives quickly and efficiently.

Course Objective

The Primary Objectives of the Seminar are to help Delegates to:

         Gain knowledge of techniques used in Project estimating, from the conceptual stage to the final detailed estimate

          Understand the different types of estimates used to accurately and progressively estimate project costs

          Understand the different types of contracts based on the distribution of risk between contracting parties

         Effectively apply incentive arrangements to get the best results from the contract.


The Process


Delegates will develop advanced project cost estimating and cost management skills and knowledge through formal and interactive learning methods. The program includes individual exercises, team projects, applicable case studies, group discussions and video material that bring to life the skills acquired throughout the course.

The material has been designed to enable delegates to apply all of the material with immediate effect at the office.

Additionally, the seminar does not assume prior knowledge of the topics covered in the course. New concepts and tools are introduced gradually to enable delegates to progress from the fundamental to the advanced concepts of project risk management.


The Benefits

         This Fundamental Program takes the practice of project estimating to a new level to ensure maximum results

         The most recent developments in the field are included to provide fresh inputs to your project management efforts

         The course takes a practical rather than a theoretical approach by introducing a case study so that new skills can be applied with immediate effect

         High quality videos of substantial projects of different kinds are screened and discussed during the seminar

         Group activities and exercises will ensure mastery of the practical application of new skills learned

         The use of software programs to facilitate the incorporation of many advanced techniques are introduced

         Related project management fields such as risk are continuously incorporated to provide an integrated view of the total project management process

         Delegates will have excellent opportunities for interaction and discussion of best practices at their respective organizations

         This course will equip delegates with the skills and knowledge to significantly improve all levels of project estimating and control in the organization

         The program will be an important stepping stone in terms of personal career development in that it prepares delegates for the internationally recognized Project Management Professional (PMP) exam


The Results


This intensive 5-day seminar will provide delegates with a proven set of critical skills and techniques to improve the accuracy and reliability of conceptual and detailed estimates used for project proposals and final estimates , and will enable delegates to:

         Integrate all relevant project elements into a cohesive and comprehensive cost estimate

         Prepare budget estimates that will enable the owner-organization to make informed decisions as to the feasibility of a potential project

         Compare the costs of alternative strategies or technical approaches to ensure the most economical project at the desired level of quality

         Structure the contract compensation arrangement to provide the highest level of incentives to complete the project on schedule and within the determined budget

         Keep accurate control of the progressive budgeting process based on the various stages of design

         Prepare accurate budget estimates through the programming phase, the schematic design phase, and finally the design development phase

         Understanding the most appropriate contracting structure to ensure the desired project results

         Apply proper risk analysis to effectively mitigate risks at minimal costs , and to determine appropriate contingencies for residual risks

         Obtain the skills required to prepare and manage the bidding process

         Prepare lump-sum, unit-price, cost plus, and time-and-materials estimates and contracts

         Developing an initial project budget for the owner

         Determining project feasibility

         Designing the project within the owners budget

         Evaluating alternative design concepts and project components

         Preparing bids

         Preparing cost proposals

         Establishing project budgets

         Determining the cost impacts of change orders

         Substantiating claims and resolving disputes

         Preparing a Schedule of Values

         Creating historical cost databases to improve future estimating accuracy


Who Should attend?

This course is designed for project cost estimators, project designers, project planners and schedulers, contracts professionals, project procurement and purchasing staff, and project control and business services professionals who have the responsibility for preparing cost estimates and project proposals in client and contracting companies

Course Outline

Cost Estimating Basics

         The estimating life cycle

         Phases of the Design Process

o    Programming phase

o    Schematic design

o    Design development

o    Construction documents

         Estimating accuracy by phase

         Conceptual Cost Estimates

o    Rough Order of Magnitude Estimates (Broad Scope Estimates)

o    Assemblies cost estimates

o    Cost indices

o    Semi-detailed Estimates (Narrow Scope Estimates)

o    Definitive Estimates (Detailed Scope Estimates)

         Quantity take-off

o    Basic procedures

         Types of construction contracts

o    Lump-sum contracts

o    Unit-price contracts

o    Cost-plus contracts

o    Cost-plus contract with guaranteed maximum price (GMP)

o    Time-and-materials contracts 

         Procurement methods

o    Bid method

o    Negotiated method

         Pre-construction services

         Risk analysis and contingencies

Broad Scope Cost Estimating Techniques

         Adjustments to Project Cost for Broad Scope Estimates

         PERT Project Cost Analysis

         1. PERT Unit Cost Estimates

o    Formulae for Cost Estimating

o    The Normal Distribution Curve

o    Z-Value Table

o    The Probability of Project Completion within Budget

o    Estimating Project Unit Cost by Using the Standard Deviation

o    Estimating the Project Unit Cost at a Required Probability

o    The Probability of Completing the Project at a Required Cost

o    PERT vs Standard Deviation & Z-Values

o    Adjustments to Estimates Based on Previous Projects

         2. Adjustments for Time

o    Review: Future Value of Money

o    Review: Present Value of Money

o    Equivalent Annual Interest Rate

o    Index to Adjust for Time

o    Equivalent Compound Interest

         3. Adjustments for Location

o    Location Index for Construction

         4. Adjustments for Size

         5. Combined Adjustments

         6. Economic Price Adjustment

         7. Unit-Cost Adjustments

         8. Learning Curves

o    Estimating Durations based on the Learning Curve Effect

o        Estimating Costs based on the Learning Curve Effect

Budget Estimating Process

         Estimating by design phase

o    Programming budget estimates

o    Schematic design budget estimates

o    Design development budget estimates

         Estimating pre-construction services

o    Request for proposal

o    Development of pre-construction services estimate

o    Pre-construction services contract

o    Budget control log  

Bid Contract Estimating Process

         Pre-estimate activities

o    Estimating process

o    Solicitation of lump-sum bids

o    Order-of-Magnitude estimates

o    Work Breakdown Structure

o    Estimating team

o    Scheduling the estimating work

o    Subcontractors and major suppliers

o    Estimating forms

o    Accuracy and error prevention

         Pricing self-performed work

o    Recap sheet

o    Materials

o    Labour

o    Applying pricing factors

o    Summary recap

         Estimating subcontractor work

o    Subcontractor work

         Estimating General Conditions

o    Project summary schedule

o    Alternative techniques

o    Elements of the general conditions estimate

         Completing the estimate

o    Final document review

o    Completing the bid summary

o    Final mark-ups

o    Sales tax

o        Validating the estimate

Unit Price Estimates

         Unit price bid forms

         Direct cost estimation

o    Materials

o    Labour

o    Indirect labour

o    Subcontractors

o    Recap summary sheet

o    Direct-to-indirect cost factor

         Mark-up determination

         Variation-in-quantity contract provision

         Risk analysis

Bid finalisation

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