Construction Cost Estimating at Predesign
CONSTRUCTION COST ESTIMATING
A basic element of the design process is facilities construction cost estimating.
Establishing a reasonable construction budget during the predesign
work will add direction and integrity to the design process. The
predesign will typically consider multiple process alternatives. Each type
of process will have a different construction cost. The owner must take
into account interest rates, administrative/legal costs, design engineering
costs, land use, and local political considerations. Invariably the issue
of design engineering and engineering support during construction will
be carefully reviewed and negotiated in part on the integrity of the predesign
process. Each of the process alternatives will also have unique operation
and maintenance costs dependent on the requirement for labor,
energy, chemical and other consumables.
Since design development is a dynamic process, it is very important
that the estimated cost of the project be periodically checked against the
capital budget. Therefore, a series of cost estimates are prepared and
compared to the previous ones. These estimates should be as detailed as
possible, based upon the increasing level of information available. It is
recommended that written guidelines for each of type of construction cost
be developed. An initial set of guidelines is offered below.
The Association for the Advancement of Cost Engineering, (AACEi)
has established a comprehensive set of standards and guidelines for this
purpose. It is imperative that the entire design team, and all project
stakeholders, be kept fully informed, and be held responsible for their
participation in the establishment of budgets for design, and ultimately
for the final construction cost of every project. A project-centered approach
coupled with an effective, open channel of communication will
prevent unfortunate surprises to escalating or uncontrolled costs. It will
further help ensure a professional engineering environment, directed at
problem solving, rather than one deteriorating into reactionary, or adversarial,
relationships between members of the design team.
More specifically, these guidelines establish the criteria, format, usage,
accuracy, and limitations of the various types of construction cost
estimates. To accomplish this task it is necessary to implement the following
criteria:
Define the type of cost estimates and a detailed narrative called
the Basis of Estimate to be prepared during the various phases of
a projects development. Within these definitions would be the expected
accuracy of the cost estimate as well as limitations on its
value and use.
Define the responsibility for the preparation and review of these
cost estimates.
Define the cost estimating method relative to the construction and
capital improvement costs of the facilities.
Develop the procedures to prepare and review the cost estimates
on a uniform basis.
Once developed, these standards can be implemented on all design
projects and capital improvement programs. A consistently applied set of
guidelines and growing project database as well as local unit pricing data
can provide a more accurate, less problematic cost estimate.
4.2 CLASSES AND TYPES OF COST ESTIMATES
Construction cost estimates are categorized into five classes: 5, 4, 3, 2,
and 1, in reverse numerical order by level of detail available depending
on their use. Each cost estimate should include a ‘‘Basis of the Estimate’’
narrative as discussed below. As the level of detail required in performing
the cost estimate increases, the labor and experience of the estimating
staff required to complete the material take-off and pricing rises significantly.
The estimating accuracy discussed below, pertinent to each class
of cost estimate, is not meant to represent absolute limits or guarantees,
but instead to establish a most likely range within which the final project
construction cost will fall.
The Consumer Price Index (CPI): The Bureau of Labor Statistics of
the U.S. Department of Labor produces monthly data on changes
in the prices paid by urban consumers for a representative basket
of goods and services. It is applicable, in a general sense, to the
monthly and annual change in the cost of goods and services in
the end user market. These would be price- level changes in aggregate
including construction related goods and services for labor
and incidental materials.
The Producer Price Index (PPI): This is also prepared by the U.S.
Bureau of Labor Statistics and measures the average change over
time in the selling prices received by domestic producers for their
output to the wholesale market. These are price-level changes in
specific manufactured products, including construction related
goods like cement, steel, and pipe.
The Engineering News-Record Construction Cost Index (ENR-CCI):
This is applicable in a general sense to the construction costs.
Created in 1931 the ENR-CCI most nearly tracks the price-level
changes in major civil engineering capital construction costs over
time.
The Handy-Whitman Index of Water Utility Construction Costs:
This has been maintained since 1949 and is applicable to water
and wastewater treatment plants. This index more closely approximates
aggregate price-level changes in more complex treatment
plants and pumping stations.
The Marshall and Swift National Average Equipment Cost Index:
This is specifically for the tracking of complex equipment pricelevel
changes. It is useful in the indexing of pure equipment costs
over tim
